<PAGE>
 
                                                                   Exhibit 10.40

                               A G R E E M E N T

                                 By and Between

                        THE CARBIDE/GRAPHITE GROUP, INC.
                                CARBIDE DIVISION


                           Louisville, Kentucky Plant



                                      And


                           INTERNATIONAL BROTHERHOOD
                             OF FIREMEN AND OILERS
                                 LOCAL NO. 320


                          Affiliated with the AFL-CIO


                           Entered into July 1, 1996
<PAGE>
 
                                    CONTENTS
<TABLE>
<CAPTION>
 
ARTICLE                                         PAGE
<S>        <C>                                  <C>
 
I          Purpose............................   2
II         Coverage...........................   2
III        Non-Discrimination.................   3
IV         Union Security.....................   3
V          PAC................................   4
VI         Wages and Hours....................   4
VII        Holidays & Premium Pay.............   6
VIII       Call-In Pay........................   8
IX         Reporting Pay......................   9
X          Vacations..........................   9
XI         Seniority..........................  12
           a)  Yard...........................  12
           b)  Furnace........................  23
           c)  Pack...........................  25
           d)  Acetylene......................  27
           e)  Lime...........................  30
XII        Grievance Procedure and Arbitration  34
XIII       Strikes and Lockouts...............  36
XIV        Safety & Health....................  36
XV         Compensable Injuries...............  39
XVI        Control Lab........................  40
XVII       Overtime...........................  40
XVIII      Schedule A/Wage Rates..............  44
XIX        General............................  46
XX         Maintenance Department.............  47
XXI        Group Insurance....................  52
XXII       Retirement.........................  54
XXIII      Jury Service & Funeral Leave.......  57
XXIV       Severance Pay......................  58
XXV        Termination & Duration Appendices..  58
XXVI       Management Function................  59
</TABLE>
<PAGE>
 
                                   AGREEMENT

THIS AGREEMENT, entered into as of July 1, 1996 by and between the Louisville,
Kentucky Plant of THE CARBIDE/GRAPHITE GROUP, CARBIDE DIVISION hereinafter
called the "Company", and the INTERNATIONAL BROTHERHOOD OF FIREMEN AND OILERS
affiliated with the A.F.L.-C.I.O. acting as the bargaining agent for the
employees affiliated with Local No. 320 I.B. of F. and O., hereinafter called
the "Union".  WITNESSETH:

                                   ARTICLE I
                                    Purpose

The general purpose of this Agreement is to promote the mutual interest of the
Company and the employees; to provide for the operation of the plant of the C/G
Carbide Division under the methods which will further, to the fullest extent
possible, the safety, health and welfare of the employees, economy of operation,
elimination of waste, quantity and quality of output, cleanliness of plant and
protection of property.  It is the duty of the Company and of the employees to
cooperate fully, individually, and collectively for the advancement of said
conditions.

                                   ARTICLE II
                                    Coverage

The Company hereby recognizes the Union as the exclusive bargaining agency of
all of the hourly rate production and mechanical maintenance, and safety and
first aid employees for the purpose of collective bargaining as provided in
applicable Federal statutes.

Executives, chemists, clerical, office, drafting and engineering; also salaried
employees and supervisory employees having the right to hire and fire, and
guards and watchmen shall not be represented by the Union and are not subject to
the provisions of this agreement.

The Company will not change the classification of any employee covered hereby or
the status of classification covered hereby for the primary purpose of limiting
or altering the Union's jurisdiction over the N.L.R.B. certified bargaining
unit.

Employees of the Company who are not covered by the terms of this Agreement by
virtue of their supervisor, clerical, or executive position, or for other
reasons set forth herein will not perform work for which contract wage rates are
established except in cases of emergency, or for the purpose of laying out work
or for demonstrating and instructing how work shall be done.
 
The Company shall have the right to establish new jobs or make changes in
existing jobs.  When a new position is established or when an existing job
position is changed, the Company will evaluate and set up an appropriate wage
rate for the position.  The wage rate will be applied to the new or revised job
position for a period of thirty (30) working days.  Employees assigned to the
new or revised job position will be required to work the thirty (30) day trial
period.

If the employee believes that the wage rate established by the Company is unjust
and requires further consideration, he shall have the right to request the Union
represent him at a meeting on this subject.

                                       2
<PAGE>
 
Such a request must be made by the employee prior to the thirtieth (30th)
working day. Both parties shall meet within seven (7) working days to discuss
and resolve the employee's request.

If the parties have not resolved the issue, the employee and/or Union shall have
the right to file a grievance and utilize the grievance/arbitration procedure
provided in the Agreement.

                                  ARTICLE III
                               Non-Discrimination

It is the policy of the Company and the Union that the provisions of this
Agreement shall be applied to all employees without regard to race, color, sex,
age, religious creed, national origin, disability, Viet Nam era veteran status,
disabled veterans or membership in the Union.  The terms "he", "his", or "man",
as used in this Agreement shall apply to both male and female employees.

                                   ARTICLE IV
                                 Union Security

All employees within the bargaining unit are required to become members of the
Union within thirty (30) days from the date of execution of this Agreement and
remain members of the Union as a condition of employment.  New employees are
required to become members of the Union on the thirty-first (31st) day of
employment and thereafter remain members of the Union in good standing as a
condition of continued employment.

Vacation Relief Workers (Students):  Employee to have temporary status and will
be laid off on September 1.  Employee must join Union on thirty-first (31st) day
of employment.

Upon receipt of proper written assignment conforming with requirements of the
National Labor Management Relations Act of 1947, the Company will deduct from
first pay of each employee the initiation fee of the Union, and shall also
deduct from such first pay and from the first pay of each month thereafter the
regular monthly dues that apply to employees of C/G.  All fees and dues so
deducted shall be promptly remitted to the Secretary-Treasurer of the Local
Union.

Upon receipt of proper notice from the Union that an employee has lost his Union
membership, the Company will remove such employee from the seniority roster.
Such notice will be sent to the Company and the employee by certified mail.  It
is understood that when the Company takes such action at the request of the
Union that the Union will take full and complete financial responsibility for
all legal actions arising out of such action.

The Company, shall, during the course of discussing Company rules and policies
inform new employees of the existence of a Union within the plant, and at the
termination of the interview said new employee shall be introduced to some Union
member designated by the Union for this purpose.


                                   ARTICLE V
                          Political Action Check-Off

                                       3
<PAGE>
 
Upon receipt of proper written notice from the employee, the Company agrees to
deduct the weekly amount specified from the wages of those employees voluntarily
authorizing such contributions to the Firemen and Oilers COPE PAC.  The Company
will transmit such deductions weekly to the treasurer of the Firemen and Oilers,
accompanied by a list of the names of those employees for whom such deductions
have been made and the amount deducted for each such employee.

The Union shall indemnify and hold the Company harmless against any and all
claims, suits or other forms of liability that shall arise out of or by reason
of the above paragraph.

                                   ARTICLE VI
                                Wages and Hours

1.   Eight (8) hours in a calendar day constitute the standard work day, and
     forty (40) hours in calendar week shall constitute the standard work week.
     The calendar day begins and ends at 11:00 p.m. and the calendar week begins
     and ends at 11:00 p.m. Saturday.

2.   All work in excess of eight (8) straight time hours in the calendar day or
     forty (40) straight time hours in any calendar week shall be paid for at
     the rate of time and one-half, provided, however, that employees will not
     be paid both daily and weekly overtime for the same hours of overtime work.
     Exceptions to this will be as follows:

     A.   An employee who receives a permanent assignment as a result of his own
          bidding or through his own request shall be paid overtime if he has
          less than eight (8) hours off between his last scheduled shift and his
          first scheduled shift in his new assignment.

     B.   A Yard employee who received a temporary assignment to a department by
          the Personnel Department as a result of following his attained
          seniority and his expressed department preference, shall be paid
          overtime if less than eight (8) hours has elapsed between his last
          scheduled shift in his current assignment and his first scheduled
          shift of his new assignment.

     C.   Employee who works both the 3-11 shift on one day and the 11-7 shift
          on the following day will be paid at one and one-half (1-1/2) rate for
          the 11-7 shift on the following day.

          Should that employee's normal shift be 3-11 and he/she works such
          shift on the same day as the 11-7 shift above, the normal shift will
          be at straight time, plus any applicable premium.

3.   Hours paid for vacations, holidays, attendance at joint sponsored
     labor/management functions, company sponsored training, company paid union
     business during the grievance procedure (including arbitration), and home
     with pay will count as time worked for the purpose of computing weekly
     overtime.

                                       4
<PAGE>
 
4.   The rates set forth in Schedule A are the regular rates as that term is
     used in the Fair Labor Standard Act. Only those rates shall be used in the
     calculation of overtime except that shift differentials shall be included
     for this purpose.

5.   No employee shall be laid off during his regular working schedule to
     equalize any authorized overtime the employee has worked during the same
     work week or pay period. Any overtime shall be in addition to the regular
     working schedule of the employee.

6.   Any employee who may be called upon to work more than sixteen (16) hours in
     any twenty-four (24) hour period and as a result thereof finds that this
     leaves him less than six (6) hours before his time to report for a
     regularly scheduled shift of work, shall have the hours of this above named
     scheduled shift counted both for purposes of pay and determining overtime
     hours worked that week.

     Preparatory time worked outside the normal shift by leaders receiving
     responsibility pay will not count toward the sixteen (16) hours.

7.   An employee having legitimate reasons may trade his off day with another
     employee, providing the men can arrange the trade themselves and it has the
     approval of their foreman.

     The above will not be construed as prohibiting non-leaders from swapping
     off days with leaders or leaders swapping off days with non-leaders. When
     swaps of this kind are approved by the foreman and made, the leader will
     lose his leader pay for any days he does not actually work as a leader.

8.   When an employee on a continuous operation is required to hold over to take
     the place of a scheduled employee who fails to appear at the schedule time,
     he shall be provided: (a) at least one-half (1/2) hour's work, if the
     scheduled employee reports for work within one-half (1/2) hour or (b) at
     least one (1) hour's work if the scheduled employee reports between one-
     half (1/2) hour and one (1) hour late. In case of employees held over from
     11-7 shift, the above shall apply, except that the employees may leave
     immediately when the late employee reports, and will be paid for the full
     half-hour or the hour.

9.   This Article is intended to provide a basis for calculating overtime and
     shall not be construed as a guarantee of hours of work per day or per week.

10.  Wages shall be paid in accordance with Schedule "A"/Wage Rates, which is
     attached hereto and is part of this contract.

11.  Employees will be paid each Thursday between the hours of 7:00 a.m. and
     3:30 p.m.

     It is recognized that in weeks in which a holiday falls or is observed, on
     Monday, Tuesday or Wednesday, unusual circumstances might prevent the
     Company from doing the above. In that event, the Company will post a notice
     to that effect as soon as the unusual circumstances are known.

12.  An employee temporarily transferred from a higher rated job to a lower
     rated job shall receive the higher rate and an employee on a lower rated
     job, temporarily transferred to a job paying a higher

                                       5
<PAGE>
 
     rate shall receive the higher rate while so employed. However, employee
     initiated transfers to a lower rated job will be paid at the lower rate.

     If such employee works on a higher rated job for four (4) hours or more he
     will be paid the higher rate for the entire shift.

13.  Any employee temporarily transferred for a period of three (3) or more days
     to any department in which there is automatic rate progression shall have
     all such periods of three (3) days credited to his time spent in that
     department for the purpose of determining when he is entitled to the higher
     rate within any particular department.

14.  The rate of working leaders in all departments or units thereof shall be
     forty (40) cents per hour higher than the rates set forth in Schedule
     A/Wage Rates.

     There shall be two (2) working leader on each of the three (3) shifts at
     the Acetylene Plant.

15.  Yard employees doing cleanup work in the furnace building monitor and on
     the furnace building roof and those that take the cleaned up material from
     the canvas chute to the load lugger trucks will be paid the furnace
     production rate. In addition to the above cleanup work, Yard employees will
     be paid the production rate for cleaning the roof of the Dry Generators,
     Pack Screening Building, Pack Storage Building and the Lime Sheds which are
     attached to the Furnace Building.

                                  ARTICLE VII
                            Holidays and Premium Pay

Holidays shall be New Year's Day, Martin Luther King (3rd Monday in January),
Washington's Birthday (3rd Monday in February), Good Friday, Decoration Day
(last Monday in May), "Flag Day", June 14, Independence Day, Labor Day, Columbus
Day (2nd Monday in October), Thanksgiving Day and Christmas Day. Should either
the Federal or State government change the three legislatured Monday holidays,
the Company and Union would discuss such effect upon the observance of these
holidays.

For each holiday the Company shall pay to employees not scheduled to work on the
holiday an amount equivalent to eight (8) hours at his straight time rate,
provided he works his regularly scheduled shift after the holiday, unless he has
a reasonable excuse for being absent.  No employee shall receive holiday pay
unless he performs work for the Company in the week in which the holiday occurs,
except that an employee who is absent from work for the entire week in which the
holiday occurs due to his own illness or an off-the-job accident or injury to
himself, shall be paid holiday pay if he performs work in the week preceding or
the week following the week in which the holiday occurs.  This is the pay
referred to in the first sentence of this paragraph.

For all work performed on a holiday the Company shall pay two and one-half (2-
1/2) times his straight time rate.  If any such hours worked on a holiday are
overtime hours, as defined in Article VI, an additional half (1/2) time will be
paid for such overtime hours.  Any employee failing to work on a holiday when
scheduled to do so shall not receive any holiday pay under any circumstances
except when the reason be due

                                       6
<PAGE>
 
to having received a compensable injury and in these instances holiday pay as
such shall be paid for the holiday during the week in which the injury occurred.
Subsequent holidays will not be paid.


                               Sunday Premium Pay

For all hours worked on Sunday which are not paid for on an overtime basis, a
premium of forty per cent (40%) based on the regular base rate as set forth in
Schedule "A"/Wage Rates shall be paid.

Sunday shall be deemed to be the twenty-four (24) hours beginning at 11:01 p.m.
Saturday.

                                 Shift Premium

Employees working on a shift basis will receive a premium of forty (40) cents
per hour for the second shift (any shift starting between 12 noon and 8:00 p.m.)
and fifty (50) cents per hour for the third shift (any shift starting between
8:00 p.m. and 4:00 a.m.).
 
For the purpose of applying shift premiums, all hours worked by an employee
during his work day are considered as worked on the shift on which he is
scheduled to start to work and does work, except:

     A.   If scheduled for the first or second shifts and he completed his
          regular turn on those shifts and continues to work four (4) or more
          hours into the next shift, he will be paid the shift premium for the
          next shift or all hours worked on it. Hours under four (4) worked in
          the succeeding shift do not carry the premium of that shift, but do
          carry the premium of the shift on which he started.

     B.   If scheduled for the third shift and he completes his regular turn,
          continuing to work into the first shift, he will be paid the third
          shift premium for all hours worked on the first shift.

     C.   If he completes his regular shift and after leaving the plant is
          called back within the same work day, he will receive the applicable
          shift premium for the hours worked or allowed.

                                  ARTICLE VIII
                                  Call-in Pay

Any employee who may be called in after he completed a shift and left the
premises of the Company and before he is scheduled to return shall be guaranteed
four (4) hours' work at time and one-half (1-1/2).  In the event the work for
which the employee was called is completed in a period of time less than four
(4) hours, the employee may leave the job unless, in the meantime, another
emergency condition has developed and it requires the same type of workers to
handle it. If this latter condition does not develop, the employee called in may
leave the job and receive either four (4) hours' pay at his straight time rate
or time and one-half (1-1/2) for the hours actually worked whichever is greater.
Only those hours actually worked will be used in computing overtime.

                                       7
<PAGE>
 
If call-in is in addition to time worked during a twenty-four (24) hour period,
the employee gets time and one-half (1-1/2) pay for time on call-in, as call-in
pay.  He also gets an additional half time (1/2) for all hours over eight (8) in
the twenty-four (24) hour period.  He does not get weekly overtime for this
also.  [If call-in are the only hours worked in a twenty-four (24) hour period,
then he is paid time and one-half (1-1/2) for all hours worked as call-in pay.]
He also gets an extra half-time (1/2) at the end of the week for all time in
excess of forty (40) hours in the week. If an employee is called in to fill out
a shift, he is paid time and one-half (1-1/2) for the hours worked on that day
and not the additional one-half (1/2) times for all hours worked over eight (8)
hours in a twenty-four (24) hour period or over forty (40) hours in the week.
It is, therefore, not necessary for an employee under the above circumstances to
have to work his full weekly schedule in order to get time and one-half (1-1/2).

It is understood and agreed that when time worked on call-in is within two (2)
hours of  the start of the scheduled work time, and the call-in becomes
continuous with the regularly scheduled hours, the Company will pay only time
and one-half for the hours worked prior to schedule.

Exception to Call-in

     A.   When an employee has completed sixteen (16) hours consecutive work he
          will be bypassed for call-in until he has had eight (8) consecutive
          hours away from the plant (reporting time).

     B.   When an employee calls off absent on his scheduled shift, he shall not
          be eligible to be called-in until sixteen (16) hours have elapsed.

                                   ARTICLE IX
                                 Reporting Pay

If there is no work for an employee on a day for which he is regularly scheduled
to work, the Company shall notify him not later than fourteen (14) hours before
his scheduled reporting time. If he is not notified and reports for work, he
shall receive a minimum of four (4) hours' work, or four (4) hours' pay if no
work is available, at his regular rate for his scheduled work on that day, and
such four (4) hours shall be counted in computing overtime.  It is agreed,
however, that this shall not apply to an employee who was absent without leave
or without a reasonable excuse on his last regularly scheduled work day, or when
the lack of work is due to strikes, fires, floods, windstorms, power
interruptions, acts of violence, or other similar things which are beyond the
control of the Company.  The Company agrees that if it becomes necessary to send
employees home after the start of the shift, it will be on the basis of
department seniority and qualification. The most senior, qualified employee(s)
will remain on the job.

                                   ARTICLE X
                                   Vacations

1.   At the completion of one year's continuous service, an employee is entitled
     to a vacation of one week and shall have one year from his qualification
     date in which to take his vacation. After qualifying for this initial one
     week vacation, the subsequent vacation qualifying date for such employee
     shall be May 14 and such employee shall have the period from May 14 to May
     14 in which to

                                       8
<PAGE>
 
     take his second one-week vacation. On the following May 14, the employee
     will become eligible to receive two weeks of vacation which will be taken
     during the vacation year from May 14 to May 14.

     A.   During the vacation years (May 14 to May 14) in which an employee's
          continuous years of service is five (5) or greater, but less than
          twelve (12) the employee will receive three (3) weeks of vacation.

     B.   During the vacation years (May 14 to May 14) in which an employee's
          continuous years of service is twelve (12) or greater, but less than
          twenty (20) the employee will receive four (4) weeks of vacation.

     C.   During the vacation years (May 14 to May 14) in which an employee's
          continuous years of service is twenty (20) or greater the employee
          will receive five (5) weeks of vacation.

     D.   Employees who are eligible for three (2) weeks vacation shall have the
          option to take one (1) week of their vacation at one (1) or more day
          intervals. Employees who are eligible for four (4) or more weeks
          vacation shall have the option to take two (2) weeks of their vacation
          at one (1) or more day intervals. Employees must notify the Company
          twenty (20) hours in advance of their regularly scheduled shift to be
          allowed one (1) or more vacation days. Eligible employees who are
          absent for three (3) or more consecutive work days shall have the
          option to receive vacation pay for the first regularly scheduled day
          not worked when at least twenty (20) hours notice is given to the
          Company prior to the second day provided the absence is verified by a
          doctor's statement. In such instance, no occurrences will be assessed.

     At the end of the vacation year (May 14), employees shall be paid for any
     unused vacation. In lieu of payment, employees may carry-over one (1) week
     of unused vacation into the next vacation year by notifying the company
     prior to April 1. In addition, employees with more than three (3) weeks
     vacation eligibility may elect to draw pay in lieu of time off for those
     eligible weeks over three (3). Except as noted herein, no vacations may be
     carried over from year to year.

     The Company shall have the right to limit the number of employees allowed
     to be off at any time in order to operate an efficient plant.

2.   Vacation pay will be computed by multiplying the employee's then straight
     time rate per hour by forty (40) hours in the case of employees entitled to
     one (1) week vacation, eighty (80) hours in the case of employees entitled
     to two (2) weeks vacation, one hundred and twenty (120) hours in case of
     employees entitled to three (3) weeks vacation, one hundred and sixty (160)
     hours in the case of employees entitled to four (4) weeks vacation, and two
     hundred (200) hours in the case of employees entitled to five (5) weeks
     vacation. In addition, applicable shift differentials will be included in
     an employee's vacation pay and holiday pay will also be included in the
     event that one of the eleven (11) recognized holidays falls within the week
     or weeks in which he takes his vacation. This holiday pay will not be
     withheld because of the provision in paragraph two (2) of Article VII.
     Employees regularly scheduled to work one or more days as an alternate
     leader will also have the leader rate for those scheduled days included in
     their vacation pay. Employees

                                       9
<PAGE>
 
     working on temporary assignments at the time they take their vacations will
     have their vacation pay computed on the basis of the average of their
     hourly straight time earnings, inclusive of shift differentials for the
     twelve (12) weeks preceding their vacation week or weeks.

3.   An employee will earn a full vacation as described in Paragraph 1 and
     Paragraph 2 in this Article by working fifteen hundred (1500) or more hours
     in his qualifying year if he has not completed five (5) years service. If
     he has completed five (5) or more years of service he shall be entitled to
     full vacation by working twelve hundred (1200) or more hours in his
     qualifying year.

     All employees who have completed their first six (6) months of service in
     their initial year and who failed to work as much as fifteen hundred (1500)
     hours in their initial year or who worked less than fifteen hundred (1500)
     hours in any subsequent vacation qualifying year during their first five
     (5) years of service be given vacation in accordance with the schedule
     given below:

<TABLE>
<CAPTION>
 
          Hours Worked             Fraction of a Whole Vacation
          <S>                      <C>
          1200 - 1400                          4/5
          900 - 1199                           3/5
          600 - 899                            2/5
          0 - 599                              None
</TABLE>

     All employees who have completed five (5) years or more of service who
     failed to work as much as twelve hundred (1200) hours in any vacation
     qualifying year will be given vacation in accordance with the schedule
     given below:

<TABLE>
<CAPTION>
 
          Hours Worked            Fraction of a Whole Vacation
          <S>                     <C>
          960 - 1199                           4/5
          720 - 959                            3/5
          480 - 719                            2/5
          0 - 479                              None
</TABLE>

     Time lost due to an employee being ill, taking earned vacation or having
     received an injury will be counted as time worked for the purpose of
     computing vacation earned, except that in case of prolonged absences for
     any reason including sickness or injury, an employee will cease to earn
     vacation benefits at the end of twelve (12) months from the time that such
     an extended time loss began.

     Vacation due employees who get laid off or have their employment terminated
     in the third (3rd) qualifying period which is the time between the second
     (2nd) anniversary and the following May 14, will be determined by using the
     number of hours provision set forth in paragraph 3 of this Article.

4.   Any new employee who leaves the Company or has his employment terminated
     for any reason before completion of six (6) months' service shall not be
     entitled to receive any vacation pay. An employee who has completed six (6)
     months service and leaves the Company, has his employment terminated for
     any reason, or begins to lose time because there is no work available shall
     be paid

                                       10
<PAGE>
 
     at that time, if he so desires, any vacation he has earned but not taken or
     previously received pay for.


5.   For the purpose of fitting the vacation plan to operating requirements, it
     shall be necessary for a period of one (1) month to elapse between
     vacations. Vacations will so far as possible, be granted at times most
     desired by employees and departmental seniority shall be taken into
     consideration in the allotment of the vacation period, but the final right
     to designate the vacation period, for the specific purpose of insuring the
     efficient operation of the plant, is reserved exclusively to the Company,
     and the Company may specify a week or weeks as the vacation period, or part
     thereof, if it should decide to close the plant for repair, maintenance, or
     other purposes. In such cases, employees entitled to one (1) week vacation
     will take their vacation during one (1) of such weeks and the employees
     entitled to two (2), three (3), four (4), or five (5) weeks vacation may be
     required if the plant is closed for as long as five (5) weeks to take all
     of their vacation during such period or if the plant be closed down for one
     (1) week to take the remaining weeks of their vacation in consecutive order
     either before or after.

     A request made by a senior employee after May 4 (for a preferred vacation
     period) will not be honored if this time has been selected prior to May 4
     by a junior employee. Selections of preferred vacation period made after
     May 4 of each year will be on the basis of first come, first served.

6.   Vacation checks will be available to employees on the same day as they
     receive their regular paycheck, or as soon as they are available.



                                   ARTICLE XI
                                   Seniority

1.   Without discrimination in regard to race, sex, color, age, or creed,
     departmental seniority shall apply in case of layoff, transfer, and
     promotion within and between the different departments. Seniority, as used
     herein, shall consist of the following factors:

     A.  Length of departmental service.
     B.  Qualification.
     C.  Ability.

     When factors B and C are relatively equal, length of departmental service
     shall govern.

2.   The departments are as follows:

     A.  Acetylene Department
     B.  Furnace Department
     C.  Packing, Crushing, and Raw Materials Department

                                       11
<PAGE>
 
     D.  Mechanical Maintenance Department
     E.  Control Lab
     F.  Safety and First Aid Department
     G.  Yard Department
     H.  Lime Department

3.   Employees who may be laid off from any and all departments will be assigned
     to the Yard Department. All layoffs from the plant will be from the Yard on
     the basis of plant seniority. When the Company decides to make a layoff
     from the Yard they will check the plant seniority list for the whole plant.
     If the most junior employees on the basis of plant seniority are not in the
     Yard Department, the Company will move out a sufficient number of junior
     employees by plant seniority from the various departments, subject to the
     exceptions listed below, to meet, or fill out, the quota or employees to be
     laid off. Exceptions to getting the most junior employee from the
     departments other than the Yard are listed below:

     A.   The Junior employee has a permanent skill classification above the
          level of helper and is currently assigned to a section of the
          Maintenance Department other than:

          1.  Maintenance Helper

     B.   The junior employee holds the job of First Aid Attendant and a senior
          employee is unable to meet the established qualifications for this
          job.

     C.   Removing the junior employee will result in either the Furnace,
          Acetylene, Lime or Packing Departments having more than ten percent
          (10%) of the total number of permanently assigned employees currently
          working in the department but have not attained departmental seniority
          status.

     All recalls from layoff outside the plant will be made on the basis of
     plant seniority and in accordance with Paragraph 6-H of this Article.
     People returning from layoff will return to a job in the department where
     they last worked, based on their departmental seniority. They would then
     have forty-eight (48) hours to accept that job, or any other job their
     seniority would entitle them to, as a permanent assignment. Should the
     employee choose such other job, it is understood the Company would have
     until the start of the following week to get the employee transferred
     thereto.

     If the need is such that in the opinion of the Company it can only be met
     by taking on skilled employees, the Company will first call back laid off
     employees who possess the required skills.

4.   There shall be a continuous ninety (90) calendar day probationary period
     for new production employees, for new mechanical maintenance and first aid
     employees, during which time the Company may discharge or discipline with
     or without cause, and its decision shall not be subject to grievance
     procedure. If new employees are continued in the employ of the Company
     after the stated period, they shall be immediately thereafter credited with
     seniority dated back to the date of employment.

                                       12
<PAGE>
 
5.   The Company may assign qualified employees to temporary duty not exceeding
     seven (7) calendar day. Such employee will receive pay in keeping with
     rights granted in paragraph ten (12) of Article VI. It is agreed that such
     assignments will only be made when there is no employee available and
     qualified remaining in the Yard Department.

6-A. Seniority shall not be interchangeable between any of the departments
     listed in numbered paragraph 2 above.

6-B. An employee will attain departmental seniority after he has worked for six
     (6) months in a given department. Time worked in a department, whether
     resulting from either a temporary or permanent assignment, will be recorded
     and counted toward this six (6) months required to attain departmental
     seniority status, if in each instance it is as much as five (5) days
     duration. Assignments for periods of less than five (5) days will not be
     counted for this purpose and no permanent record of them will be kept.

     Employees who have accumulated six months departmental seniority in a given
     department will not accrue further seniority in that department until they
     are permanently assigned to that department.

6-C. An employee attaining departmental seniority in accordance with Paragraph
     (B) above, and who later gets a job in some other department except the
     Yard as a result of being the successful bidder on a posted vacancy shall
     continue to accumulate seniority in his old department for a period of six
     (6) months. However, after completing six (6) months in this new
     department, his seniority in his old department shall revert back to the
     date he left the old department. If an employee should successfully bid
     from a department in which he has attained departmental seniority and
     before he attains departmental seniority in the new department transfers to
     a third department, he shall cease to accumulate seniority in the first
     department. Furthermore, his established departmental seniority in the
     first department will revert back to the date he transferred from it.

     An employee laid off from his department to the Yard Department will
     continue to earn departmental seniority in the department he was laid off
     from until at least one of the following things happens:

     a.   He gets a job in a department other than the one he was laid off from
          as a result of being the successful bidder on a posted job.

     b.   By using the provision of paragraph 6-D or 6-E of Article XI, he rolls
          into another department.

     c.   He declines to bid on a posted permanent opening in the department
          from which he was laid off.

     All employees laid off from the plant will continue for the length of time
     set forth in paragraphs 6-H (a) and 6-H (b) to earn plant seniority and
     departmental seniority in the last department they were laid off from and
     had reached departmental seniority status in.

                                       13
<PAGE>
 
     A Yard employee for the length of time that he remains in a department as a
     result of being drafted to fill a posted vacancy as set forth in the third
     paragraph of Section 6-G below, shall not reach departmental seniority
     status in keeping with Section 6-B above. Insofar as the provisions 6-C (a)
     and 6-C (b) above are concerned he shall be considered a Yard employee.

     Any Yard employee who gets a job in a department other than the one he was
     laid off from as a result of being the successful bidder on a posted
     vacancy and gets laid off from it before attaining departmental seniority
     status shall have the time spent in the last department added to his
     departmental seniority in the department other than the Yard he was laid
     off from.

6-D. An employee who has no established departmental seniority in accordance
     with paragraph "B" above may be displaced by another employee who has been
     laid off from his department provided the laid off employee possesses a
     greater amount of plant seniority.

6-E. An employee who is assigned to a department and has attained departmental
     seniority in accordance with Section "B" above and who holds also
     departmental seniority in another department, or in other departments will
     not be allowed to displace another employee in such other department even
     though the other employees may have less department seniority unless he is
     laid off from his department.

6-F. The Company will post in the gatehouse and in each department, notice of
     permanent openings to be filled. The Company will also post in the
     gatehouse and in each department, notices for vacancies resulting from
     employees expected to be off for a period longer than thirty (30) days due
     to their own illness or injury to themselves. Employees who become
     successful bidders on these latter vacancies will be handled as temporary
     employees in all respects except distribution of overtime. On this they
     will be treated as a new permanent employee coming into the department. In
     the Pack Department only, successful bidders on these latter vacancies will
     have the right to bid over employees from the Yard Department on temporary
     assignment in the Pack Department. Employees will have five (5) full days,
     exclusive of Saturdays, Sundays and holidays to bid for such vacancies.
     Bidding will be done when an employee registers his request, for a
     particular assignment, with the Personnel Office. Employees going on
     vacations or authorized leaves of absence must notify the Personnel Office
     in advance of their desire to be considered as applicants or "bidders", for
     any openings which may be advertised while they are away. Upon their return
     such employees will have forty-eight (48) hours, exclusive of Saturdays,
     Sundays and holidays, to accept or reject any assignment which may be
     theirs as a result of having been successful bidders. In cases of
     rejection, the second highest bidder will be declared the successful
     bidder.

     Bidding will be accomplished when an employee registers his request for a
     particular assignment in the Human Resource Department (Department Office
     if applicable). All vacancies (permanent, temporary or vacation) shall be
     posted, and the person bidding shall complete a bid sheet in triplicate
     with distribution as follows:

     1.  Copy to employee
     2.  Copy to Department Steward
     3.  Copy to Human Resources Department/Department Manager

                                       14
<PAGE>
 
     This paragraph pertains to all departments (including maintenance).

     Employees away from the job as a result of their own illness or having
     received an injury for all of the period that any opening was posted shall
     have the right to request and get such a job provided they are entitled to
     it by seniority and they make their request known within forty-eight (48)
     hours, exclusive of Saturdays, Sundays and holidays, after their return to
     work.

     In the event the Personnel Office receives no bids for a posted opening,
     the job will be filled by making an assignment from the Yard Department.
     This assignment will be made by drafting the most junior employee.
     (Exception: If this results in the assignment of an employee who has not
     qualified as a furnace tapper, this will not occur but rather the most
     junior employee who has qualified at the furnace will be drafted. Note: In
     this instance, when the more junior employee has completed tapper
     qualification, he shall replace the previously drafted employee on the
     posted opening). Should he refuse he shall be considered terminated. Any
     employee so drafted will make a good faith effort to qualify on the
     required jobs.

     Should the Company award a job to an employee in the belief that he or she
     was the successful bidder and it is later found that the job was awarded
     incorrectly, the change will be made to award the job to the proper person.
     In this case, the person first awarded the job shall not forfeit his or her
     right to the job he or she left.

6-G. Temporary assignments will be made from the Yard Department on the basis of
     plant seniority except for those employees who hold departmental seniority
     in the departments where the vacancies exist. In such cases departmental
     seniority will govern. In any individual case an employee, in keeping with
     the above seniority rights, will be assigned on the basis of his preference
     as on file with the Personnel Department as explained below. Yard employees
     will be allowed to register choices of six (6) departments; namely,
     Maintenance, Acetylene, Furnace, Lime, Pack and Yard. They will have the
     option of omitting any of the above named departments from the preference
     list and will only be considered for jobs on their preference list except
     as stated in the following paragraph. An employee may change his
     preferences after being offered an assignment or while working on an
     assignment but he must take assignments offered to him based on his current
     preference and must fill such assignment for its duration or at least until
     the beginning of the next pay period following the start of an assignment.
     An employee who has been assigned for more than one (1) week to a
     department which was not his first choice may transfer to the department of
     his first choice at the end of any week should an opening in his first
     choice department develop for the following week and he is entitled to it
     by seniority.

     Yard employees Weekly Preference Sheets shall be kept current and posted in
     Yard Office. Permanent Yard Department employees will have the option of
     training on all bid jobs.

     It is agreed that the practical application of provisions of this paragraph
     is not intended to alter the Company's policy of making effective use of
     the Yard Department as a labor pool for the entire plant and particularly
     the production departments. The Company will therefore have the right to
     fill any and all jobs which cannot be filled on a normal seniority basis,
     by drafting a

                                       15
<PAGE>
 
     sufficient number of junior employees on a reverse seniority basis. Should
     they refuse they shall be considered terminated.

     The Company may make temporary assignments from the yard for which the need
     develops after the start of the shift and, which last less than one (1)
     day, without regard to seniority.

     In order to minimize the number of times these job holders are transferred
     to other departments, the following will apply:

     a.   The Company will continue its practice of requiring newly-hired Yard
          employees to qualify as a furnace tapper.

     b.   Non-bid job holders may be sent to the furnace for cleanup even if not
          otherwise qualified. (Includes disqualified employees)

     c.   The employees holding these jobs will not be considered a part of the
          Yard Labor Pool until all other Yard employees have been assigned from
          the Yard.

     d.   The Company shall have, in its discretion, the right to assign the
          most junior qualified employee in the plant to temporary duty not
          exceeding seven (7) calendar days rather than assigning a bid-job
          employee from the Yard.

     It is agreed that the Yard foreman will not assign junior employees to fill
     temporary assignments of shorter duration than one (1) day when it is just
     as convenient to send a senior employee and other foremen will not
     deliberately hold back on getting Yard employees needed until after the
     start of the shift in order to evade the obligation to take employees who
     have been assigned on a seniority basis.

6-H. Employees will be called back to work when needed on the basis of plant
     seniority provided:

     a.   They have not been on layoff longer than the length of plant seniority
          they had when they were laid off up to two years of seniority. This
          applies to all employees hired after 7/1/84.

     b.   They have not been on layoff longer than two (2) years if they had
          less than five (5) years of plant seniority when they were laid off.

     c.   They have not been on layoff longer than three (3) years if they had
          five (5) years or more of plant seniority when they were laid off.

     d.   They can rate acceptable after taking a physical examination by the
          plant physician. This examination may be dropped on the option of the
          Company if the layoff has been of shorter duration than thirty (30)
          days.

                                       16
<PAGE>
 
     Any employee who may fail to pass the above referred to physical
     examination will be handled in accordance with the provisions of paragraph
     9 of this Article, provided they are eligible to return under the
     requirements set forth in Sections 6-H (a-b-c) above.

7.   An employee shall lose his seniority rating: (a) where he quits voluntarily
     or is absent from work without a reasonable excuse for a period of three
     (3) working days; (b) where he has been discharged for cause; (c) where the
     layoff has lasted longer than the time limits set forth above in Section 6-
     H, where, after having been laid off, he fails to return to work within
     five (5) working days after day of notice given by the Company to return to
     work. Additionally, for employees hired after 7/1/87, an employee will lose
     his/her seniority rating if such employee is drafted to a department and
     fails to qualify in that department.

8.   Employees laid off and desiring to avail themselves of the opportunity to
     be recalled must inform the Company of any change in address as notice will
     be sent only to the last known address by certified mail.

9.   In consideration of those employees who are and who become handicapped by
     physical disability or old age, it is agreed that such employees will be
     transferred to jobs the requirements of which are so limited as to permit
     such employees to qualify to perform, providing such jobs are in existence.

     It is agreed that the practical application of this provision will be as
     follows: An employee who becomes handicapped as set forth above will be
     given and will accept a job in the department he is currently working in if
     there is one that he can perform satisfactorily without modification. This
     will be done even though the handicapped person has less departmental
     seniority, but this is not intended to give the handicapped person any
     preferential treatment in case of layoff or call-back.

     In the event there is no job in this department that he can satisfactorily
     perform, the following will apply: He will be transferred to the Yard
     Department or any other department provided:

     a.   He has enough departmental seniority to entitle him to hold a job in
          that department.

     b.   There is in that department a job which he can do without
          modification. If it should happen in the course of seeking a place for
          a physically handicapped employee, that in his own department or the
          department into which he is being transferred, there is a job which he
          can do but it is already filled with a physically handicapped employee
          who holds less seniority rights, the senior employee shall be given
          the job. The employee thus replaced will be handled in the same manner
          as though this one job had never been given him.

     Any handicapped employee transferred to another department will have the
     right to bid for a permanent opening in a different department in
     accordance with Article XI, Section 6-F, provided there is in the
     department where the vacancy exists a job the requirements of which are so
     limited as to permit such employee to qualify to perform.

                                       17
<PAGE>
 
     It is agreed that in the event a handicapped employee is faced with layoff
     outside the gate he shall be allowed to exercise his plant seniority to get
     in any department a job that he is capable of immediately performing
     without modification.

     It is further agreed that the employee to be moved to make room for any
     handicapped employee must be the most junior non-handicapped on the basis
     of departmental seniority in the department who holds the job the
     handicapped employee is deemed able to perform without modification. The
     employee who is removed from his job by a handicapped employee shall have
     the right to exercise his seniority to secure a job.

     It is understood that employees who become handicapped, physically or
     adjudged temporarily or permanently partially disabled by a ruling of the
     Compensation Commission or by agreement between the party and the company
     will be allowed to continue in their regular job or on any other job their
     seniority may entitle them to provided they have the mental and physical
     ability to perform the work of such job without modification. In the event
     there is a disagreement between the parties with respect to the mental or
     physical ability of such handicapped or disabled employees to perform the
     work of any job to which he is entitled by seniority, he will be given a
     trial period if so recommended by the board of doctors. During this trial,
     when one is recommended, a decision will be reached on the disagreement.
     The board of doctors will consist of three (3) doctors; one selected by the
     employee, one selected by the Company and the third selected by their first
     two (2) doctors. The decision of this board will be final and binding on
     whether a trial period should be made and the duration of the trial. The
     fees will be shared equally by the Company and the Union.

10.  Any employee who may become physically handicapped to the extent that he is
     unable to hold a job in the bargaining unit will retain his seniority
     rights until such time that he would lose, or would have lost, his
     seniority as a result of a layoff made on a regular seniority basis in
     accordance with the provisions of this agreement.

11.  Shifts shall be given to employees holding permanent assignments according
     to their preference and departmental seniority. For the purpose of moving
     to a preferred shift, departmental seniority shall be the deciding factor.
     In making such moves a maximum of three (3) moves shall be permitted to
     fill one (1) vacancy. The final vacancy is to be filled by transferring or
     hiring a person directly into the department.

     The Company will give all yard people opportunity to file a shift
     preference along with their departmental preferences. It is understood that
     no Yard employee will continue for a second full week on a temporary
     assignment on a shift not in keeping with his shift preference unless it
     becomes necessary because of one or more of the following reasons:

     a.   Giving priority to departmental preference as provided in paragraph
          6-G of this Article.

     b.   There were additional vacancies in the department and the Personnel
          people did not become aware of them until after Wednesday of the
          previous week.

                                       18
<PAGE>
 
      For the purpose of assuring adequately trained employees, a period of
      sixty (60) days shall be allowed for training new employees in the
      Mechanical Maintenance Department on the day shift prior to assigning
      them to vacancies on shifts other than the day shift. In any other
      departments a period up to four (4) weeks training is to be used if five
      (5) or more vacancies exist at the same time within that department. The
      new employees will be distributed as nearly equal as possible. Resulting
      vacancies may be filled temporarily by assigning employees in the
      department with more seniority to the shift on which these vacancies
      occur.

12.   The jobs of leader and regularly scheduled alternate leader are
      considered separate promotions and each shall be filled on the basis of
      departmental seniority.

13-A. Any employee in the bargaining unit who may be promoted to a supervisory
      job outside the bargaining unit may within one (1) year following
      promotion elect to return to a job in the bargaining unit. Such employee
      shall continue to accumulate departmental and plant seniority for a period
      of six (6) months after the date of his promotion. During this twelve (12)
      month period, he shall continue membership in the Union by paying the
      regular inactive dues of the Union. After one (1) year, the supervisor
      will give up all seniority rights in the bargaining unit. This means that
      he could only return to the bargaining unit as a new employee.

      Any supervisory employee in the Louisville Plant who may be transferred to
      another of the Company's operation shall forfeit all seniority rights in
      the bargaining unit.

13-B. The Union recognizes that the Company has a policy of promoting from
      within and in the practical application of this policy does from time to
      time appoint Acting Foremen to fill temporary vacancies in the supervisory
      force or to enlarge the supervisory force to meet a temporary need. It is,
      therefore, agreed that such Acting Foremen do not lose any seniority right
      by having so served.

      The Company's policy in regard to the use of Acting Foremen is as follows:

      a.   To fill in for regular foremen who are not on the job because of
           vacations, illnesses, leaves of absences, or other such reasons, plus
           the utilization of Acting Foreman to fill in situations where
           schedule considerations leave a day or so in a week which is
           impossible to efficiently schedule.

      b.   To cover temporary needs due to fluctuations in production schedules
           or other temporary needs which the Company is not able to definitize.

      In carrying out these policies, the Company will make assignments of
      Acting Foremen in such a fashion that no one person shall be allowed to
      act as a foreman in excess of forty-five (45) days in any contract year,
      either consecutive or cumulative, unless no other qualified employee
      agrees to take the assignment. The Company will prepare a list on July 1st
      of each year of all employees deemed qualified to be Acting Foremen in
      each department. Such person must be permanently assigned to the
      department in which he acts as foreman at the time he is given the Acting
      Foremen assignment. Any employee desiring to have their name deleted from
      the list may do so by notifying

                                       19
<PAGE>
 
      their supervisor by July 15th of each year. If employees become qualified
      for Acting Foremen they may be added to the eligible list at the times of
      their qualification.

      If any employee is used as Acting Foremen in excess of forty-five (45)
      days in any contract year and there are other qualified employees whose
      name have not been deleted from the list, the Company will pay the most
      senior eligible employee on the qualified Acting Foremen list the straight
      time rate for all hours worked after the Company has been notified that an
      employee has exceeded the forty-five (45) days.

      The Company will charge any overtime worked by an Acting Foremen to his
      department.

      In lieu of using Acting Foremen, the Company may elect to utilize a leader
      and pay such leader responsibility pay.

13-C. Any employee appointed or elected to Union duties in the International
      Brotherhood of Firemen and Oilers shall be granted a leave of absence with
      seniority accumulative while in such service. Renewal will be considered
      automatically granted each year for a one-year extension of such leave
      upon application in writing requesting such renewal.

14.   The Company will in case of layoff give three (3) days notice to employees
      with six (6) months, but less than five (5) years, of plant seniority. The
      Company will, in case of layoff, give seven (7) days notice to employees
      with five (5) or more years of plant seniority.

      The notice of obligations set forth above will be fulfilled by posting the
      proper notice on the plant bulletin boards. The days referred to above
      will be counted as the calendar days following the day of posting.

15.   The Company will post seniority lists for all employees twice each year at
      intervals of six (6) months. The employees shall have sixty (60) days from
      date of posting to question accuracy of the seniority shown if the
      seniority listing is questioned by an employee after sixty (60) days and
      it is found the seniority date is incorrect the Company will make
      necessary corrections. It is further agreed that the Company will not be
      held liable for losses of any nature suffered by an employee as a result
      of mistakes in the seniority posting called to the attention of the
      Company after the sixty (60) day period has elapsed. The letter of
      agreement on this subject dated May 26, 1971, outlines the total and
      complete understanding between the parties. It is agreed that the Company
      will keep posted or otherwise readily available in the gatehouse and in
      all departments a copy of the master seniority sheets.

16.   Employees who are disabled and unable to work for a continuous period of
      two (2) or more years will be deleted from the Seniority list and company
      rolls. Should such employee later produce medical evidence that indicates
      they have recovered to the extent they can satisfactorily return to active
      duty, they will be placed back on the Seniority list in the place they
      would have been had they not been disabled. They would also be reentered
      on the Company rolls.

                                       20
<PAGE>
 
                                 JOB PREFERENCE

                                Yard Department

A.   The normal bid jobs in the Yard department are hauler, alternate hauler,
     sweeper operator, paste handler and bobcat operator.

B.   Alternate Hauler - will perform the Hauler job on the Hauler's off days.

C.   Flatbed truck, dump trucks, water trucks, and bush hog, are operated on an
     as needed basis. The jobs will be bid out to the most senior employees in
     the department.

D.   When temporary vacancies occur they will be offered to the most senior
     qualified employee. For the purpose of job preference, a temporary vacancy
     is defined as absence of less than thirty (30) days created by a leave of
     absence, vacation, absenteeism, illness or injury.

E.   In the Yard department, seniority is plantwide seniority.

F.   The "Bobcat" in the Yard Department will be operated by a Yard employee on
     any job normally done by the Yard.

G.   The coke plant dust truck may be emptied by coke plant employees when there
     is no yard hauler on the shift.

H.   Permanent job holders may roll outside the Yard Department when they are
     permanently displaced from their job.


                               Furnace Department

All regular jobs in the Furnace Department that require performance of five (5)
days or more per week will be filled on the basis of preference by departmental
seniority.  Regularly scheduled relief jobs of less than five (5) days per week
will be filled on the basis of preference by departmental seniority.  In the
event such jobs are not selected by persons holding department seniority then
those who have been in the department the longest will be given the opportunity
to fill such jobs.

In filling permanent vacancies the following shall be utilized:

1.   Jobs will be posted on the department bulletin board for five (5) days and
     those interested shall sign for such openings in the Department Manager's
     office.

2.   In the filling of permanent vacancies, furnace employees may bid to other
     shifts in the Furnace Department.

                                       21
<PAGE>
 
3.   Three additional permanent postings shall be considered the maximum to be
     posted as the result of the original permanent vacancy.

4.   The remaining permanent vacancy will be filled in accordance with the
     appropriate portions of Article XI, Section 6-F (dealing with permanent
     vacancies).

Once an employee has selected a permanent job, he cannot be rolled by a senior
employee except that an employee displaced from his selected job by a reduction
in force or for any other reason beyond his control may exercise his
departmental seniority and roll a junior employee.  If the Furnace is expected
to be down for four or more hours during a shift, employees may exercise
seniority for that shift.

All employees entering a department on a permanent basis after July 1, 1978,
will be required to qualify for all jobs or be removed from that department.
All employees who are permanent members of a department prior to July 1, 1978,
shall have the option to qualify for jobs in their department.

When temporary vacancies occur, they will be offered to the most senior
qualified employee on the shift.  For the purpose of job preference, a temporary
vacancy is defined as a vacancy of less than thirty (30) days, created by leave
of absence, vacation leave, absentee, illness or injury. When it is definitely
known that temporary vacancy will exist for thirty (30) days or more, job
preference, in accordance with the principles set forth above for permanent
openings, will be immediately applied.  However, when the temporary absentee
returns, he will be permitted to go back to the job that he left, providing that
his right to the job has not been changed as a result of changes in production
levels or other unforeseeable circumstances.  If his rights have been changed
then he will return to a job which his departmental seniority entitles him to.

In the event that he returns to the job he held when he left, then other people
in the department who moved into other jobs as a result of his first leaving his
job will also return to the jobs they held prior to the time of the temporary
vacancy, provided that their job rights have not changed.

In filling a temporary vacancy which is determined to exist for thirty (30) days
or longer, each employee on a shift will be permitted to make one (1) move only
for each original vacancy. Succeeding vacancies caused by employees moving as
the result of the original vacancy will not be considered as additional
vacancies entitling employees on the shift to make more than one (1) move as a
result of the first opening.  In the filling of temporary vacancies for less
than thirty (30) days, only one move will be permitted.  In the event that the
filling of temporary vacancies of less than thirty (30) days in accordance with
the above procedure results in the Company being unable to fill the remaining
vacancy with an experienced qualified employee then the Company must assign the
least senior, qualified, experienced employee to the vacancy.  If in complying
with the above it is necessary for a leader to perform a non-leader job he shall
be paid leader pay.

Furnace department employees working overtime will fill the open position
necessitating the overtime.

Jobs will be posted on the bulletin board for five (5) days and those interested
will sign for them.

                                       22
<PAGE>
 
During the annual furnace shutdown, a number of employees will be allowed to
exercise their seniority to work as maintenance helpers instead of remaining at
the furnace.  This procedure shall operate according to the following rules:

A.   One choice shall govern the entire shutdown period.

B.   Furnace department employees must register their choice with the Human
     Resources Department at least one month prior to the start of the shutdown.

C.   If there are insufficient volunteers to remain in the furnace the most
     junior employees will stay in the furnace department.

New Hot Chill crane operators will be given two (2) weeks training prior to
being left alone on the job.

Effective July, 1993, the two tappers on each shift shall be paid leader's pay
rate.

Changes made to fill any permanent vacancy will be put into effect at the
beginning of calendar weeks and if such permanent openings occur in the middle
of the week they will be filled on a temporary basis until the start of the
calendar week.   Nothing in all of the above will be construed or interpreted to
mean that anything in this entire statement on job rights will add to or
subtract from an employee's rights under Section 9, Article XI of the existing
Agreement.

                               PACKING DEPARTMENT

The Packing Department is divided into four (4) units; namely, Raw Materials,
Crusher, Packing and Ball Mill.  The employees in this department will be
allowed to exercise departmental seniority or if they have not attained
departmental seniority they will exercise seniority based on length of service
in the department in obtaining employment in their preferred unit.  Pack
employees have exclusive rights to the hauling and packaging of carbide for
shipment.

Once an employee has selected a unit, he cannot be rolled from such unit by a
senior employee from another unit except that an employee displaced from his
selected unit by reduction in force or for any other reason beyond his control,
will exercise his seniority within 30 days and roll a junior employee in another
unit unless said employee returns to his old job on a permanent basis within the
30 day period.  A non-leader or non-alternate leader may not roll a leader on a
day-to-day basis, if the leader or alternate leader has been on the job for as
much as four hours.

An employee displaced from his chosen shift by a reduction in force or other
reasons beyond his control will be allowed to displace any junior employee in
any unit.

The employees in each of the four (4) units will be allowed to exercise
departmental seniority in selecting a job on a daily basis at the start of each
shift.  The primary Crushing Unit will follow their present rotating frequencies
which are of less than one (1) day.  New employees entering the unit will be
expected to learn all the jobs in the unit in a reasonable length of time.

                                       23
<PAGE>
 
All employees that come into the department on a permanent basis after November
1, 1959, and after having been in the department for a four (4) week period will
be required to learn all of the jobs in all of the units or be removed from the
Department.  Exceptions to this are the leader's jobs in the Pack and Primary
Crusher Units.

When a vacancy occurs for a temporary leader, the job will first be offered to
permanently assigned employees in the department by seniority and
qualifications.  If the job is refused by permanently assigned employees, it
would then be offered to employees temporarily assigned to the department.  If
the job is refused by temporarily assigned employees, it will be assigned to the
least senior qualified temporarily assigned employee, if one is in the
department, or to the least senior qualified permanently assigned employee, if
there is no qualified temporarily assigned employee in the department.

Company will train two (2) leaders for each shift over and above the employees
holding those jobs.  These employees will be available to replace the regular
leaders on their shift.  The leader-trainees will be offered training by shift
seniority.  If all employees on the shift refuse, the least two (2) senior
employees will be trained.  Pack employees entering Pack Department prior to
November 1, 1959 will be exempt from being drafted as a leader-trainee.  With
its present operation, the Company agrees to maintain leaders in the Ball Mill.

It is understood that no more than one (1) employee will be trained at a time
and that he will be trained within a period of eight (8) weeks.  During this
training period he will be a member of the Packing unit if this should be
necessary to expedite the training and the junior qualified employee will take
his place.

For the purpose of job or unit preference, a temporary vacancy is defined as a
vacancy of less than thirty (30) days, created by a leave of absence, vacation
leave, absentee, illness or injury. When it is definitely known that a temporary
vacancy will exist for thirty (30) days or more, job preference in accordance
with the above permanent job rules will be immediately applied. However, when
the temporary absentee returns he will be permitted to go back to the job he
left, providing that his right to the job has not changed as a result of changes
in production levels or other unforeseeable circumstances.  If his rights have
been changed then he will return to a job which his departmental seniority
entitles him to.  In the event that he returns to the job he held when he left,
then other people in the department who moved into other jobs as a result of his
first leaving his job will also return to the jobs they held prior to the time
of the temporary vacancy, provided, that their job rights have not changed.

In filling a permanent vacancy or a temporary vacancy which is determined to
exist for thirty (30) days or longer, each employee on a shift will be permitted
to make one (1) move only for each original vacancy.  Succeeding vacancies
caused by employees moving as a result of the original vacancy will not be
considered as additional vacancies entitling employees on the shift to make more
than one (1) move as a result of the first opening.  In the filling of temporary
vacancies for less than thirty (30) days, only one move will be permitted.  In
the event that the filling of temporary vacancies of less than thirty (30) days
in accordance with the above procedure results in the Company being unable to
fill the remaining vacancy with an experienced, qualified employee, then the
Company may assign the least senior, qualified experienced employee to the
vacancy.

                                       24
<PAGE>
 
Jobs in the Packing, Crushing, Raw Materials and Ball Mill Departments will be
posted on the Bulletin Board for five (5) days and those interested will sign
for them.  Changes made to fill any permanent vacancy will be put into effect at
the beginning of calendar weeks and if such permanent openings occur in the
middle of the week they will be filled on a temporary basis until the start of
the calendar week.

Any employee who reports for work late and has not called in prior to the start
of the shift or has called but is more than two (2)  hours late, will accept the
job available at the time.

The cold chill crane operator will be posted as a five day job.

Nothing in all the above will be construed or interpreted to mean that job
preference rights include the right to move from shift to shift (except for
successful bidders on posted openings) or that anything in this entire statement
on job rights will add to or subtract from an employee's rights under Section 9,
Article XI of the existing Agreement.

A.   Training

     1.   To ease the training backlog, four (4) summer students will be added
          to the Pack Department to assist the training effort. Since these
          personnel are intended to facilitate training, no extra vacation shall
          be permitted as a result of their presence, nor shall the ensuing
          training be interrupted by borrowing such personnel to avoid draft
          overtime.

    2.    In future summers, if the training deficit continues, summer students
          will again be added under the same rules. One summer student shall be
          added for each twenty (20) weeks of training lag, up to a maximum of
          four (4) students.

    3.    When the students return to school, current practices shall apply to
          ongoing trainees.

    4.    Bargaining unit employees currently disqualified from the Pack
          Department shall (as openings occur) be allowed to rebid into the Pack
          Department. They shall be allowed to rebid into the Pack Department.
          They shall be allowed one (1) successful bid. If they are again
          disqualified, they may not rebid.

                              ACETYLENE DEPARTMENT

The normal and accepted job assignments in the Acetylene Department are: Dry
Generator Control Room and Dry Generator Outside Employee.  The Utility Employee
performs all miscellaneous work assignments on a day to day basis.  All regular
jobs in the Acetylene Department that require performance five (5) days or more
per week and regularly scheduled relief jobs will be filled on the basis of
preference by departmental seniority.  In the event such jobs are not selected
by persons holding departmental seniority then those employees who have
completed the training described below will be given the opportunity to fill
such jobs.

When new employees are needed and taken into the department they will be trained
by rotating them over regularly scheduled relief jobs until they have spent a
maximum of two (2) weeks on each of the jobs

                                       25
<PAGE>
 
mentioned above, plus an additional two (2) weeks in the Compressor Room. A
Control Room Operator can become qualified only after having had two (2) weeks
training. An exception to this is when an employee possesses a handicap which
prevents him from performing the necessary duties. In no event will the training
period exceed twenty-six (26) weeks of active working time in the department.
All employees that enter the Department on a permanent basis will be required to
learn all of the jobs or be removed from the Department. Employees who are
holding these regularly scheduled relief jobs will be expected to take the
permanent assignment of the new employee for the two (2) week or four (4) week
period necessary to complete the training and at the completion of that period
will return to their regularly assigned jobs. An employee permanently assigned
to the Acetylene Department may bid on a job any time he wishes, but the
contract obligations to assign only qualified people to fill permanent openings
will be adhered to.

Once an employee has selected a job, he cannot be rolled by a senior employee
except that an employee displaced from his selected job by reduction in force or
for any other reason beyond his control, may exercise his departmental seniority
and roll a junior employee and with the exception that a non-leader or non-
alternate leader may not roll a leader or alternate leader.

The above covers permanent vacancies.

For the purpose of job preference, temporary vacancy is defined as a vacancy of
less than thirty (30) days, created by a leave of absence, vacation leave,
absentee, illness or injury.  When it is definitely known that a temporary
vacancy will exist for thirty (30) days or longer, job preference in accordance
with the permanent opening rules will be immediately applied.  However, when the
temporary absentee returns he will be permitted to go back to the job that he
left, provided that his right to the job has not been changed as a result of
changes in production levels or other unforeseeable circumstances.

If his rights have been changed then he will return to a job which his
departmental seniority entitles him to.  In the event that he returns to the job
he held when he left, then other people in the department who moved into other
jobs as result of his first leaving his job will also return to the jobs they
held prior to the time of the temporary vacancy, provided that their job rights
have not changed.

Employees in the Acetylene Plant who temporarily are prevented from performing
their regular jobs because of injury or recovery from illness will be allowed to
displace employees who are performing jobs which the injured employees or the
employees who are recovering from illness are capable of performing.

For a known temporary vacancy of one calendar week or more, the vacancy will be
posted within the department and will be filled by departmental seniority.  If
no permanent departmental employees bid on the vacancy, the Utility Employee or
Relief Utility Employee will be assigned to fill the vacancy.  Temporary
vacancies of less than one calendar week will be filled on a day by day basis by
the Utility Employee or Relief Utility Employee in accordance with departmental
seniority.

If the employee scheduled to fill a temporary vacancy is not qualified for the
job, the Company will assign the least senior qualified employee, on the shift,
to the vacancy.

                                       26
<PAGE>
 
When there are both regular and full-time employees and regularly scheduled
relief employees working on the same work assignment and the crew of that
particular assignment has to be reduced, the employees will be taken off in
accordance with their departmental seniority.

An employee reporting for work late will be allowed to fill his regular job
unless he is more than two (2) hours late, provide he reports such tardiness.

Employees trading off days will trade jobs for the days involved in the trade.
Should the trade involve a person in the Utility Group, the one coming into the
Utility Group due to the trade will not be allowed to bid out of the Utility
Group but will use the seniority of the person with whom he traded only for the
purpose of remaining in the Utility Group.

In filling a permanent vacancy or a temporary vacancy which is determined to
exist for thirty (30) days or longer, each employee on a shift will be permitted
to make one (1) move only for each original vacancy.  Succeeding vacancies
caused by employees moving as the result of the original vacancy will not be
considered as additional vacancies entitling employees on the shift to make more
than one (1) move as a result of the first opening.  In the filling of temporary
vacancies for less than thirty (30) days, only one (1) move will be permitted.
In the event that the filling of temporary vacancies of less than thirty (30)
days in accordance with the above procedure results in the Company being unable
to fill the remaining vacancy with an experienced, qualified employee then the
Company may assign the least senior qualified, experienced employee on the shift
in the department.

For the purpose of an orderly and expedient administration of all of the above
rules and regulations, job preference listings for each shift in the above
department will be maintained on bulletin boards.  Employees will be expected to
keep their preferences current on this list so that if a vacancy occurs, the
foreman can go to the list and immediately make the necessary job changes.  The
most senior employee expressing a preference for the open job will be assigned
to and must accept the job.

When an employee submits a bid for a job he shall specify whether he is bidding
on a five (5) day job or a relief job.

When new and permanent openings in the Acetylene Department develop as a result
of starting a new operation or of the Company deciding that more employees are
required to satisfactorily meet the work demands of existing operations, the
Company will advertise to fill such openings.

Beginning with the first full pay period in November in each year of this
agreement, employees shall be permitted to exercise their department seniority
for the purpose of assignment to jobs (including, but not limited to, leader
jobs and alternate leader jobs) of their preference.

To administer the foregoing provision, the Company on October 10, of each year
will begin to ask employees, in the order of their department seniority on each
shift, to express their job choices.  Each employee must express his choice at
the time of this contact and his expressed choice shall be final. Any employee
who fails to express a choice at the time of this contact shall forfeit his
choice and will be assigned, on the basis of seniority, to any jobs that are
left after assignments have been made in accordance with the

                                       27
<PAGE>
 
preferences expressed in the completed inquiry. This procedure will be completed
not later than October 20 of each year.

Employees on vacation or on authorized leaves of absence shall register their
first three (3) choices with their foreman before they go on vacation or on
leave.  The choices registered with their foreman will be considered their
choices as of October 10.

All alternate leaders will replace the leaders for temporary absence of thirty
(30) days or less.

In the Dry Generator Plant the person regularly scheduled to cover the off days
of the leader and alternate leader will replace the alternate leader for
temporary absences of thirty (30) days or less. Temporary vacancies of alternate
leaders in the Acetylene pipe line section will be filled by departmental
seniority.

The Company and the Union will endeavor to work out satisfactory procedures so
that employees in the Acetylene pipe line section will be filled by departmental
seniority.

The Company and the Union will endeavor to work out satisfactory procedures so
that employees in the Acetylene Plant who have served six (6) months or more but
who have not worked on all jobs in the department will be given the same
training opportunities as a new employee, so that the said older employees will
be qualified to exercise their job preference when future openings develop in
the Acetylene Plant.

Changes made to fill any permanent vacancies in any of the departments mentioned
above will be put into effect at the beginning of calendar weeks and if such
permanent openings occur in the middle of the week they will be filled on a
temporary basis until the start of the calendar week.

Nothing in all the above will be construed and interpreted to mean that job
preference rights include the right to move from shift to shift or that anything
in this entire statement on job rights will add to or subtract from an
employee's rights under Section 9, Article XI of the existing Agreement.

                                LIME DEPARTMENT

The normal and accepted job assignments in the Lime Department are: Silo, Barge,
Pond Material, Lime Handling and Lime Truck Driver.

Jobs in the Lime Department will be filled on the basis of departmental
seniority.  In the event departmental seniority is equal, jobs will be awarded
on the basis of plant seniority.
 
All regular jobs in the Lime Department that require performance five (5) days
or more per week will be filled on the basis of preference by departmental
seniority.  Regularly scheduled relief jobs of less than five (5) days per week
will be filled on the basis of preference by departmental seniority.  In the
event departmental seniority should be equal, plant seniority will prevail.

Once an employee has selected a job, he cannot be rolled by a senior employee
except an employee displaced from his selected job by reduction in force or for
any other reason beyond his control, may exercise his

                                       28
<PAGE>
 
departmental seniority and roll a junior employee but with the exception that a
non-leader or non-alternate leader may not roll a leader or alternate leader.

All employees entering a department on a permanent basis after July 1, 1978,
will be required to qualify for all jobs or be removed from that department.
All employees who are permanent members of a department prior to July 1, 1978,
shall have the option to qualify for jobs in their department.

For the purpose of job preference, when it is definitely known that temporary
vacancies will exist for thirty (30) days or more, job preference as set forth
above for permanent openings, will be immediately applied.  However, when the
temporary absentee returns, he will be permitted to go back to the job that he
left providing that his right to the job has not been changed as a result of
changes in production levels or other unforeseeable circumstances.  If his
rights have been changed then he will return to a job which his departmental
seniority entitles him to.

In the event that he returns to the job he held when he left then other people
in the department who moved into other jobs as a result of his first leaving his
job will also return to the jobs they held prior to the time of the temporary
vacancy, provided that their job rights have not changed.

In filling a permanent vacancy or a temporary vacancy which is determined to
exist for thirty (30) days or longer, each employee on a shift will be permitted
to make one (1) move only for each original vacancy.  Succeeding vacancies
caused by employees moving as a result of the original vacancy will not be
considered as additional vacancies entitling employees on the shift to make more
than one (1) move as a result of the first opening.  In the filling of temporary
vacancies of less than thirty (30) days, only one move will be permitted.  In
the event that the filling of temporary vacancies less than thirty (30) days in
accordance with the above procedure results in the company being unable to fill
the remaining vacancy with an experienced, qualified employee, then the Company
must assign the least senior, qualified experienced employee to the vacancy. If
in complying with the above it is necessary for a leader to perform a non-leader
job he shall be paid leader pay.  With its present operations, the Company
agrees to maintain leaders in the Lime Department.

When a vacancy occurs for a temporary leader, the job will first be offered to
permanently assigned employees in the department by seniority and
qualifications.  If the job is refused by permanently assigned employees, it
would then be offered to employees temporarily assigned to the department.  If
the job is refused by temporarily assigned employees, it will be assigned to the
least senior qualified temporarily assigned employee, if one is in the
department, or to the least senior qualified permanently assigned employee, if
there is no qualified temporarily assigned employee in the department.

Employees on permanent assignment will not be allowed to bid on vacancies of
shorter duration than thirty (30) days, except for vacation vacancies.  If the
employee scheduled to fill a temporary vacancy is not qualified for the job,
then the Company will assign the least senior qualified employee to the vacancy.
 
Lime employees who are removed from the Lime Department for lack of work, will
be moved to the Yard Department.  They will retain the right to return to their
job in the Lime Department for a period of six (6) months unless they exercise
their seniority to move into another job. Their wages will be maintained

                                       29
<PAGE>
 
at their Lime Department rates for a period of two weeks. After this two week
period, their wages will be adjusted to the job they are assigned to while
working out of the Yard department.

For the purpose of an orderly and expedient administration of all of the above
rules and regulations, job preference listings for each shift will be maintained
on bulletin boards. Employees will be expected to keep their preferences current
on this list so that if a vacancy occurs, the foreman can go to the list and
immediately make the necessary job changes.  The most senior employee expressing
a preference for the open job will be assigned to and must accept the job.

When permanent employees are needed and taken into the department they will be
trained by rotating them over regularly scheduled jobs until they have spent a
maximum of two (2) weeks on each job.  Employees who hold these regularly
scheduled jobs will be expected to take the permanent assignment of the new
employee for the two (2) week period necessary to complete the training and at
the completion of that period will return to their regularly assigned jobs.

The Company and the Union will endeavor to work out satisfactory procedures so
that employees in the Lime Department who have not worked on all jobs in the
department will be given the same training opportunities as a new employee so
that the said older employees will be qualified to exercise their job
preferences, according to seniority, when future openings occur.

Changes made to fill any permanent vacancy will be put into effect at the
beginning of calendar weeks and if such permanent openings occur in the middle
of the week they will be filled on a temporary basis until the start of the
calendar week.  Nothing in all of the above will be construed and interpreted to
mean that job preference rights include the right to move from shift to shift or
that anything in this entire statement on job rights will add to or subtract
from an employee's rights under Section 9, Article XI of the existing Agreement.

                                  ARTICLE XII
                      Grievance Procedure and Arbitration

1.   In the adjustment of all grievances, the following procedure shall apply:

     Step 1: Any employee having a grievance shall within five (5) days of the
     time that the event took place take the matter up with his foreman with or
     without his departmental Steward or the Plant Chairman of the Union being
     present. In case the matter cannot be satisfactorily settled within twenty-
     four (24) hours, resort will be had to Step 2.

     It was brought out that under certain circumstances an employee could fail
     to become aware of a misapplication of contract terms within the five (5)
     day time limit set forth above. The Company and the Union agreed that in
     such a case, the beginning of the five (5) day period would be immediately
     after the time that the employee had reasonably clear evidence that the
     complained of act had taken place.

     Step 2: The grievance shall be reduced to writing by the employee or his
     departmental Steward (on forms mutually satisfactory to the Union and the
     Company and furnished by the Union) and the

                                       30
<PAGE>
 
     parties mentioned in Step 1 above shall submit the same to the Department
     Head involved within two (2) days after the time mentioned in Step 1 has
     expired. In case the matter be not satisfactorily settled at this Step
     within two (2) days after its submission to the Department Head, resort
     will be had to Step 3.

     Step 3: Within two (2) days after the time mentioned in Step 2 above has
     expired, the grievance shall be submitted to the Plant Manager or a
     designated representative, by the parties mentioned in Step 1 and Step 2
     above, including a Union Business Representative or his designated
     representative. The parties will use their best efforts to settle the
     matter at this Step; however, if they are unable satisfactorily to settle
     the matter at this Step within seven (7) days after submission to the Step,
     resort shall be had to conciliation as provided in Step 4, or the parties
     may mutually agree to omit Step 4 of the grievance procedure and resort
     shall be had to arbitration as provided in Step 5.

     Step 4: In the event a grievance is not settled in Step 3, the parties will
     immediately contact the Louisville Labor-Management Committee and request
     that a conciliator be furnished. If it should happen that the Louisville
     Labor-Management Committee were unable to furnish a conciliator, the
     Federal Mediation and Conciliation Service would be contacted. The person
     thus designated to hear the dispute would contact both the Union and the
     Company for the purpose of arranging a meeting. It is understood that an
     earnest effort would be made to speedily settle the grievance at this
     level, but the time used in Step 4 would not exceed ten (10) days unless
     the Company and the Union should mutually agree that more time was needed.
     If the parties fail to settle the grievance in the manner set forth in this
     Step, resort shall be had to arbitration as provided in Step 5.

     Step 5: The Company and the Union shall agree upon an arbitrator who will
     hear his dispute or grievance, but who shall not have authority to amend or
     modify this Agreement. The decision of the arbitrator shall be final and
     binding upon the Parties. The arbitrator shall be selected within ten (10)
     days following the receipt by either party from the other or the request
     for the appointment of an arbitrator to hear the matter and settle the
     dispute. In case the Parties cannot agree upon an arbitrator within such
     period, they shall make a mutual request to the Director of the Louisville
     Labor-Management Committee for a panel of five (5) available arbitrators.
     The Parties will select an arbitrator from this panel or a second one
     obtained in the same manner as the first.

     The fees and expenses of the arbitrator shall be shared equally between the
     parties.

     It is specifically understood that only matters involving the application
     or interpretation of this contract go to arbitration.

2.   Saturdays, Sundays, and holidays shall not be counted as days for the
     purpose of this Article.

3.   At any step of the Grievance Procedure, the employee affected may be called
     in by the Shop Committee and the employee shall be compensated at his
     straight time rate for all reasonable time

                                       31
<PAGE>
 
     spent in discussing his grievance with the Shop Committee and for the time
     spent in any of the steps.

4.   If an employee is discharged and he feels he has been unjustly discharged
     the matter may be submitted to Grievance Procedure, starting with the
     second Step, providing the employee makes his claim within five (5) days
     after his discharge.

5.   The time limits mentioned in this Article are specified for the purpose of
     expeditiously disposing of grievances and disputes, but may be extended by
     mutual agreement. however, the waiver by the Company or the Union of any
     such time limits in any case shall not constitute a waiver by the Company
     or the Union of any such time limits or its right to insist on adherence
     thereto in any subsequent case.

6.   The Shop Committee shall consist of any five (5) of the duly elected Plant
     Officers or Stewards of the Union.

7.   Any and all grievances presented to the Company in writing shall be
     answered in writing by the Company.

8.   It is agreed that the Plant Chairman of the Union and the Departmental
     Stewards will notify their respective foremen before leaving the job to
     handle or discuss grievances. It is agreed further that Departmental
     Stewards on duty at the Plant are forbidden to handle grievances or related
     matters for any employees outside of their own department.

9.   Unless an additional number is agreed to in advance by the Company, the
     maximum number of employees who may attend a grievance meeting, in addition
     to the Plant Chairman or his designee and the Steward, shall be two (2).
     Witnesses may be called in addition to the above maximum.

10.  The Company agrees that an employee has the right to union representation
     in disciplinary actions.

11.  Shop Chairman.

     In order to allow the Union shop chairman to be present for ordinary
     day-to-day collective bargaining matters, he or she shall work the day
     shift without regard to his seniority.

     Recognizing that this may cause scheduling difficulties the Company may
     transfer the shop chairman to the Yard providing however,

     A.   The shop chairman shall continue to be paid his/her base rate.
          (Includes Leader rate).

     B.   He/She shall continue to accrue seniority in his/her department.

     C.   He/She shall have the opportunity to work overtime in his/her normal
          department.

                                  ARTICLE XIII

                                       32
<PAGE>
 
                              Strikes and Lockouts

All disputes and grievances arising hereunder shall be peaceably settled in
accordance with procedure provided by this Agreement which the parties recognize
as adequate and fair.  Pending the settlement of any grievance or dispute, there
shall be no lockout by the Company and neither the Union nor any of the
employees will engage in strikes, picketing, slowdowns, work stoppages, sit-
downs, or sit-ins that would interfere with the Company's normal operation.

                                  ARTICLE XIV
                               Safety and Health

1.   The Company shall maintain all reasonable and necessary precautions for
     safeguarding the health and safety of its employees, and all employees will
     cooperate in the implementation thereof. Both the Company and the Union
     recognize the Company's primary responsibility to provide for the
     prevention, correction, and elimination of all unhealthy and unsafe working
     conditions and practices. The Union agrees that it will encourage all
     employees to work in a safe manner.

     The Company further agrees that it will continue to comply with all
     applicable state and federal health and safety standards.

2.   Employees will at all time exercise safety in the operation and performance
     of their duties and will immediately report all injuries to the First Aid
     Department; and the Company will, on all shifts, provide first aid
     equipment and supplies, together with a qualified person familiar with
     standard first-aid practices, for the purposes of first-aid to the injured.

     Effective July 1, 1984, the qualifications for a first aid attendant are as
     follows:

     A.   Must be dependable and reliable.

     B.   Must have a high school education or G.E.D.

     C.   Must have had at least twenty-four (24) consecutive months of
          practical experience in emergency first aid work within the last three
          (3) years.

     D.   Must have and maintain current Emergency Medical Technician
          Certification.

     E.   Must develop working knowledge of fire-fighting and fire-fighting
          equipment.

3.   In consideration for those employees whose duties are such that burns are
     sustained and clothing is burned and damaged by heat the Company agrees to
     furnish protective helmets, heat shields and goggles, consistent with its
     ability to obtain such equipment. The Company expects to issue such
     equipment to employees and maintain such equipment but will continue to
     deduct from an employee's pay when he is separated from the employ of the
     Company, the value of any such equipment not turned back to the Company.

                                       33
<PAGE>
 
     It is further agreed that a commonly accepted type of welder's jacket will
     be bought by the Company and furnished to all welders who spend a major
     portion of their time welding and more particularly overhead welding work.
     The employees are obligated to the extent of giving a reasonable amount of
     care to these jackets while in their possession.

4.   Each major department will have a Safety Committee which will meet at least
     once a month. Each committee will consist of at least one supervisor and no
     more than three (3) hourly employees. The Safety Director and the Union
     Plant Chairman will serve on all the department safety committees and will
     rotate as Plant Safety Committee Chairman on a monthly basis. It will be
     their responsibility to correlate the safety activities in compliance with
     general company policy.

     These departmental safety committees are to review regularly both existing
     plant safety rules and safety rules of their own departments. They are to
     evaluate the rules and the performance of the departmental working force on
     carrying out the rules. This may result in specific recommendations that
     some rules be deleted and/or modified and specific steps be taken to insure
     compliance with all safety rules and regulations. A second important task
     is for each department safety committee to make a careful and intensive
     study of all working procedures in its own department and recommend changes
     that are deemed necessary. They are to consider ways and means of insuring
     that everyone cooperates fully to carry on the work in keeping with the
     adopted rules and procedures.

     The safety committees do not have final authority on any matter and,
     therefore, their activities are advisory in nature. Recommendations that
     receive a majority vote of a safety committee will be considered
     sufficiently important to warrant the attention of the Plant management.
     Questions which cannot be settled by the local plant management will be
     scheduled for an explanation to the Union International Representative in a
     meeting with the shop committee.

5.   Any employee who suffers a compensable injury at work shall be given, upon
     his request, a copy of the pertinent accident report and the resultant
     first report of injury sent to worker's compensation.

6.   An employee shall have the right to request and get a review from the
     foreman's immediate superior when and if he is ordered to perform or
     continue to perform an assignment which involves danger over and above
     which is normal for that particular work under the then prevailing
     conditions. The employee in making the request may do so with or without
     his steward or other Union official.

7.   Employees off from work for four (4) days or more because of illness or
     injury with no time limits who have advised the Company that he has written
     doctor's release to return to work may also be required to obtain a release
     from the Company doctor. The doctor's release must be brought to the
     Personnel Department after the employee's last medical appointment prior to
     returning to work. The Company is obligated to allow the employee to return
     to work no later than his first regularly scheduled shift after the
     expiration of forty-eight (48) hours, exclusive of holidays, from the time
     the release from his physician is received by the Company. This in no way
     modifies the Company's rights to require proof of absence from employees
     with poor attendance records.

                                       34
<PAGE>
 
8.   The wearing of safety shoes is a condition of employment and the Company
     will pay $95.00 a year effective July 1, 1993 toward the purchase of these
     shoes.

     Employees working less than six (6) months shall not be entitled to any
     rebate on the purchase of safety shoes. After the employee has completed
     six (6) months of service, the Company will refund to him up to the above
     listed amount toward the purchase of safety shoes.

9.   The Company will furnish appropriate gloves for the performance of
     assignments.

10.  The Company shall provide prescription ground safety glasses to employees
     requiring them, if they have completed six (6) months of continuous service
     with the Company.

     These glasses will conform to Federal Specifications and be made as a
     result of an examination by an Optometrist or Ophthalmologist approved by
     the Company. The employee will choose a preferred frame from an approved
     selection.

     The Company is not to pay for eye examinations or glasses when such
     examinations show that prescription ground safety glasses are not needed in
     performing the employee's job at the plant. It is understood that the
     examination and prescription will be for safety glasses only and not more
     than one (1) pair of glasses per Contract year for any one employee be
     given.

     The limit on glasses will not be the controlling factor when they become
     broken or their effectiveness impaired during the course of the employee's
     work on the job. The Company will not be responsible for replacing or
     repairing safety glasses or frames for safety glasses unless they were
     damaged or lost during the course of the employee's work on Company
     premises and unless there is reasonable proof that the employee was
     exercising a reasonable amount of care and diligence in protecting the
     equipment.

     The Company will provide five (5) pairs of flame retardant clothing to
     furnace and maintenance employees upon their entry into the department. In
     addition, the Company will replace flame retardant clothing for the
     employees in the Furnace and Maintenance Departments as needed when the
     clothing is burnt or destroyed by their normal process. Employees
     requesting replacement clothing must turn in their damaged clothing.

                                   ARTICLE XV
                              Compensable Injuries

1.   In case an employee sustains a compensable injury and it is necessary to
     secure for him or send him to a doctor, the following shall apply:

     A.   If the doctor sends him back to work that day with a statement to the
          effect that his injury was bona fide and required medical attention,
          he shall be credited with the time required for the visit to the
          doctor, otherwise, he shall be given an opportunity to make up time
          lost through his visit to the doctor.

                                       35
<PAGE>
 
     B.   If the doctor sends him home, he shall be paid for the full number of
          hours in his shift on the day on which the injury occurred at his rate
          on that day.

2.   In case an employee, in the course of his work, suffers a compensable
     injury under the Kentucky Workers Compensation Board; after the four (4)
     day waiting period has elapsed, the Company will pay to such employee an
     amount of money as determined by multiplying the number of hours of
     employment lost during the four (4) day waiting period by the employee's
     straight-time rate per hour, provided, however, that if such disability
     shall continue for more than three (3) weeks and the employee is
     compensated by such Board for such four (4) day waiting period, then the
     amount to be paid by the Company shall be reduced by the difference between
     the amount received by the employee and the amount the Company would have
     paid as provided above. If time lost as result of such compensable injury
     extends beyond the four (4) day waiting period, then the Company; in
     addition to the above payment, will make up the difference between what the
     employee would have earned at his straight time rate per hour and the
     amounts of money received by the employee from the Kentucky Worker's
     Compensation Board as payment for time lost as a result of a compensable
     injury. The Company will only make up such difference up to a period of
     twenty-six (26) weeks beyond the initial four (4) day waiting period. The
     basic intent of this paragraph is to provide that the employees sustaining
     a compensable injury shall not suffer any diminution in his normal straight
     time hourly earnings for an aggregate period of twenty-six (26) weeks as a
     result of such injury.

     After the initial twenty-six (26) weeks payment will be made on the
     following basis:

     The next twenty (20) weeks (27-46) the Company will make up the difference
     between the compensation payment and 80% of the employee's base weekly
     earnings.

 
                                  ARTICLE XVI
                                  Control Lab

1.   There shall be two (2) jobs in the Control Lab -- Analyst and Sr. Analyst.

2.   The Analyst position will perform a variety of tests to assure product
     quality. The Analyst shall also perform related job responsibilities.

3.   The Sr. Analyst will be responsible for covering scheduled day shift
     vacancies unless covering vacancies due to employee absence, vacation or
     other items where there is a need for additional manpower.

4.   The normal shift for the Sr. Analyst is days.

5.   The Sr. Analyst draws the equivalent of Leader pay.

6.   To qualify as a Sr. Analyst, an employee must be a qualified analyst. If no
     Analyst bids for Sr. Analyst, the most junior analyst must fill the
     position.

                                       36
<PAGE>
 
                                  ARTICLE XVII
                                    Overtime

The company will, insofar as is practical, distribute any necessary overtime
work within a department as equally as is possible among the employees in that
department.  The Union recognizes that the Company can only carry out this
principle if all employees cooperate by working overtime when requested.  It is
agreed further that the Company will maintain, post and keep current a list of
all employees in each department for the purpose of determining who is next
entitled to overtime.  Any employee who voluntarily passes up his turn to work
overtime which was offered by the Company will have such refusal marked against
him on the overtime sheet; and it will be counted for distribution purposes as
overtime worked.

The Company will make a reasonable effort to call in employees who are not
scheduled to work when the overtime occurs if they are next due for overtime and
the Company becomes aware of the need at least two (2) hours before the overtime
work is to be done.  It is understood that if the Company is aware that a shift
will be short of its normal crew at least two (2) hours in advance of its
beginning and overtime develops on such shift the Company will call in the
employees who are next due for overtime.  In the event the Company is not aware
of the need for overtime at least two (2) hours in advance, they will have the
option to calling people in for overtime work right up to the time that the work
begins or to hold employees over.  If the Company decides to call in employees,
the call must be made in the order indicated by the department overtime sheets.

Reasonable effort, as used in this section, will be a single telephone call
using the last telephone number that the employee has registered on the overtime
sheet in his department.  In the event such call produces a busy signal or no
answer then the persons next entitled to overtime will be called until the
opening is filled or the list is exhausted.  If the list is exhausted and when
making the first calls a person's telephone was found busy, another single call
will be made to such person or persons.

It is agreed that when an employee is next entitled to overtime under the
provisions of this section and through error is not allowed to work, he will be
given the next opportunity to work overtime. In the event he is passed over the
second time and he has prior to this called the first error to his foreman's
attention, he shall be paid the amount of money he would have earned had he been
allowed to work.

An employee working with limitations on hours (either hours per day or days per
week) shall be charged with an overtime refusal for each occasion he/she would
have been asked to work if not for the work limitation.

The following procedure on distribution of overtime are recognized as being
acceptable in all departments:
 
1.   All overtime, either worked or refused, will be recorded on the overtime
     sheet.
 
2.   Any new permanent employee coming into a department will be assigned hours
     of overtime equal to the highest overtime, worked or refused, of the then
     present permanent employees.

3.   Any employee paid at the time and one half (1-1/2) rate for hours worked as
     a result of going from his old assignment on Saturday to his new assignment
     on Sunday, will not have such hours charged to the overtime board.

                                       37
<PAGE>
 
4.   All permanent employees names in each department will be listed on the
     departmental overtime sheet by departmental seniority. All employees who
     desire to be called for overtime shall list a telephone number on the
     sheet. Any employee who does not have a phone number listed on the sheet
     will be charged as if worked whenever his name is reached as phone calls
     are being made for overtime.

     If an employee is offered at least five overtime opportunities offered by
     phone call at home and fails to work a minimum of one such occasion during
     a period of thirty days, that employee shall have his/her phone number
     removed from the overtime list for a period of six months and thereafter
     until they request their phone number be placed back on the overtime list.
     Such employees will still be eligible for overtime while they are working
     in the plant.

     If the overtime list of employees on the shift preceding the shift on which
     the overtime occurs has been exhausted and no one is willing to work, the
     qualified employee on the preceding shift with the lowest number of hours
     on the overtime sheet will be drafted. However, the Company will continue
     to call other employees on the list until the entire departmental overtime
     sheet is exhausted.

     With respect to drafting employees only, each department will maintain a
     separate sheet for use when drafting becomes necessary. Drafting will
     continue to be based on the number of overtime hours. When an employee is
     drafted, their name and the date will be placed on the draft sheet. On the
     next occurrence when drafting is needed, the person with the next lowest
     hours will be drafted instead of the first person. This procedure will
     continue until all employees on the shift involved have been drafted, at
     which time the procedure will start over again. Qualifications will need to
     be considered, as always, and all procedures for offering overtime to
     employees prior to drafting remains unchanged. The object of this change is
     so that drafting will be on a rotating basis. The union membership voted on
     accepting the above procedure in a joint effort between the Union and the
     Company to distribute overtime drafting in such a way that a few individual
     does not bear all the burden.

     It is further agreed that when the Company is faced with drafting employees
     for overtime in any department and there are Yard employees on the shift
     assigned to that department on a temporary basis, the Yard employees may be
     offered the opportunity to work overtime, in accordance with their
     individual plant seniority, during the period that the entire overtime
     sheet is being exhausted and for the remainder of the overtime period
     provided the entire departmental overtime sheet has been exhausted.

5.   New permanent maintenance employees will not be allowed to work overtime
     until they complete their probationary period unless the overtime list has
     been exhausted.

6.   A Yard employee who has previously registered a request for overtime in the
     yard will be considered for Yard overtime if he is available at the time
     the Yard overtime occurs.

7.   When a Yard employee on temporary assignment to another department accepts
     overtime in the Yard Department, he will not give up his regularly
     scheduled hours for that week.

                                       38
<PAGE>
 
8.   Handicapped employees who are unable to perform the work on which overtime
     occurs due to physical reasons will not be charged with refusing the
     overtime. Employees with long term medical restrictions regarding overtime
     will be required to update verification of such restrictions at least every
     six months.

9.   When an employee works a double shift either voluntarily or drafted the
     employee will be given a fifteen (15) minute break sometime near the end of
     the first shift or the beginning of the second shift.

10.  OVERTIME RENEWAL:  The Company agrees to renew the overtime list of all
     departments on August 1 of each year.

                                 ARTICLE XVIII
                             SCHEDULE A/WAGE RATES
<TABLE>
<CAPTION>
 
                                     7/1/96  7/1/97  7/1/98  7/1/99  7/1/00
Yard Department

<S>                                  <C>     <C>     <C>     <C>     <C>
Start..............................  $13.84  $14.34  $14.89  $15.49  $16.09
End of 30 Days.....................   15.85   16.35   16.90   17.50  $18.10

Truck Driver.......................   16.31   16.81   17.36   17.96   18.56
Sweeper Operator...................   16.31   16.81   17.36   17.96   18.56
Paste Handler......................   16.31   16.81   17.36   17.96   18.56
Bobcat Operator....................   16.31   16.81   17.36   17.96   18.56
                                                                     
Tester Department/Control Lab                                        
                                                                     
Analyst Start......................   16.25   16.75   17.30   17.90   18.50
End of 30 days.....................   16.59   17.09   17.64   18.24   18.84
Sr. Analyst........................   16.59   17.09   17.64   18.24   18.84
                                                                     
Crush, Packing & Raw Materials                                       
                                                                     
Start..............................   16.15   16.65   17.20   17.80   18.40
End of 30 Days.....................   16.23   16.73   17.28   17.88   18.48
End of 60 Days.....................   16.31   16.81   17.36   17.96   18.56
Chill Crane Operator...............   16.59   17.09   17.64   18.24   18.84
                                                                     
Furnace Department                                                   
                                                                     
Start..............................   16.35   16.85   17.40   18.00   18.60
End of 30 Days.....................   16.43   16.93   17.48   18.08   18.68
End of 60 Days.....................   16.51   17.01   17.56   18.16   18.76
Electrode Paste....................   16.51   17.01   17.56   18.16   18.76
</TABLE>

                                       39
<PAGE>
 
<TABLE>
<S>                                   <C>     <C>     <C>     <C>     <C>
Chief Utility......................   17.09   17.59   18.14   18.74   19.34
Tapper.............................   16.62   17.12   17.67   18.27   18.87
Hot Chill Crane Operator...........   16.74   17.24   17.79   18.39   18.99
Control Room Operator..............   17.03   17.53   18.08   18.68   19.28
 
Acetylene
 
Start..............................   16.15   16.65   17.20   17.80   18.40
End of 30 Days.....................   16.23   16.73   17.28   17.88   18.48
End of 60 Days.....................   16.31   16.81   17.36   17.96   18.56
                                                                    
Lime Department                                                     
                                                                    
Start..............................   16.15   16.65   17.20   17.80   18.40
End of 30 Days.....................   16.23   16.73   17.28   17.88   18.48
End of 60 Days.....................   16.31   16.81   17.36   17.96   18.56

Mechanical Maintenance
 
First Class
From...............................   17.59   18.29   18.94   19.54   20.14
 
                                      7/1/96  7/1/97  7/1/98  7/1/99  7/1/00
 
To.................................   17.94   18.64   19.29   19.89   20.49
 
*Welder adjustment will be .15/hr
 
Second Class
 
Start..............................   16.59   17.29   17.94   18.54   19.14
End of 30 Days.....................   16.65   17.35   18.00   18.60   19.20
End of 60 Days.....................   16.73   17.43   18.08   18.68   19.28
End of 90 Days.....................   16.79   17.49   18.14   18.74   19.34
                                                                    
Helpers                                                             
                                                                    
Start..............................   16.33   17.03   17.68   18.28   18.88
End of 30 Days.....................   16.39   17.09   17.74   18.34   18.94
End of 60 Days.....................   16.44   17.14   17.79   18.39   18.99
                                                                    
Maintenance Painters                                                
                                                                    
Beginner...........................   16.79   17.49   18.14   18.74   19.34
Class B............................   17.03   17.73   18.38   18.98   19.58
</TABLE>

                                       40
<PAGE>
 
<TABLE>
<S>                                   <C>     <C>     <C>     <C>     <C>
Class A............................   17.29   17.99   18.64   19.24   19.84
Top................................   17.94   18.64   19.29   19.89   20.49
                                                                    
Safety & First Aid.................   17.09   17.59   18.14   18.74   19.34
</TABLE>

Any employee hired after July 1, 1984, will be paid $3.00 less than the current
appropriate wage rate in Schedule A for his/her first year of employment.  Upon
his/her first employment anniversary, he/she will receive a $1.00 wage increase
and will earn $2.00 less than the current appropriate wage rate in Schedule A
for his/her second year of employment.  Upon his/her second employment
anniversary, he/she will receive a $1.00 wage increase and will earn $1.00 less
than the current appropriate wage in Schedule A for his/her third year of
employment.  Upon his/her third employment anniversary he/she will receive the
current appropriate wage rate as listed in Schedule A.

                                  ARTICLE XIX
                                    General

1.   The Company will furnish bulletin boards for the posting of notices of
     Union meetings and other Union announcements. All such notices pertaining
     to or making reference to the Company shall be subject to approval by the
     Company before posting.

2.   No employee shall engage in any Union activities on the property of the
     Company during working hours or in any manner which shall interfere with
     production, except as provided in Article on Grievance Procedure.

3.   It is understood and agreed that the Company, subject to the provisions of
     Article XII, has the right to discipline or discharge any employee for any
     just cause, failure or refusal to comply with any of the provisions of this
     Agreement, and violations of any reasonable published or posted rules.

4.   As long as present operating conditions exist in the Generators, Coke
     Drying, Pack and Carbide Crusher and the Lime Department, the Company will
     continue a leader in each.

5.   All notices required to be given hereunder shall be made in writing, sent
     certified mail and addressed as follows:

     If to the Company:   The Carbide/Graphite Group, Inc.
                          P.O. Box 3727
                          Louisville, K 40201-3727

     If to the Union:     International Brotherhood of Firemen & Oilers
                          Local 320
                          6801 Dixie Highway, Suite  122
                          Louisville, KY 40258

                                       41
<PAGE>
 
     The above addresses are subject to change. Notification of such change will
     be given to the other party prior to the change.

     If the Company decides to close the plant or a department within the plant,
     they will give as much notice as possible to the Union.

                                   ARTICLE XX
                             Maintenance Department

The Maintenance Department will continue to do the same work in all of the
departments except the Acetylene Department that they have in the past.  All
mechanical maintenance employees will be included in weekend rotation.

In the Acetylene Department, Maintenance will continue to do the work they have
done in the past, and will do all cutting and threading of pipe to be used in
the Acetylene Department.  The Acetylene Plant foremen will not start their
people on a job that will require more than two (2) man-hours to complete,
excepting production maintenance, included among which are jobs such as: the
cleaning of generators and allied equipment, pipes, and the changing of
orifices.  The Acetylene Plant Foremen will not start their people on a piping
job that will require more than one and one-half (1-1/2) man-hours to complete,
excluding cutting and threading of pipe.

1.   The Company will get new employees for the Maintenance Department by one of
     the following methods:

     A.   If the need is temporary and can be met by taking on unskilled
          employees they will be taken from the Yard Department in accordance
          with paragraph 6-G of Article XI.

     B.   If the need is permanent and can be met by taking on Helpers, the
          Company will first recall any Helpers who may be on layoff from the
          department. In the event there are no Helpers on layoff, the Company
          will advertise and accept bids for the needed numbers of Helpers. In
          addition it will be considered proper for the Company to ascertain
          whether or not these employees are able to do climbing required to do
          plant maintenance and painting work.

          There will be a probationary requirement of a maximum of sixty (60)
          calendar days when entering Maintenance for transferred employees. If
          such transferred employee is disqualified from the Maintenance
          Department, he shall be allowed to return to his department and
          exercise his seniority. The employee bumped as a result of the return
          of an employee to the department may also exercise his seniority.

     C.   If the need is such that in the opinion of the Company it can only be
          met by taking on skilled employees, the Company will first call back
          laid off employees who possess the required skills. In event there are
          no such people on layoff, and in the opinion of management, the nature
          of the work involved will permit the utilization of other than first-
          class maintenance skills, the Company will post and accept bids from
          employees within the plant who possess qualifications which, in the
          opinion of Management, meet a second-class maintenance

                                       42
<PAGE>
 
          standard. Those employees who bid and are selected as a result of
          their qualifications, will be given a written test and in some
          situations, a welding test. The most senior employee or employees who
          pass the test will be awarded the job.

2.   Shifts shall be given to employees holding permanent assignments according
     to their preference and department seniority. For the purpose of moving to
     a preferred shift, department seniority shall be the deciding factor. In
     making such moves, a maximum of three (3) moves shall be permitted to fill
     one (1) vacancy.

3.   The starting rate for Mechanical Maintenance employees shall be in
     accordance with their apparent ability.

4.   The Maintenance Painters will be paid according to the rate given in
     Schedule "A"/Wage Rates.

     The Maintenance Painters will progress through the listed rates in the
     following manner.

     Beginning Painters   Top Second Class Maintenance

     Class B              After working on a painting assignment for a period
                          of six (6) months.

     Class A              Twelve (12) Months

     Top                  Eighteen (18) Months

      Any skilled painters who may be hired and brought into the Mechanical
      Maintenance Department direct from the outside or who may bid into the
      department from other departments shall be started at a rate in accordance
      with their apparent ability.

      The Maintenance Painting Crew will be expanded in the same manner as the
      Maintenance Department as provided in Article XVI, Paragraph 1. When the
      need is temporary, workers from the Yard can be transferred to the
      Maintenance Painting Crew provided there are no Maintenance Department
      employees who desire this work.

5.   When and if it should become necessary to reduce the size of the
     Maintenance Painting Crew, it will be accomplished in the following manner
     and in the order given:

     A.   Any employee who may be working on a temporary assignment shall be
          taken off first.

     B.   The employees, other than workers currently in the crew working on
          permanent assignments, shall be taken off in accordance with their
          Maintenance Department Seniority.

     Reductions that affect workers currently in the Painting Crew will be made
     in accordance with their departmental seniority.

                                       43
<PAGE>
 
     The rates of any maintenance employees who may be cut back in Steps 1 and 2
     above would be based on their regular classification in the Maintenance
     Department.

     The Company shall consider the normal complement of the Maintenance
     Painting Crew to be two (2).

     Once the Painting Crew has been reduced below the normal complement of two
     (2), the Company shall offer any of the painters on cut back the
     opportunity to return to the Maintenance Painting Crew when the Company
     needs to add workers again. Such offers will be made on the basis of
     departmental seniority.

     The Company will make a special effort to keep any employees who were
     regular members of the Maintenance Painting Crew in June, 1981, who become
     involved in a cut-back, assigned for the maximum amount of time, to work
     that is deemed most appropriate to enable the employee to pass the merit
     tests for advancement. Merit tests will be given to these particular cut-
     back painters no later than three (3) months after they are cut back from
     painting. Any such cut-back painter who fails this first test shall be
     given another test at the end of a second three (3) months period. Once any
     of these painters gets a permanent maintenance classification as high as
     bottom first class, he shall be considered eligible to receive the painting
     rate through any length of cut back from the Painting Crew.

     No cut-back in the Maintenance Painting Crew that involves one (1) of the
     four (4) June, 1981, painters shall be considered permanent until it has
     lasted for a continuous period of one (1) year.

     Should any regular member of the Painting Crew of June, 1981, be
     permanently cut back and then be recalled to painting before the expiration
     of a year from the date of cut back, the cut back will be considered
     "temporary" and the employee shall be protected against any loss of pay he
     may have had because he worked at a rate lower than his painting rate.

6.   The Company will give tests which are designated to show the qualifications
     of maintenance employees who feel entitled to promotion. Exceptions are
     noted in paragraph (a) below. The tests will consist of oral and written
     questions and also work demonstrations. A passing grade will be 70%. Any
     employee who has taken a promotion test may take another after a period of
     six (6) months. He shall have the right to make a second attempt on a test
     leading to a particular promotion after a period of three (3) months, if he
     came within 15% of making a passing mark on the first attempt.

     A.   Any employees who came into the Painters groups after July 1, 1981,
          will not be permitted to take any promotion tests as set forth in this
          section of the Contract until they have moved out of these special
          jobs and served at least six (6) months in their permanent
          classifications. The employees presently (November 1, 1968) assigned
          to oiling may take their promotion tests on schedule every three (3)
          or six (6) months.

7.   The Company will continue to be guided by past practice in assigning
     employees to operate the various pieces of heavy equipment such as
     bulldozers, cranes, tractors, etc. In the event any change in the assigning
     of employees to the operating of heavy equipment is contemplated, it should
     be made

                                       44
<PAGE>
 
     by mutual agreement between the Company and the Union. If unable to reach
     such an agreement, the issue will be taken to arbitration.

     Any maintenance employee trained on the payloader may be used to operate
     the payloader for any assignment lasting no more than three hours.

8.   There shall be a Leader and Alternate Leader in the Oiling Crew.

9.   The Company agrees to provide a $100.00 tool allowance a year to the
     Maintenance Department effective July 1, 1993. Employees entering the
     Department between January 1 and June 30 will be given half the present
     tool allowance for that year. The tool allowance is payable on July 15th.

10.  The (primary*) bid jobs in the Maintenance Department are as follows:

     1.  Casings                    6.  Painter
     1a. Alternate Casings          7.  Furnace
     2.  Chill Car Make-Up*         8.  Pack
     3.  Container Repair*          9.  Baghouse
     4.  Garage*                    10. Pond*
     5.  Oiler*(2)                  11. Machinist
     5a. Alternate Oiler

     Alternate leader bid jobs shall be utilized when the leader is not
     available for assignment; therefore, the alternate leader and the leader
     cannot occupy the same days off.

     Bid jobs effective 7-1-93 will include the following positions:

         -  Two baghouse employees (in addition to leader)
         -  One garage job beside leader
         -  One Pack-bid person beside leader
         -  Preventative maintenance jobs (if and when established)

     The following pertains to primary bid jobs:

     1.   When their bid job is operating:

          A.   Primary job incumbents can not be rolled.
          B.   Primary job incumbents can not bid out.

          Additional primary bid jobs can be created during the life of this
          agreement by mutual consent of the Company and the Union.

     If in any department not all employees are needed (i.e., only one man is
     needed) the additional employees will be eliminated before the leader(ie:
     that leaders will be the last to be cut out from each bid job and the last
     to be rolled).

                                       45
<PAGE>
 
     If any of these new jobs is not bid upon by any employee, no one will be
     forced to take such job. Management will assign available employees when
     such work is required, but rebid on quarterly basis.

     When a bid job is eliminated for an entire shift, management will allow
     rolling rights on such temporary cutbacks not to exceed one move. (Note: If
     anyone rolls into the oiler job(there presently are 3) the individual
     displaced will be the non-primary employee. The employee rolling-in will
     not be allowed to pick the area).

     The above listing shall not restrict the Company's prerogative to
     establish, modify or delete bid jobs which are no longer applicable.

                                  ARTICLE XXI
                                Group Insurance

1.   The benefits set forth below and described in the Group Benefit Plan
     Booklet for Firemen and Oilers, Local 320 effective July 1, 1996, shall be
     in effect for the term of this agreement.

2.   Life Insurance

     Life insurance, effective July 1, 1993, increase Life Insurance amount to
     $27,000. Effective July 1, 1999, increase Life Insurance amount to $28,000.
     Effective July 1, 2000, increase Life Insurance amount to $29,000.

     A.   Employees who retire on or after July 1, 1972 shall be provided with
          $2,000 Life Insurance policy provided that they have fifteen (15)
          years service.

     B.   Accidental Death and Dismemberment, effective July 1, 1993, increase
          Accidental Death and Dismemberment to $13,500. Effective July 1, 1999,
          increase to $14,000. Effective July 1, 2000, increase to $14,500.

3.   Medical Insurance - As of August 1, 1996, medical insurance will be
     provided under Option 2000 Advantage POS Enhanced Plan - High Option as
     described in the Anthem Blue Cross and Blue Shield proposal. Specific
     terms, coverages and procedures are listed in said proposal. The Company
     reserves the right to change carriers if costs increase too much. In such
     instance the benefits will be unchanged.

     The monthly employee contributions for medical plan coverage shall be:

 
     Employee only........................................  10.00
     Employee and one dependent...........................  16.00
     Employee and two or more dependents..................  22.00
 
4.   Dental: Effective July 1, 1993, those employees and eligible dependents
     shall have Dental Insurance in accordance with the following plan at no
     additional cost.
     

                                       46
<PAGE>
 
     Lifetime Maximum................................  None except orthodontics
     Calendar Year Maximum...........................  1,000
     Calendar Year Deductible*.......................  $25/per person
                                                       $50/per family
                                                       (Aggregate Max.)
     Covered Expenses................................  80% Reasonable &
                                                       Customary (except
                                                       orthodontics)
     Orthodontics....................................  50%-$1,000 lifetime
                                                       maximum per individual
                                                       (eff. 8/1/93)

    *Deductible will not be applied against any diagnostic or preventive
     expenses.

5.   The weekly Sick and Accident Benefit for active employees who may become
     disabled and prevented from working as a result of a non-occupational
     accident or disease shall be as follows for twenty-six (26) weeks:

     Employees actively at work who go out on Accident and Sickness Benefits
     after July 1, 1996:

     A.   Effective July 1, 1996, Accident and Sickness Benefits are $295.00 per
          week. Effective July 1, 1999, Accident and Sickness Benefits are
          $300.00 per week. Effective July 1, 2000, Accident and Sickness
          Benefits are $305.00 per week.

     B.   An employee who is off 21 consecutive days as a result of being ill
          will be paid the weekly sick benefit for the initial seven (7) day
          waiting period.

     C.   The Company will pay insurance premiums for employees on sick leave
          for a period not to exceed twelve (12) months from the date the sick
          leave began as long as the employee makes the appropriate monthly
          contributions.

6.   The benefits for laid off employees who have two (2) or more years of plant
     seniority at the time of layoff are as follows:

     1.   Full coverage will be continued through the end of the calendar month
          following the month in which the layoff occurs.

     2.   For an additional period of three calendar months beyond the time set
          forth in paragraph No. 1 above, coverage for employees and dependents
          including:

          A.   Life Insurance
          B.   Option 2000 Advantage POS Enhanced Plan - High Option
          C.   Maternity benefits (9 months from date of layoff)

                                       47
<PAGE>
 
     In the last three (3) calendar months period only the sick and accident
     benefit is excluded. Employees will have the option of continuing these
     benefits for an additional period of three calendar months by paying the
     weekly cost in advance.


                                  ARTICLE XXII
                                   Retirement

The Union recognizes and agrees that it is essential to the efficient operation
of the plant that a retirement age be established, and that the Company's
established age of sixty-five (65) is reasonable.  The parties agree that the
new law that will be in effect January 1, 1979 allows an employee to postpone
their retirement until age seventy (70).  However, both parties agree that
normal retirement for all employees will still be reached at age sixty-five
(65).

The present Retirement Income Plan provides that employees who work beyond age
sixty-five (65) will not accrue any credited service beyond age sixty-five (65)
nor will they receive any benefit from changes in the pension plan made after
their sixty-fifth (65th) birthday.

The Union gives recognition to the fact that the Company has a Retirement Income
Plan to provide financial assistance to retired employees and the Union agrees
to use its good offices in urging employees to participate in this plan.

Effective July 1, 1981, employees in this bargaining unit will be eligible to
participate only in the Non-Contributory Retirement Income Plan for Bargaining
Unit Employees according to its terms and conditions. Employees who are
presently enrolled in the Contributory Retirement Income Plan may continue in
that Plan but if they drop out they will automatically go into the Non-
Contributory Retirement Income Plan for Bargaining Unit Employees and may not
then re-enter the Contributory Plan.

It is further agreed that the minimum pension payable under the Company's Non-
Contributory Retirement Income Plan will be computed as follows:

1.   Effective July 1, 1996, $27.00 per month per year of service for employees
     retiring on or after July 1, 1996.

2.   Effective July 1, 1997, $28.50 per month per year of service for employees
     retiring on or after July 1, 1997.

3.   Effective July 1, 1998, $30.00 per month per year of service for employees
     retiring on or after July 1, 1998.

4.   Effective July 1, 1999, $31.50 per month per year of service for employees
     retiring on or after July 1, 1999.

                                       48
<PAGE>
 
5.   Effective July 1, 2000, $33.00 per month per year of service for employees
     retiring on or after July 1, 2000.

This total pension shall be comprised of payments from the present plan (C/G)
and the prior plan (BOC). The C/G plan shall pay the portion of the total
payment which is not the responsibility of the BOC.

Effective 7/1/96, there shall be no reduction for early retirement if the
employees age and years of service total eighty(80) years or greater.

C/G non-contributory pension plan benefits effective July 1, 1975 for employees
retiring on or after such date are as follows:

Eligibility -
     First of month following employment.

Vesting -
     Five (5) years of continuous service.

     Should legislation be passed to require an immediate change in vesting
     rights, this plan shall be so changed to comply with such law.

Joint Annuity - Three (3) months for election.

Disability Pension -
     Ten (10) years of continuous service.

Maximum Participation -
     Forty-two (42) years credit.

Include -
     Social Security Adjustment Option.

Early Retirement -
Actuarial reduction six (6) percent per year (1/2 percent per month).

     Effective July 1, 1978, active employees on the payroll who have ten (10)
years of continuous service will be eligible for early retirement at age 62 with
no actuarial reduction in their pension.

Disability -
     Employees who qualify for disability retirement will not be actuarially
     reduced.

Social Security -
     No offset for any retirement above benefit paid in addition to Social
     Security.

                                       49
<PAGE>
 
                                  401(K) PLAN

In addition to the defined benefit plan, the Company will establish a 401(k)
Plan for the Bargaining Unit. The Company will pay the recordkeeping, trustee,
and IRS filing fees associated with the plan.  Plan provisions will include the
following:

1.   Employee contributions will be permitted up to 15% before tax or IRS
     limits, whichever is lower.

2.   A loan feature will be incorporated into the plan.  The employees will pay
     any fees (loan origination or maintenance, etc) associated with loans.

3.   There shall be no Company match.


                          RETIREES INSURANCE - Part I

Employees who retire after July 1, 1987 (either disability retirement or early
retirement) under the terms of the Retirement Income Plan may elect to continue
themselves and their eligible dependents in the Option 2000 Advantage POS
Enhanced Plan - High Option health plan.

Employees retiring during the life of the Agreement will pay $50/month per
covered individual.

Once an employee retires his contribution will not be increased.

                          RETIREES INSURANCE - Part II

For retirees eligible for Medicare, the Company will offer Blue Cross/Blue
Shield of Kentucky's Option 2000 - Plan H.

For employees retiring 8/1/93 or later, the contribution will be $20/month per
covered individual.

Employees retiring before 8/1/93, the contribution rate will be unchanged.

If you are a retired employee eligible for Medicare and your dependents are not
eligible for Medicare, you will be covered under Part 2 of the plan and your
dependents will be covered under Part 1.

Similarly, if you are a retired employee not eligible for Medicare, and your
spouse is eligible for Medicare, you will be covered under Part 1 of the plan
and your spouse will be covered under Part 2.

When an insured individual becomes eligible for Medicare, the coverage for that
individual will be changed from Part 1 to Part 2.

                                       50
<PAGE>
 
WHEN COVERAGE STOPS FOR YOU OR YOUR DEPENDENTS

     -  When the maximum benefits have been paid.
     -  When dependent children reach limiting age.
     -  On the last day of the month for which contributions have been made.

This premium ($20.00), will be fixed for the life of this contract (7/1/96 -
6/30/2001), but will be subject to adjustment for employees who retire after
6/30/2001.

Active employees who work beyond age 65 will continue while actively employed to
be covered by the active employees medical insurance program.

If the spouse of an employee actively at work becomes 65 she/he will continue to
be covered as a dependent by the active employees medical insurance program, but
the benefits will be coordinated with Medicare.

Surviving dependents may continue their coverage after the death of a retiree by
paying the appropriate contributions.


                                 ARTICLE XXIII
                          Make-up Pay for Jury Service
                               and Funeral Leave

1.   Any employee required to serve on a jury will receive from the Company an
     amount of money when added to that which he received for such service will
     equal wages he would have earned had he not been performing such jury
     service. If any such employee is permanently assigned to the second or
     third shifts, he shall be reassigned to the day shift, on a week to week
     basis, for that period he is serving as a juror.

     Employees must promptly notify the Company when they are called for jury
     service.

     Any time paid for under this provisions is not time worked and will not be
     counted in computing overtime.

2.   An employee shall be protected against loss of pay for such time as may be
     needed for purpose of attending the funeral of a member of his immediate
     family up to a maximum of three (3) scheduled working days at his then
     regular straight time hourly rate during the period beginning with the day
     of death and ending with the day after the funeral. Immediate family is
     interpreted to cover husband, wife, father, mother, child, brother, sister,
     father-in-law, and mother-in-law. The three scheduled working days shall
     also apply for grandparents and grandchildren of employees only. One day
     funeral leave for stepchild, stepmother, stepfather, brother-in-law and
     sister-in-law of employees only. Any time paid for under this provision is
     not time worked and will not be counted in computing overtime.

                                  ARTICLE XXIV
                                 Severance Pay

                                       51
<PAGE>
 
The Company will provide a severance pay policy for employees on the payroll
provided the following conditions are met:

A.   Severance pay will be paid only for a complete plant shutdown.

B.   Employees must be actively employed by the Company, or have been laid off
     during the ninety (90) day period before the plant is shut down.

C.   Receipt of severance pay will completely cancel an employee's seniority and
     continuous service with the Company.

D.   Employee will receive forty (40) hours at their straight time rate for each
     week of severance pay.

E.   Severance payment to any employee shall not exceed twenty-six (26) weeks.

     The following graduated schedule will apply to all employees:

          One (1) year but less than three (3) years - 1 weeks pay. Three (3)
          years but less than five 5) years - 2 weeks pay. Five (5) years but
          less than seven (7) years - 3 weeks pay. Seven (7) years but less than
          ten (10) years - 4 weeks pay. Ten (10) years but less than twenty (20)
          years - 4 weeks pay plus one-half (1/2) weeks pay for each year of
          service between ten (10) and twenty (20). Twenty (20) years or more -
          9 weeks pay plus 1 weeks pay for each year of service after twenty
          (20) years.


                                  ARTICLE XXV
                              Management Function

The management of the COMPANY and the direction of the working force, including
the right to plan, direct, and control plant operations; to schedule and assign
work to employees; to determine the means, methods, processes, and schedules of
production, including the contracting out of work with prior notification; to
determine the products to be manufactured, the location of its plants, and the
continuance of its operating departments; to establish and require employees to
observe COMPANY rules and regulations; to hire, promote, transfer, lay off, or
relieve employees from duties; and to maintain order and to suspend, demote,
discipline, and discharge employees for just cause are the sole rights of the
COMPANY. The exercise by the COMPANY of any of the foregoing rights shall not
alter any of the specific provisions of this Agreement, nor shall they be used
indiscriminately against any member of the UNION.  The foregoing enumeration of
Management's rights shall not be deemed to exclude other rights or functions of
Management not specifically set forth.  The COMPANY therefore retains all rights
not otherwise specifically covered by this Agreement.


                                  ARTICLE XXVI
                      Termination and Duration Appendices

                                       52
<PAGE>
 
This Agreement and Appendices express the full and complete understanding of the
Parties on the subject of working conditions, hours of work and other conditions
of employment, including method of wage payment.  Each party agrees that the
other shall not be obligated to bargain collectively with respect to any subject
or matter not specifically referred to or covered in this agreement.  It,
therefore, is agreed that this Agreement will become effective as of July 1,
1996, and remain in effect until 11:00 p.m., July 1, 2001,and for annual periods
running from June 30 to June 30, thereafter unless sixty (60) days prior to the
expiration date either party notifies the other in writing of its desire to
terminate on the expiration date.

It is further agreed that the terms and conditions of the Agreement may, by
mutual consent, be altered, added to, deleted or modified. Any such change or
modification will be covered by an addendum, properly executed by both parties,
which then becomes part of the Agreement.

IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be
signed this June 30, 1996 by their duly authorized Representatives.

THE CARBIDE/GRAPHITE GROUP, INC.
CARBIDE DIVISION, LOUISVILLE, KENTUCKY PLANT

----------------------------------------------------------
Walter Damian, Vice President of Human Resources

----------------------------------------------------------
Ara Hacetoglu, Vice President and Plant Manager


----------------------------------------------------------
Mike Eicher, Manager of Human Resources

----------------------------------------------------------
Rhonda Rinker, Human Resource Administrator

----------------------------------------------------------
Don Willinger, Engineering Manager

LOCAL 320, INTERNATIONAL BROTHERHOOD OF FIREMEN AND OILERS

----------------------------------------------------------
Mike Moses, Business Manager

----------------------------------------------------------
Robert Gunter, Plant Chairperson

----------------------------------------------------------
Ralph Cissell, Vice Chairperson
 

                                       53
<PAGE>
 
----------------------------------------------------------
Gary Davenport, Committeeman

----------------------------------------------------------
Jeffery Duke, Committeeman

----------------------------------------------------------
Gerald Gallagher, Committeeman

----------------------------------------------------------
Gerry Madden, Committeeman

----------------------------------------------------------
John Mayhew, Committeeman

----------------------------------------------------------
Doug McDonald, Committeeman

                                       54
<PAGE>
 
                                    ADDENDUM


August 14, 1978

Mr. Charles R. Adwell, Business Manager
International Brotherhood of Firemen & Oilers
Local 320
Suites 110-112, Dixie Manor Building
Louisville, KY  40258

Dear Mr. Adwell:

     Based on conversation with the Firemen & Oilers Union during our recent
negotiations, we offer this letter for clarification and record purposes.

     During the negotiations the Union presented a proposal regarding additional
pay for the leaders on the two night shifts in the Maintenance Department.  The
Company did not agree at the close of negotiations to accept the Union's
proposal.  In conversations since negotiations closed, apparently the Union was
under the impression that the Company had agreed to take some action regarding
the proposal.  In response to this request, the Company agrees to the following:

     "The Company will pay the leaders on the 3-11 shift and the 11-7 shift in
     the Maintenance Department the same rate of pay as that of an acting
     foreman.

     This agreement is contingent on the following conditions:

     1.  This agreement applies to the Maintenance Department only.

     2.  The Firemen & Oilers Union signs the Contract ratified by their
         membership on June 29, 1978.

     3.  Time worked by these leaders does not count as acting foreman time and
         will not be so recorded.

     4.  Agreement is for the term of this current Contract.

     5.  This additional rate of pay is to be paid only during the time they are
         acting as leaders on their shift and does not apply to overtime
         situations or other times when they may not be working as leaders."



     Please sign below to indicate Union agreement to the above stipulations.

 
                                         Sincerely yours,

                                       55
<PAGE>
 
                                         Gordon A. Worster
GWS/dc                                   Industrial Relations Coordinator


 
Charles R. Adwell

 
Vaughn Bennett       Norman Kaiser

P.S. Condition in above letter renewed thru June 30, 2001.

                                       56
<PAGE>
 
July 1, 1984

Mr. Charles R. Adwell, Business Manager
International Brotherhood of Firemen & Oilers
Local 320
Suite 122, Dixie Manor Building
Louisville, Kentucky 40258

Dear Mr. Adwell:

     A lengthy discussion was held on the subject of drafting.  Both parties
acknowledge that drafting should be a last resort to be used when sufficient
volunteers for overtime are not available to do essential work.  Essential work
would be defined as covering 1) absenteeism, 2) work to cover unanticipated
customer production orders, 3) necessary maintenance repair, 4) work necessary
to keep production continuing, 5) work to correct unsafe conditions requiring
immediate attention, etc.  Drafting is not appropriate for non-essential work.

     When employees are drafted, the reasons why the draft is necessary will be
explained to them.  If an employee feels the work is non-essential or that he is
not the appropriate person according to proper drafting procedure to be
selected, he may request the presence of an on-shift union steward to discuss
the issue with the Supervisor.

     After an employee is drafted, the foreman doing the drafting will continue
to exhaust the overtime list to seek volunteers if he has not already done so.

     Once the essential work for which an employee was drafted is completed, a
supervisor will offer the employee the opportunity to leave.

     Pack Department employees who are drafted over to the next full shift (8
hours) will be allowed to exercise their seniority for available job openings on
that shift in the daily shape-up.

     Both parties recognize that drafting can be greatly reduced by:

     1)  More voluntary overtime being worked.

     2)  Seeking volunteers for non-essential overtime over a period of days
         with the hours to be worked out at the employee's choice (two hour
         minimum) before the overtime becomes essential.

     The content of this letter will be discussed with all supervisors by the
Plant Manager and the Industrial Relations Manager.  The Union agrees to discuss
this letter with all Union Stewards.

                                         Sincerely,
                                         Sue H. Carney
SHC/gkm                                  Plant Manager

                                       57
<PAGE>
 
July 1, 1993



Mr. Ronald Ashton, Business Agent
International Brotherhood of Firemen & Oilers
Local 320
6801 Dixie Highway, Suite 122
Louisville, KY 40258

Dear Mr. Ashton:

     The company agrees to continue its practice of training Furnace, Pack,
Lime, and Acetylene department employees in order to maximize the number of
employees available to handle the work.  Senior employees who desire the
training will be trained first.

                                         Sincerely yours,
                                         Ara Hacetoglu
                                         Plant Manager

                                       58
<PAGE>
 
July 1, 1996

Mr. Ronald Ashton, Business Manager
INTERNATIONAL BROTHERHOOD OF FIREMEN & OILERS
Local 320
6801 Dixie Highway, Suite 12
Louisville, KY 40258

Dear Mr. Ashton:

This letter will summarize our negotiating agreement concerning incidental
maintenance:

         Operating departments may, on occasion, perform simple minor
     maintenance (for example, replace boot on screen, adjust packing gland)
     using basic hand tools (screwdriver, pliers, wrench, etc.) or perform
     simple, routine lubrication of department equipment.

         Those responsibilities will be limited to thirty (30) minutes in
     duration.

         This Agreement will become ineffective whenever any maintenance
     employee is cut out of the department.


Very truly yours,

Ara Hacetoglu
Vice President and Plant Manager

                                       59
<PAGE>
 
July 1, 1996


Mr. Mike Moses, Business Agent
INTERNATIONAL BROTHERHOOD OF FIREMEN & OILERS
Local 320
6801 Dixie Highway, Suite 122
Louisville, KY 40258

Dear Mr. Moses:

The parties agree the following practices will continue through the term of this
agreement.

1.   The Company will discontinue its present practice of adjusting seniority
     dates for absences exceeding (3) months. Seniority dates will continue to
     be amended for events breaking continuous service (e.g. quits, discharges,
     expiration of time on lay-off, etc).

2.   The Company agrees to offer container work to Maintenance employees before
     sending Company owned containers out for repair or painting. If the
     response is insufficient to fully meet the need, then some part of the work
     may be contracted in addition to our Maintenance employees' work.

     It is understood that containers not actually owned by the Company are
     sometimes sent out for repair or painting and sometimes done in the plant
     by our Maintenance people. This practice will remain unchanged.

3.   The Company intends to maintain its policy of limiting employees to 16
     hours of continuous work. However, should a situation arise where an
     employee volunteers to work over 16 consecutive hours, those hours over 16
     will be paid at the double time rate.

4.   If the Company is contracting any janitor work, before someone is put out
     of the plant because of a physical handicap that renders them unable to
     perform any bargaining unit job and they could do a janitor job, then a
     janitor job would be reestablished up to three regular janitor positions.
     The pay rate would be $3.00 less than the Yard rate. If the handicap is the
     result of an on-the-job compensable injury, the pay rate would be the Yard
     rate.

     Should the Company decide to bid any janitor jobs, the pay rate would be
     $3.00 less than the Yard rate. The current janitor is not affected by this
     agreement and will continue to be paid the Yard rate.

Sincerely,


Mike Eicher
Manager, Human Resources

                                       60
<PAGE>
 
July 1, 1996



Mr. Mike Moses, Business Agent
INTERNATIONAL BROTHERHOOD OF FIREMEN & OILERS
Local 320
6801 Dixie Highway, Suite 122
Louisville, KY 40258

Dear Mr. Moses:

The Company and the Union agree to jointly develop a state approved Mechanical
Maintenance Apprenticeship Program.  The provisions of the program will be
developed by a committee consisting of two Company representatives and two Union
representatives.  Upon completion, the program developed will be submitted to
the Kentucky Labor Cabinet for state certification.  Upon approval, the program
will be implemented on a mutually agreeable schedule.

Sincerely,



Mike Eicher
Manager, Human Resources

                                       61
<PAGE>
 
                                     INDEX
                                  (by subject)

<TABLE>
<CAPTION>
                                                          PAGE
<S>                                                       <C>
Agreement...............................................     2
Acting Foremen..........................................    20
Acetylene Department....................................    27
Arbitration.............................................    34
Accident Reports........................................    38
Addresses...............................................    46
Bargaining Unit.........................................     2
Bulletin Boards.........................................    46
Bereavement Leave.......................................    57
Call-in Pay & Exceptions................................     8
Call Back From L/O......................................
Clothing................................................    37
Compensable Injuries....................................    39
Control Lab.............................................    40
Departments.............................................    12
Disability & Seniority..................................    19
Disciplinary Action.....................................    36
Discharge...............................................    35
Discipline..............................................    66
Duration................................................    58
EMT Qualifications......................................    37
Furnace Department......................................    23
Funeral Leave...........................................    57
Grievance Procedure.....................................    34
Grievance Procedure - Compensation......................    35
Glasses.................................................    37
Garnishments............................................    45
Hold Over Pay...........................................     5
Holiday Pay/Eligibility.................................     6
I.B.F. & O Appointment..................................    21
Insurance...............................................    52
Job Vacancies - Permanent...............................    15
Job Vacancies - While Absent............................    16
Job Vacancies - No Bidders..............................    16
Jury Service............................................    57
Leader Pay..............................................     6
Lay-off.................................................    13
Lay-off Notice..........................................    21
Lime Department.........................................    30
Leader Continuation.....................................    46
Maintenance.............................................    47
</TABLE>

                                       62
<PAGE>
 
<TABLE>

<S>                                                       <C>
Maintenance Tests.......................................    49
Maintenance Bid Jobs....................................    50
Non-Discrimination......................................     3
New Jobs................................................     3
No Lay Off to Avoid Overtime............................     5
Overtime Provisions.....................................    40
Overtime Renewal........................................    43
Purpose.................................................     2
PAC.....................................................     4
Pay Day.................................................     6
Preference Sheets.......................................    16
Physical Disability.....................................    18
Promotion to Supervision................................    20
Pack Department.........................................    25
Reporting Pay...........................................     9
Retirement..............................................    54
Retirees Insurance......................................    56
Sunday Premium..........................................     7
Shift Premium & Exceptions..............................     7
Seniority...............................................    12
Shift Preference........................................    19
Seniority Lists.........................................    21
Shop Chairman...........................................    36
Strikes & Lockouts......................................    36
Safety & Health/Committees..............................    36
Safety Shoes (January)..................................    38
Trading Days Off........................................     5
Temporary Transfer......................................     6
Temporary Assignments...................................    16
Time Limits.............................................    34
Tool Allowance..........................................    50
Union Security..........................................     3
Union Activity Restriction..............................    46
Vacations...............................................     9
Vacations - Prorated....................................    10
Work Day/Week...........................................     4
Work Over 16 Hours......................................     4
Wage Rates..............................................    44
Wage Progression........................................    45
Yard Transfers..........................................    17
Yard Department.........................................    23
</TABLE>

                                       63