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                                                                   Exhibit 10.38
 
                                   AGREEMENT

This agreement entered into as of 1st day of February, 1996, is entered into by
and between The Carbide/Graphite Group, Inc, Carbide Unit, located at Calvert
City, Kentucky, hereinafter referred to as the "Company" and the Oil, Chemical
and Atomic Workers International Union, Local 3-556, for and on behalf of its
members, hereinafter referred to as the "Union."

                                   ARTICLE I

                                    PURPOSE

The general purpose of this agreement is to promote the mutual interest of the
employer and the employees; to provide a peaceful method of adjusting
differences which may arise between the parties; and to provide for the
operation of the Calvert City, Kentucky Plant, of The Carbide/Graphite Group,
Inc. under the methods which will, to the fullest extent, further the safety and
welfare of the employees, economy of operation, elimination of waste, quantity
and quality of output, cleanliness of plant and protection of property.

                                  ARTICLE II

                                  RECOGNITION

1.  The Company recognizes the Union as the exclusive bargaining agent of the
    employees covered by this agreement as certified by the National Labor
    Relations Board, under date of May 4, 1954, Case 9-RC-2213. The term
    "employee," as used in this agreement, means all hourly rated production
    employees, maintenance employees, first aid employees and janitors
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    of the Calvert City, Kentucky Plant, but excluding all office clerical
    employees, storekeepers (except as modified by the 12/22/93 Agreement),
    guards, professional employees, supervisors and chemists as defined in the
    act.

2.  The Company will not change the classification of any employee covered
    hereby or the status of a classification covered hereby for the sole purpose
    of diminishing the certified bargaining unit.

3.  Employees of the Company who are not covered by the terms of this agreement
    by virtue of their supervisory, clerical, or executive positions, or for
    other reasons set forth herein, will not perform any 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 parties agree that the above section has been bothersome and it is
    the desire of both parties to establish a better understanding and
    relationship in connection with this problem. The parties agree to use their
    best efforts in good faith to improve the overall relationship in the
    various departments.

4.  There shall be no discrimination because of race, color, creed, sex, age,
    national origin, Vietnam era veteran, or disabled Vietnam era veteran
    status. The term "he," "his," or "man" as used in this agreement shall apply
    to both male and female employees. The Company and Union further agree to
    comply with the terms of the Americans with Disabilities Act of 1992 and in
    the event there is a question as to the application of the terms of the law,
    the Union and Company shall meet to discuss the matter. It is recognized
    that employees may need to waive their right to confidentiality to the
    extent necessary for the Company and Union to discuss

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    the matter as it may apply to seniority.


                                  ARTICLE III

                                  UNION SHOP

1.  All employees within the bargaining unit are required to become members of
    the Union on and after the thirtieth (30th) day following 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
    and after the thirtieth (30th) day following the date of employment and
    thereafter remain members of the Union in good standing as a condition of
    continued employment, provided, however, any employee shall be deemed to
    have such membership in the Union if the employee has paid or tendered the
    initiation fee and dues uniformly required as a condition of such
    membership, to the Union or its treasurer.

2.  During the life of this agreement and in accordance with the provisions of
    the Labor Management Relations Act of 1947, and in accordance with the
    "Authorization of Checkoff of Dues" forms hereinafter set forth, and to the
    extent permitted by the law of the applicable jurisdiction, the Company
    agrees to deduct Union Membership dues levied in accordance with the
    Constitution and By-Laws of the Local Union from the first pay of each
    employee who executes or has executed the following "Authorization for
    Checkoff of Dues" form.

                                   Date:__________________________

I, ____________________, Clock No. _________, hereby assign to Oil, Chemical and
Atomic Workers International Union, A.F.L.-C.I.O., Local 3-556, from any wages
earned or to be earned 

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by me as your employee, the appropriate monthly dues and initiation fees
in such amount as may hereafter be established by the Union and become due to
it, as my membership dues in said Union.  I authorize and direct you to deduct
such amount from my first pay for each month and to remit same to the Union.

This assignment, authorization and directive shall become operative
contemporaneous with the effective date of the new collective bargaining
agreement between the Employer and Union.

This assignment, authorization and directive shall be irrevocable for the period
of one (1) year, or until the termination of the said new collective agreement
between the Employer and the Union, whichever occurs sooner; and I agree and
direct that this assignment, authorization and directive shall be automatically
renewed and shall be irrevocable for successive periods of one (1) year or for
the period of such succeeding applicable collective agreement between the
Employer and the Union, whichever shall be shorter, unless written notice is
given by me to the Employer and the Union within fifteen (15) days prior to the
expiration of each period of one (1) year, or the expiration of such applicable
collective agreement between the Employer and the Union, whichever occurs
sooner.

                                   Signature____________________________________

               Witness__________________________________________________________

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                                  ARTICLE IV

                               MANAGEMENT CLAUSE

1.  The management of the plant and the direction of the working forces and the
    operations in the plant, including the hiring, promoting, transferring and
    retiring of employees; the suspension, discharging, or otherwise
    disciplining of employees; the laying off and calling to work of employees
    in connection with any reduction or increase of the working forces; the
    scheduling of work and the control and regulation of the use of all
    equipment and other property of the Employer; and all matters not
    specifically covered by this agreement are the exclusive functions of
    management. In the exercise of all the above functions, the management shall
    not act contrary to the provisions of this agreement.

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

3.  It is understood and agreed that the Company, subject to the provisions of
    Article XIV 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 violation of any reasonable published or posted rules.

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                                   ARTICLE V

                           HOURS OF WORK & OVERTIME

                                 Hours of Work
                                 -------------

1.  The standard work week shall begin at 11:00 p.m. on Saturday night and end
    on the following Saturday night at 11:00 p.m. and shall normally consist of
    five (5) days of work and two (2) off days for each employee. The work day
    shall be from 11:00 p.m. to 11:00 p.m.

    Where production requires continuous operation twenty-four (24) hours per
    day, the day will be made up of three (3) shifts and each shift will consist
    of eight (8) continuous hours. The normal starting time for shift employees
    is number three (3) shift 11:00 p.m., number one (1) shift 7:00 a.m., and
    number two (2) shift 3:00 p.m. The normal work time for day workers not on
    continuous operation is from seven (7:00) a.m. to three-thirty (3:30) p.m.
    There shall be a thirty (30) minute non-paid lunch period scheduled at the
    middle of the shift.

                                    Overtime
                                    --------

2.  All work in excess of eight (8) hours in the twenty-four (24) hour period
    after an employee starts to work shall be paid for at the rate of time and
    one-half. Exception to this instance would be when an employee makes a
    regular scheduled change of shifts or when the change is made at the request
    of the employee. All work in excess of forty (40) hours in any work week
    shall be paid for at the rate of time and one-half; provided, however, that
    the employee will not be paid both daily and weekly overtime for the same
    hours of overtime work.

3.  Time and one-half will be paid for all hours worked on the sixth (6th)
    consecutive day in a work week when eight (8) full hours have been worked or
    credited on each of the five (5) days preceding the sixth (6th) day.
    Overtime pay for the sixth (6th) day will be reduced by

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    the number of hours less than eight (8) worked or credited on any of the
    five (5) days preceding the sixth (6th) day.

    Doubletime will be paid for all hours worked on the seventh (7th)
    consecutive day in a work week when eight (8) full hours have been worked or
    credited on each of the six (6) days preceding the seventh (7th) day.
    Overtime pay for the seventh (7th) day will be reduced by the number of
    hours less than eight (8) worked or credited on any of the six (6) days
    preceding the seventh (7th) day.

    When an employee starts a 24-hour period on the sixth (6th) day which
    extends into the seventh (7th) work day of the work week, the employee shall
    be paid for all hours worked on the seventh (7th) day at doubletime provided
    the employee worked or was credited eight (8) hours on the sixth (6th) day
    as set forth above.

    Should an employee be sent home by the Company after working a part of a
    shift due to lack of work, the remainder of the shift not worked will be
    counted in calculating sixth (6th) and seventh (7th) day overtime.

4.  Hours worked in one work week will not be used in calculating sixth (6th)
    and seventh (7th) day overtime in any other week. Any pay for hours not
    worked are not counted in calculating overtime unless specifically set forth
    in this agreement. The rates set forth in Schedule A are the regular rates
    as that term is used in the Fair Labor Standards Act. Only those rates shall
    be used in the calculation of overtime, except that night shift
    differentials shall be included for this purpose.

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5.  Employees who work overtime shall not be required to take time off during
    that payroll week other than regular scheduled time off. No employee will
    work overtime without the authorization of his/her supervisor.

6.  The following Union time will be counted as working time for the purpose of
    qualifying for overtime only:

    (a)  Normal Union meetings (i.e., membership meetings);

    (b)  Arbitration;

    (c)  Negotiation.

    (d)  Mediation.

7.  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.

8.  An overtime list will be posted for each job overtime group, showing the
    amount of overtime worked by each employee. This list will be used as a
    basis for overtime distribution. The Company must necessarily use the
    available employee for overtime and thus the equalization will take place
    over selected periods of time. The Union recognizes that the Company can
    only carry out this principle if all employees cooperate by working overtime
    when required.

    In the event an employee has placed his/her card in the "preferred" rack and
    the employee is then bypassed for overtime, the employee will be paid the
    applicable rate for which he/she was bypassed. Since the employee from the
    "preferred" rack is paid for the overtime, the employee shall be charged
    with the appropriate number of overtime hours.

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    If the employee's card is in the "non-preferred" overtime rack, and the
    employee is then bypassed, the employee will be paid the premium portion of
    the pay which would have been earned had such employee worked:

    (a)  time and one-half bypass receives half time premium.

    (b)  doubletime and one-half bypass receives time and one-half premium.

    (c)  call-in pay receives two hours pay or the premium for the time worked.

9.  In order to expedite the allocating of overtime opportunities, the following
    procedure will be followed:

    (a)  In each department suitable name card racks will be provided labeled
         "Prefer Overtime" and "Do Not Prefer Overtime."

    (b)  Each employee will place his/her name card in the rack of his/her
         preference. If the preference of any employee changes, the employee may
         move his/her name card to the appropriate rack and notify his/her
         Supervisor; however, such change shall not be made during the last
         three (3) hours of the shift the employee is working.

    (c)  When overtime is worked by anyone who has placed his/her card in the
         "Prefer Overtime" rack, an equal number of hours will be credited to
         each person in that overtime group who has not placed his/her card in
         the "Prefer Overtime" rack and has less overtime hours worked and/or
         credited to him/her. If more than one (1) employee works overtime, the
         amount to be credited will be only those hours worked

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         by the person who worked the most overtime that instance.

    (d)  Each time an employee places his/her overtime card in the Preferred
         Overtime rack, his/her hours will be credited to the high hours plus
         one (1).

10. In order to further expedite the administration of overtime, the following
    procedure provides a method for administering overtime in the various job
    groups.

    A.  Overtime in all groups will be administered in accordance with the
        following procedure:

        I.  If the overtime requirements are known more than eight (8) hours
            prior to the overtime shift, but not more than three (3) days, you
            will:


            (a)  Assign the overtime to employees in the job groups for which
                 overtime is needed that have their cards in the "Preferred
                 Overtime" rack beginning with the employee with the least
                 amount of overtime hours worked or credited. This will not
                 negate the prescheduled employee's overtime opportunities that
                 may occur prior to the prescheduled overtime nor will it change
                 the employee's prescheduled overtime.

            (b)  Offer the overtime to any employees in the job groups for which

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                 overtime is needed that have their cards in the "Non-Preferred
                 Overtime" rack.

            (c)  Referring to the Furnace Department only, when the above
                 overtime procedures for the Furnace Job Groups (3, 3A, or 4)
                 have been exhausted, the Company will offer the overtime to
                 other Furnace Department employees in the following manner:

            (d)  Overtime & Progression - See Addendum A dated May 19, 1993.

        II. If the overtime requirements are realized eight (8) hours or less
            prior to the overtime shift, you will:

            (a)  Assign the overtime to the employees in the job groups that are
                 on duty and have their cards in the "Preferred Overtime" rack
                 beginning with the employee with the least amount of overtime
                 hours worked or credited, and if additional employees are
                 needed,

            (b)  Offer the overtime to any employees that are on duty in the job
                 groups for which overtime is needed that have their cards in
                 the "Non-Preferred Overtime" rack.

            (c)  Referring to the Furnace Department only, when the above
                 overtime procedures for the Furnace Job Groups (3, 3A, or 4)
                 have been

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                 exhausted, the Company will offer the overtime to other Furnace
                 Department employees in the following manner:

            (d)  Overtime & Progression - See Addendum A dated May 19, 1993.

    B.  Yard employees that are assigned into the various departments on a
        weekly group change will be given equal overtime opportunities. Upon
        entering the department, Yard employees will be credited with the
        highest overtime hours that any permanent employee has, plus an
        additional four (4) hours. Each time a Yard employee changes
        departments, the above will apply. Yard employees working in production
        departments on daily assignments will be eligible for overtime in the
        Yard department only.

        Overtime lists will be maintained separately for Yard, Truck Drivers,
        Storekeeper, and Janitor employees.

        (a)  Yard overtime will first be offered to the Yard employees. If
             additional help is needed, the overtime will be offered to the
             Truck Drivers and Storekeeper.

        (b)  Truck Driving overtime will first be offered to the Truck Drivers.
             If additional help is needed, the overtime will be offered to the
             Yard employees.

        (c)  Janitor overtime will first be offered to the Janitors. If
             additional help is needed, the overtime will be offered to the Yard
             employees.

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        (d)  Storeroom overtime will first be offered to the Storekeeper if
             additional help is needed. Overtime will then be offered to the
             Truck Drivers.

    C.  Overtime Maintenance

        (a)  Overtime in Group #1 will be administered on the basis of primary
             skills. The three (3) primary skills will be grouped for the
             purpose of distributing overtime as indicated below:

             1.  General Maintenance and Welders;

             2.  Mechanics;

             3.  Operators.

             All three (3) of these classifications will have separate overtime
             racks.

             If additional manpower is needed in the above three (3)
             classifications, the Company will follow the overtime procedure for
             the other classifications.

        (b)  Overtime in Group 1A will be administered on the basis of primary
             skills as listed below:

             1.  Electricians

             2.  Instrument Mechanic

             Addendum "B" identifies those items which are considered to be
             instrument work of a call-in nature, however instrument work on the
             off shifts (of a non-

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             call-in nature) can be performed by a qualified on duty
             electrician. Work assignments as defined by this paragraph shall
             apply only to overtime assignment and shall not be construed to
             involve any other work assignment.

        (c)  If the overtime opportunities are limited to one shift, only those
             employees on that shift that have their cards in the "Non-Preferred
             Overtime" rack, who have less overtime hours worked or credited
             than the employee who worked overtime will be credited; however, if
             the overtime opportunity is expanded to include all shifts, then
             all employees on all shifts with cards in the "Non-Preferred
             Overtime" rack with less overtime hours worked or credited than the
             employee who worked overtime will be credited.

11. In emergency callouts, the qualified employees in each overtime group who
    have placed their name cards in the "Preferred Overtime" rack and who have
    the lowest number of hours worked and/or credited will be called providing
    they have left their telephone number at the Personnel Department.

12.  Before an employee works more than sixteen (16) hours, it must be agreed to
     by the employee and the Company. In case an employee works more than
     sixteen (16) hours, the employee will receive two (2) times his/her
     straight time rate for all hours worked over sixteen (16). If an employee
     is sent home during his/her regular scheduled shift after completing
     sixteen (16) continuous hours, the employee shall be paid for the balance
     of his/her regular scheduled shift that is not worked at the employee's
     regular straight time rate.

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13.  Employees absent for thirty (30) days or more except for vacation or sick
     leave will, upon return to work, be credited with hours equal to the
     employee with the highest hours in the job group.

14.  Employees on light or restricted duty will not be allowed to work any
     overtime (NOTE: The sixth scheduled day for a swing worker is not
     considered overtime for this purpose).

                                  ARTICLE VI

                                  WAGE RATES

1.  Wages shall be paid in accordance with Schedule "A" which is attached hereto
    and is a part of this contract.

2.  Each employee will be paid once each week on Thursday after 2 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 circumstances are known.

3.  Employees working on a shift basis will receive a premium of forty (40)
    cents per hour for the second (2nd) shift starting at 3:00 p.m. and ending
    at 11:00 p.m. and forty-five (45) cents per hour for the third (3rd) shift
    starting at 11:00 p.m. and ending at 7:00 a.m.

    If such employees are required to work during a scheduled non-paid lunch
    period, they shall be paid for such time worked at the rate of time and one-
    half and shall be allowed sufficient

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    time to eat their lunch when the job is completed or when they can be
    relieved.

    For the purpose of applying shift premiums, all hours worked by an employee
    during the employee's work day are considered as worked on the shift on
    which the employee is scheduled to start work and does work, except:

    (a)  If scheduled for the first or second shifts and the employee completes
         his/her regular turn on those shifts and continues to work for four (4)
         or more hours into the next shift, the employee will be paid for shift
         premium for the next shift, for 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
         the employee started.

    (b)  If scheduled for the third shift and the employee completes his/her
         regular turn, continuing to work into the first shift, the employee
         will be paid the third shift premium for all hours worked on the first
         shift.

    (c)  If the employee completes his/her regular shift and after leaving the
         plant is called back within the same work day, the employee will
         receive the applicable shift premium for the hours worked.

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

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    a higher rate, shall receive the higher rate while so employed.

5.  Whenever a new job is started or an old job substantially changed so as to
    make it a new job, the Company shall discuss the subject with the Union,
    before fixing or changing the rate. The decision by the Company may be made
    subject to the Grievance Procedure.

6.  Approved rate changes will become effective on Sunday following the
    eligibility date.

    An employee shall be promoted from one classification to another when
    capable of performing the work of the classification.

7.  Yard employees working in any production cleanup area will be paid Group
    Four (4) rate.

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                                  ARTICLE VII

                                 SHIFT TRADING

Employees may trade shifts with other employees in the same job classification
on a temporary basis not exceeding four (4) weeks, or on a permanent basis.
Employees may also trade off days in any one week.  These trades will be
permitted provided the employees can arrange the trade themselves and it has the
prior approval of their supervisor.

Maintenance Department Group Trades - In Job Group 1, any employee may trade
work schedule groups with another employee in the same crew provided both have
the same primary skill classification.

In Job Groups 1 and 1A, the trades will be made after the posting of the normal
schedule for the period in which the trade is to become effective.  Such trades
shall not exceed the normal schedule period for these groups.

A trade of shifts which interferes with the posted vacation schedule will not be
permitted.  If a trade is made that interferes, then the employees trading must
reschedule their vacations.

When an employee, who is involved in a shift trade, receives a new job per the
bidding procedure, the employee will go to his/her new job.  The other employee,
who represents the other half of the shift trade will continue on the shift for
which the employee has traded until the end of the trade period.

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The employee who replaces the employee above will go to the vacancy created by
the trade until the end of the trade period, at which time the employee goes to
his/her permanent shift.

Weekly group changed employees shall be allowed to trade with a permanent
employee.  Such trades shall be in accord with the terms of this Article VII.

A trade of shifts or off days shall not infringe the seniority rights of other
employees, shall not result in the working of more than forty (40) hours in any
calendar week and shall not result in overtime premium pay.

Such trades shall be in accordance with the following:

                                                    May Trade With

Furnace Attendant................................Furnace Attendant

Tapper......................................................Tapper

Desulf Operator....................................Desulf Operator

Packer......................................................Packer

Utility....................................................Utility

Calcine Coal Attendant......................Calcine Coal Attendant

Coke Attendant......................................Coke Attendant

Paste Attendant....................................Paste Attendant

Acetylene Attendant............................Acetylene Attendant

First Aid Attendant............................First Aid Attendant

Janitor....................................................Janitor

General Maintenance 1C......................General Maintenance 1C

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General Maintenance 2C......................General Maintenance 2C

Welder 1C................................................Welder 1C

Welder 2C................................................Welder 2C

Equipment Operator 1C........................Equipment Operator 1C

Electrician............................................Electrician

Truck Driver..........................................Truck Driver

Yard..........................................................Yard

                                 ARTICLE VIII

                                   HOLIDAYS

1.  The Company recognizes the following eleven (11) holidays:

    New Year's Day                                   Fourth of July

    Washington's Birthday                            Labor Day
          (Third Monday in Feb.)

    Good Friday                                      Thanksgiving Day

    Memorial Day                                     Day After Thanksgiving
      (Last Monday in May)

    Columbus Day                                     Christmas Day
         (Second Monday in Oct.)

    Extra Christmas Day


    If an employee is not required to work on any of the eleven (11) holidays
    listed above, the employee shall receive eight (8) hours pay at his/her
    regular rate for such holiday. However, to be entitled to pay for a
    recognized holiday which is not worked, the employee must be on

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    the payroll and must have worked a major portion (four (4) hours or more) of
    the scheduled work day immediately before and after the holiday, unless the
    employee's failure to so work is due to a death in the employee's immediate
    family or unless the employee's failure to so work on the day before the
    holiday is due to an absence which has been requested in writing at least
    twenty-four (24) hours in advance of such absence and which request is
    granted by Management, or unless the employee's failure to work on the day
    after the holiday is due to an absence which has been requested in writing
    at least forty-eight (48) hours in advance of such absence and which request
    is granted by Management. The above language does not pertain to daily or
    weekly vacations.

    In no case shall a request be granted for both days. Also, the employee
    shall not have refused to work such holiday if the employee was requested or
    scheduled to work.

2.  If an employee is required to work on any of the eleven (11) holidays listed
    above, the employee shall receive two and one-half (2-1/2) times his/her
    regular hourly rate for all hours worked on such holiday.

3.  In case an employee is required to work more than eight (8) hours on any of
    the above holidays, such overtime shall be paid for at the rate of two and
    one-half (2-1/2) times his/her regular rate.

4.  When a holiday falls on an employee's regularly scheduled work day, but is
    not worked by the employee, such holiday will be counted as a day worked for
    the purpose of computing overtime pay provided the employee qualified for
    holiday pay. When a holiday falls on an

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    employee's day off and the employee does not work, such holiday will not be
    counted as a day worked for the purpose of computing overtime pay.

                                  ARTICLE IX

                                 REPORTING PAY

1.  An employee who reports for work at his/her designated starting time on a
    regular scheduled work day and has not been previously notified that there
    will be no work for him/her on that day (provided the employee worked the
    last preceding work period of his/her shift, so that notice could be given,
    or permission for the employee's absence was granted by his/her supervisor)
    will be given not less than four (4) hours work, of any type available and
    pay therefor, or not less than four (4) hours pay at his/her regular hourly
    rate.

2.  This provision shall not apply in case work is not available due to fire,
    power breakdown or emergencies of any kind beyond the control of the
    Company.

                                   ARTICLE X

                                  CALL-IN PAY

    An employee who has completed his scheduled shift and clocked out, and is
    called in by the Company to perform work outside of his/her regular
    scheduled shift will receive not less than four (4) hours pay at straight
    time, or pay at the applicable rate for such hours worked, whichever is
    greater.

                                  ARTICLE XI

                                   VACATIONS

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1.  A regular employee is entitled to an annual vacation as follows:

    (a)  Upon the completion of one (1) year, but less than two (2) years
         continuous service, one (1) week.

    (b)  Upon the completion of two (2) years, but less than five (5) years
         continuous service, two (2) weeks.

    (c)  Upon the completion of five (5) years, but less than twelve (12) years
         continuous service, three (3) weeks.

    (d)  Upon the completion of twelve (12) years, but less than twenty (20)
         years continuous service, four (4) weeks.

    (e)  Upon the completion of twenty (20) years, but less than twenty-five
         (25) years continuous service, five (5) weeks.

    (f)  Upon the completion of twenty-five (25) years continuous service, six
         (6) weeks.

    Vacation pay will be computed by multiplying the employee's then straight
    time rate per hour by forty (40) hours in case of employees entitled to one
    (1) week's vacation and eighty (80) hours in the case of employees entitled
    to two (2) weeks' vacation and one hundred twenty (120) hours in the case of
    employees entitled to three (3) weeks of vacation and one hundred sixty
    (160) hours in the case of employees entitled to four (4) weeks of vacation
    and two

                                       23
<PAGE>
 
    hundred (200) hours in the case of employees entitled to five (5) weeks of
    vacation and two hundred forty (240) hours in the case of employees entitled
    to six (6) weeks of vacation.

2.  In case employment be terminated after six (6) months service has been
    completed, an employee shall be paid the proportionate amount of his annual
    vacation pay (minus vacation pay received, if any) calculated in twelfths
    (12ths); (maximum allowance 23/12ths) based upon completed months of service
    to the month in which termination occurs. Any employee separated from the
    payroll receiving accrued vacation pay, who is subsequently reinstated with
    full seniority, shall either return the accrued vacation pay at the time of
    reinstatement, or have it deducted from his/her next earned vacation.

3.  Intermittent or continuous absence totaling more than two (2) months during
    the twelve (12) months preceding an employee's anniversary date of
    employment will cause the employee's vacation to be reduced one-twelfth
    (1/12) for each full month of accumulated absence in excess of two (2)
    months. Exceptions to this above will be made when the time lost was
    directly attributed to an employee having received an injury at the plant.
    Absences for any other reasons such as layoffs, granted leaves, etc., will
    not be counted as time worked in determining vacation earned.

    When vacation time includes a paid holiday (weekly), an additional day of
    vacation shall be granted. The day must be the last scheduled work day prior
    to the week of vacation or the first scheduled work day after the week of
    vacation. Vacations are to be taken in the year following the date of
    qualification. The qualifying date for vacations shall be the anniversary of
    the employee's hire date.

                                       24
<PAGE>
 
    Employees who qualify for a vacation shall have one (1) year, beginning with
    the hire date anniversary in which to complete the vacation. One (1) week of
    vacation may be carried over into the next vacation year.

    A vacation calendar will be posted in each department and the employees
    shall choose vacation dates on a first-come, first-serve basis.

    Employees with more than two (2) weeks of vacation may elect to draw pay in
    lieu of time off for those eligible weeks over two (2). Vacation time paid
    in this manner does not count as time worked for overtime calculation
    purposes.

    It is agreed that some employee vacation may be taken in single day units.

    The amount of single vacation days an individual may take is governed by the
    following:

    Normal Vacation        Max. No. of Single Days
    ---------------        -----------------------
    1 or 2 Weeks                 5 Days

    3 Weeks or More              10 Days


    Normally an employee will request vacation at least a day in advance, but
    requests will be considered if made at least one (1) hour before start of
    shift.

    Individuals making a request after the end of their previous shift recognize
    they may not know

                                       25
<PAGE>
 
    immediately if such request was granted. Management will attempt to answer
    the query as soon as possible.

    One-day vacations will be granted on a first-come, first-served basis. One-
    day vacations will not be granted for negotiated Union holidays.

    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; however, the
    Company intends to grant the requests wherever practical.

    The maximum number of employees permitted to take vacations at any one time
    shall be in accordance with the following schedule:

<TABLE>
<CAPTION>
                                  Maximum Number    Number Allowable
                                Allowable Per Week     Per Shift
                                ------------------     ---------    
<S>                             <C>                 <C>
     Calcine Coal                      2                 1
     Electrode Paste                   2                 1
     Electrical Maintenance            1                 1
     Acetylene                         2                 1

     Mechanical Maintenance*
          Mechanics                    1                 1
          Operators                    1                 1
          General Maintenance          3                 3

</TABLE> 

                                       26
<PAGE>
 
<TABLE> 
<S>                             <C>                 <C>
          Welders                           

     Yard                              2                 2
     First Aid                         1                 1
     Janitors                          1                 1
     Furnace                           3                 1
     Pack                              1                 1
     Desulf                            1                 1
     Storekeeper                       1                 1
</TABLE>

    *The total number of employees allowed on vacation per week in this
     classification Group 1 will be three (3).

    If operations of the plant necessitate a substantial change in employment,
    it is mutually agreed that the allowable number of vacations will be
    reviewed and adjusted proportionally.

    Application for vacation dates shall be made verbally to the Heads of the
    various departments and the Department Head shall post each employee's
    chosen date on the vacation calendar.

    If the Company should decide to close the plant for repairs, maintenance, or
    other purposes, the Company and the Union may recommend to the employees
    that they take their vacations during such period that the plant is closed.

    For employees who have three (3) or more weeks of vacation, the Company may
    schedule

                                       27
<PAGE>
 
    one (1) week of that vacation in the event of a plant, department, or
    department shift shutdown.

                                  ARTICLE XII

                                   SENIORITY

1.  Seniority is based on the total length of service with the Company of an
    employee at the plant. The seniority of each employee is his/her relative
    position with respect to other employees. Exercise of seniority by employees
    shall depend upon qualifications to perform the work. If the qualifications
    of two or more employees are considered equal and they have sufficient
    qualifications for the work, the employee having the greatest seniority
    shall be given preference.

2.  Seniority shall apply in filling vacancies, layoffs, transfers, recall, and
    polling for shift. Seniority will be administered as follows:

    (a)  A new employee shall be considered a probationary employee for the
         first sixty (60) working days of employment. At the end of that period,
         if the employee is retained, his/her name will be placed on the
         seniority list and his/her seniority shall date from the date of hire.

         A probationary employee shall be subject to layoff, discipline, or
         discharge at the sole discretion of the Company.

         Any probationary employee rehired after a termination will have all
         days worked (both

                                       28
<PAGE>
 
         before and after termination) counted toward the completion of the
         probationary period.

    (b)  The seniority of an employee shall cease on the date of:
    
         1.  Discharge

         2.  Resignation, including an absence for five (5) consecutive days
             without notifying the Human Resource Department or Supervisor.

         3.  A layoff or disability leave of absence (as set forth in
             Section c).

         4.  An employee declining to return to work, or failing to return to
             work or make satisfactory explanation within five (5) days from the
             date when the registered letter of notification is postmarked when
             recalled.

             (i)  A reply by the employee postmarked within the five (5) day
                  period shall be considered to be within the time period.

            (ii)  Written notification by registered mail to the last known
                  address of the laid-off employee, with copy to the Union,
                  shall constitute adequate notice under this Section.

                                       29
<PAGE>
 
           (iii)  Written notification of any change of address and telephone
                  number to the Company and Union shall be the sole
                  responsibility of the employee.

    (c)  Any employee who is laid off or incurs a leave of absence will continue
         to accumulate seniority as follows after the date of layoff or leave.

         Up to three (3) years of service........................ 12 Months
         From three (3) to five (5) years of service............. 24 Months
         More than five (5) years of service..................... 36 Months

         If such employee is not recalled or in cases of disability does not
         return within the applicable months, as shown above, from the date of
         layoff or commencement of disability leave, the employee will cease to
         have seniority. Such seniority accumulated during a period or periods
         when not on the payroll will apply only in the case of filling
         vacancies, layoffs, recall and transfers and will not be counted as
         length of service for the purposes of determining vacation rights or
         any other benefits.

    (d)  Employees will retain and accumulate seniority during periods of
         excused absence or leave of absence.

    (e)  If an employee is transferred from one job group to another, his/her
         total plant seniority will be transferred.

                                       30
<PAGE>
 
    (f)  Where an employee is going to be absent for more than two (2) weeks,
         the job may be filled on a temporary basis from within the job group.
         If the job cannot be filled from within the job group, then it will be
         offered to the most senior Yard employee. In the event the employee is
         off one (1) year or more, the employee will, on return, displace the
         least senior employee in the job classification.

3.  (a)  When a permanent reduction in force is to be made in any production
         job, the employees on the job having the least amount of seniority
         shall be the first to be laid off from that job. Employees so laid off
         may displace any less senior employee in Job Groups 2, 2A, 3, 3A, 4, 5,
         6, 7, 10, and 11. All displaced employees will have the same
         displacement rights. Any employee may displace a less senior employee
         in Group 10.

    (b)  Any temporary reduction in force in any production job classification
         in excess of two (2) continuous months will automatically become a
         permanent reduction in force.

4.  The Local Union President, Committeepersons, Secretary/Treasurer, and
    regular Stewards shall have preferential seniority in the matter of layoffs
    and shall be retained in their respective departments, job and shift to do
    any work during their tenure in office. This preferential seniority cannot
    be used for any other purpose. It is agreed that the number of each is as
    follows and the Union will currently advise the Company of the names of the
    various individuals:

<TABLE>
<S>                                  <C>
    Union President................................................1
</TABLE>                    

                                       31
<PAGE>
 
<TABLE>                     
<S>                                  <C>
     Secretary/Treasurer...........................................1
     Committeepersons............................................ .2
     Stewards....................................1 Regular Steward &
     ............................................1 Alternate Steward
                                                  for each shift in:
                                                   Paste, Acetylene,
                                            Maintenance, Yard, Pack,
                                             Furnace, Calcined Coal,
                                     Desulf and Janitor Departments.
</TABLE> 

    When operations are curtailed or suspended in any production group, the
    Company may retain any or all of the employees in this group according to
    their seniority, if they so desire, for an indefinite period to do cleanup
    and repair work which normally falls within the limits of their ability and
    skill and assist in maintenance work in his/her department.


5.  When a reduction in force is to be made, the following employees may be
    retained irrespective of seniority:

    An employee who by reason on special training and skill cannot be replaced
    satisfactorily by an employee having greater seniority. Likewise, an
    employee who by reason of special training and skill may be recalled out of
    seniority for assignments within his/her skill. It is understood that
    simultaneously all other employees within his/her classification will be so
    assigned within their skill. Prior to recalling or retaining this employee,
    the Company shall discuss the subject with the Union.

                                       32
<PAGE>
 
6.  A permanent vacancy is said to exist in any production group when, after the
    employees in the group have been assigned jobs according to their seniority,
    there is need for a permanent addition.

    (a)  The Company shall post on plant bulletin boards notice of permanent
         vacancies for seven (7) days so that interested employees may bid on
         such jobs.

         If no bids are received from active employees, the Company will recall
         the most senior employee on the recall list.

         If the most senior employee on the recall list holds a permanent job
         classification, he/she will not be required to forfeit his/her
         permanent job upon recall. He/she will be assigned from Group 10, Yard,
         by seniority to the job opening(s) on a weekly basis in accordance with
         the Yard preference procedure.

         When all employees have returned to their permanent jobs, the senior
         Yard employee at that time will be assigned to the permanent vacancy
         that was bid.

         If no one is on the recall list, the Company will hire a new employee.

    (b)  The Company recognizes that a qualified new employee on any job will
         require a reasonable time to learn how to perform the job.

    (c)  Temporary jobs filled for more than four (4) weeks will be bid as
         permanent with the

                                       33
<PAGE>
 
         exception of vacancies created by employees away from work due to
         illness or injury (work or non-work related).

    (d)  Any employee who bids on a job shall receive that job and shift. A
         change of shift may only occur if agreed on by the employee(s) and
         supervisor, or if agreed to by the Union Committee and Management for
         the good of the Company or employee(s).

7.  The Company agrees to establish and maintain a recall listing of laid-off
    employees and to maintain a seniority listing showing the names of all
    employees in the order of their seniority ranking in the various job groups
    within the Personnel Office for inspection and/or copying by certified Union
    representatives during office working hours, and to put such list on the
    bulletin boards. Four (4) copies of such listings will be given to the Union
    for their sole and exclusive use within thirty (30) days after the effective
    date of this contract. Such lists mentioned in this article will be posted
    on the plant bulletin boards.

    In accordance with seniority provision of this agreement, employees on
    recall list will be recalled to work beginning with most senior employee in
    the job group and progressing until needed manpower is obtained.

8.  Irrespective of Section 3 of this article which covers a permanent reduction
    and Section 6 which covers the filling of a permanent vacancy, the following
    procedure will be followed when there is a fluctuation in the level of
    operations.

    (a)  In the event of a temporary reduction in force of two (2) months or
         less, the following shall apply:

                                       34
<PAGE>
 
         1.  In a partial department shut down, those employees having the least
             seniority in a job classification shall be reduced first.

         2.  Employees displaced will be assigned to the Yard. A permanent Group
             10 employee (Janitors and Truck Drivers) without sufficient
             seniority to hold his/her job, will be reduced to Group 10 Yard
             Laborer.

         3.  Employees displaced during a temporary reduction will maintain
             their current rate of pay.

         4.  Employees without sufficient seniority to claim a job in the Yard
             Department shall be allowed to displace the least senior employee
             in job groups 2, 2A, 3, 3A, 4, 5, 6, 7, and 11 before being laid
             off.

         5.  If there are employees more senior in the Yard Department, Group
             10, the senior employee in the Yard will be assigned on a weekly
             basis to fill the vacancy based on Yard preference procedure.

    (b)  In other job groups, employees will be reduced according to seniority
         within the group and those employees reduced will go into Group Ten
         (10).

    (c)  The least senior employees in Group Ten (10) will be the first to be
         laid off from that group and their names will be placed on the recall
         listing as set forth in Section 9 of this article.

                                       35
<PAGE>
 
    (d)  When operations are resumed, the employees will return to their jobs in
         the reverse order as outlined in Paragraphs (a), (b), and (c) above.
         Each employee will return to the job he/she held at the time the
         operations were reduced.

9.  Maintenance:
    ----------- 

    1.  1st Class Maintenance
        2nd Class Maintenance

    1A. 1st Class Electrical Maintenance
        2nd Class Electrical Maintenance


    Maintenance employees will be rated and tested on primary skills such as
    electrical maintenance, welding, machining, general maintenance ability,
    ability to run and maintain cranes and bulldozers, and other skills which
    the operations of the plant might require.

    In the best interest of efficient operations of the plant, it is the
    intention of the Company to utilize maintenance employees at their primary
    skills; however, it is agreed that maintenance employees will perform any
    and all types of maintenance work as directed by Management. In the
    assignment of work, the parties to this agreement agree that it is the
    responsibility of Management to assign work. It is also understood that if
    this responsibility is used in such a fashion to be unfair or
    discriminatory, the Union has the right to grieve under the grievance
    procedure as set forth in Article XIV.

    In an effort to improve operating efficiencies, employees will be permitted
    to do incidental work such as cleanup and minor repair work on equipment in
    their department, only on the back shifts and weekends. This work should not
    exceed 30 minutes nor require more than

                                       36
<PAGE>
 
    the most basic hand tools such as pliers, screwdrivers, wrenches and
    hammers. This is in no way intended to relax the jurisdictional boundaries
    between the production and maintenance groups. In no case will this be
    permitted to compromise employee safety.

10. Job Groups:
    ---------- 

    1.  1st Class Maintenance
        2nd Class Maintenance

    1A. 1st Class Electrical Maintenance
        2nd Class Electrical Maintenance

    2.  Desulf Operator

    2A. Pack

    3.  Furnace Attendants and Tappers

    3A. Tapper

    4.  Utility

    5.  Calcine Coal

    6.  Acetylene Attendant

    7.  Paste Attendant

    8.  First Aid Attendant

    10. Yard:  Truck Driver - Labor - Janitor - Storekeeper

    11. Coke Attendant

11. Yard:
    ---- 

    (a)  In the assigning of Yard employees to production jobs on a week-to-week
         basis, the Company reserves the right to assign employees to
         departments in which they have experience. The senior yard employees
         will be assigned to the production jobs they have experience in when
         the need arises.

                                       37
<PAGE>
 
    (b)  The regular yard Steward will be the last Yard employee assigned to
         production work except for the Truck Drivers.

    (c)  A permanent or temporarily reduced Group Ten (10) (Yard employee) may
         exercise a temporary preference for assignments in accordance with
         seniority into the Paste, Utility, Acetylene, Furnace, Calcine Coal,
         Coke, Pack, Desulf, and Janitor Department.

    (d)  Such preferences will be made in writing in the Personnel Office no
         later than the 20th day of the preceding month to be effective and will
         become effective the first Sunday of each calendar month.

    (e)  When such temporary preference is made, it will be for one (1) calendar
         month duration.

    (f)  Once an employee exercises a temporary preference, it cannot be changed
         until the following month.

12. Relief Attendants:
    ----------------- 

    (a)  A bid will be posted for an Acetylene Attendant-Relief. This bid will
         be posted and any employee in the plant may bid on the opening. The
         successful bidder will be assigned to the Acetylene Department on a
         weekly basis to replace an employee on sick leave, vacation, etc. When
         the employee is not working at the Acetylene Department, he/she will be
         assigned to the Yard Department and may be group

                                       38
<PAGE>
 
         changed to any other department.

         If a permanent Acetylene Attendant's job opens, the Acetylene
         Attendant-Relief will fill the permanent position.

         Each time the Acetylene Attendant-Relief enters the Acetylene
         Department, the employee's overtime hours will be credited with the
         highest overtime hours of the permanent Acetylene Attendant plus an
         additional four (4) hours and then would be eligible for overtime when
         working in that department on a weekly basis.

         If the Acetylene Attendant-Relief's job is subsequently eliminated,
         normal contract procedures will prevail.

    (b)  A bid will be posted for a Temporary First Aid Attendant. This bid will
         be posted and any employee in the plant may bid on the opening. The
         successful bidder will be assigned to the First Aid Department on a
         weekly basis to replace an employee on sick leave, vacation, etc. The
         First Aid Relief may be used as extra help in the First Aid Department.
         He may also be used on a daily basis to fill vacancies but only after
         the overtime procedure for the First Aid Department has been exhausted.
         If the First Aid Relief is scheduled to be on duty on the vacant shift,
         he may be transferred to the First Aid Department to cover the shift.
         If the First Aid Relief is on a different schedule than the vacant
         shift, his regular shift will not be changed; however, the Company may
         request that the First Aid Relief cover the vacancy as overtime if
         agreed to by the First Aid Relief. When the employee is not working in
         the First Aid

                                       39
<PAGE>
 
         Department, he/she will be assigned to their permanent position.

         If a permanent First Aid Attendant job opens, the Temporary First Aid
         Attendant will be offered such permanent opening before the First Aid
         Attendant's job is put up for bid.

         Each time the Temporary First Aid Attendant enters the First Aid
         Department, the employee's overtime hours will be credited with the
         highest overtime hours of the permanent First Aid Attendant plus an
         additional four (4) hours and then would be eligible for overtime when
         working in that department on a weekly basis.

         If the Temporary First Aid Attendant's job is subsequently eliminated,
         normal contract procedures will prevail.

         It is mutually understood that this agreement will become valid and all
         prior agreements in regard to this matter will become null and void.

         No employee shall be allowed to hold the First Aid Attendant position
         or First Aid Relief position without EMT Certificate (present
         incumbents grandfathered). An employee with First Aid
         training/experience may bid for the First Aid Attendant or First Aid
         Relief positions without EMT Certification. If such employee is awarded
         such bid, he/she will obtain EMT Certification within three (3) months.
         Failure to obtain such certification will result in such employee being
         removed from such job immediately unless extended by mutual consent of
         the Company and Union.

                                       40
<PAGE>
 
    (c)  A bid will be posted for a Temporary Desulf Relief Attendant. This bid
         will be posted and any employee in the plant may bid on the opening.
         The successful bidder will be assigned to the Desulf Department on a
         weekly basis to replace an employee on sick leave, vacation, etc. When
         the employee is not working in the Desulf Department, he/she will be
         assigned to the Yard Department. The employee will then take daily
         assignment from the Yard Department and may be group changed to any
         other department.

         If a permanent Desulf Attendant job opens, the Temporary Desulf Relief
         Attendant will be offered such permanent opening before the Desulf
         Attendant's job is put up for bid.

         Each time the Temporary Desulf Relief Attendant enters the Desulf
         Department, the employee's overtime hours will be credited with the
         highest overtime hours of the permanent Desulf Attendant plus an
         additional four (4) hours and then would be eligible for overtime when
         working in that department on a weekly basis.

         If the Temporary Desulf Attendant's job is subsequently eliminated,
         normal contract procedures will prevail.

13. The right of the Company to retire any employee who has attained the age of
    seventy (70) years is hereby acknowledged and all seniority rights granted
    to employees hereunder are subject and subordinate to such right.

                                       41
<PAGE>
 
                                 ARTICLE XIII

                               LEAVE OF ABSENCE
1.  Leaves of absence without pay, for good and sufficient reasons will be
    granted upon request to the Company. The duration of such leaves shall not
    exceed thirty (30) days.

2.  The Company will comply with the Family Medical Leave Act of 1993 (FMLA) in
    granting qualifying leaves of absence.

3.  Any employee on leave of absence shall be entitled to benefits as may be in
    force during the period the employee is on leave of absence with the
    provisions of the Group Insurance Plan and Retirement Income Plan. Any
    employee on leave of absence which exceeds the provisions of the Group
    Insurance Plan and Retirement Income Plan regarding reinstatement in these
    plans shall be reinstated with benefits in force and provided for by the
    plans at the time of the employee's reinstatement.

4.  Employees on sick leave for six (6) weeks or longer must present a statement
    from his/her doctor that he/she is physically fit. The Company may request
    such employee to be examined by a doctor designated by the Company at the
    Company's expense including four (4) hours pay for the individual.

    Should the doctor designated by the Company declare any employee unfit to
    return to work, the employee may return to his/her doctor for examination at
    the employee's expense. Should the doctor indicate the employee is able to
    work, then the two doctors shall get together to try to resolve the issue.
    If the two doctors cannot resolve the issue, they will select a third doctor
    who will resolve the issue. In such an event, the fees of the third
    physician shall be

                                       42
<PAGE>
 
    paid by the Company. Employees will be paid four (4) hours pay in the
    event this occurs.

                                  ARTICLE XIV

                      GRIEVANCE PROCEDURE AND ARBITRATION

1.  Any grievance of any employee covered by the terms of this agreement, or any
    dispute which shall arise between the Union or its members and the Company
    with respect to the interpretation or application of any of the terms or
    provisions of this agreement, shall be determined during the term of this
    agreement, by the procedure set forth by this article.

2.  Grievances shall be taken up for adjustment as may be necessary and in the
    following manner:

    Step 1:  An employee having a grievance shall within five (5) days from the
             date of the discovery thereof, take the matter up with his/her
             supervisor, with or without a steward being present. Regardless of
             settlement, the grievance shall then be reduced to writing on the
             grievance forms provided for this purpose and submitted to the
             supervisor within two (2) days. Reply to be given as promptly as
             possible but must be given within two (2) days.

    Step 2:  If either party decides to carry the grievance further, it shall
             notify the other party in writing not later than five (5) days
             following the decision in the first step and within five (5) days
             following receipt of such notification the Grievance Committee of
             three (3), the International Representative or his/her
             representative of the Union, and the aggrieved employee shall meet
             with the Works Manager or his/her representatives to reach
             settlement. Reply shall be

                                       43
<PAGE>
 
             made in writing within five (5) days after such meeting.


    Step 3:  In the event the parties are unable to resolve a grievance after
             having met at the prior steps, they may, by mutual agreement,
             present the matter to a Kentucky State Mediator who will act only
             in the capacity of an Advisor. The advisory opinion of the mediator
             shall not be final and binding on either the Company or the Union.
             Lost time incurred by the Union will be paid by the Company.

    Step 4:  If not settled, the grievance shall be referred to arbitration in
             case written request is made by either party within fifteen (15)
             days after date of reply in the second step. If such request for
             arbitration is not made, the grievance shall be considered settled.
             Any grievance referred to arbitration will be waived unless it is
             arbitrated within thirty (30) days after the request for
             arbitration unless the parties mutually agree to delay the
             arbitration for a longer period .

3.  A request may be made by either party to the Federal Mediation and
    Conciliation Service of Washington for the name of seven (7) arbitrators. If
    the seven (7) arbitrators are acceptable to both parties, one (1) of the
    seven (7) will be selected by the Union and the Company, both striking three
    (3) names. The remaining arbitrator shall hear the case and render a
    decision which shall be final and binding upon both parties.

                                       44
<PAGE>
 
    The arbitrator shall not have the power to add to, or subtract from, or to
    modify any of the articles of this agreement. The expense of the arbitrator
    shall be shared equally by the Company and the Union.

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

5.  The periods of time as above stated in this procedure are exclusive of
    Saturdays, Sundays, and Holidays in all cases.

6.  (a)  The Union shall furnish the Company with the names of all stewards and
         the Grievance Committee and the Company shall recognize and deal with
         these representatives of the Union in settling grievances in accordance
         with the above procedure.

    (b)  A Steward shall be permitted to spend a reasonable amount of time
         without loss of pay to assist in the adjustment of grievances within
         the department he/she represents by arrangement with his/her
         supervisor.

    (c)  The Grievance Committee of the Union shall be permitted to spend a
         reasonable amount of time without loss of pay to discharge their
         responsibilities in Step 2 above by arrangement with their supervisor.

                                       45
<PAGE>
 
7.  The time limits mentioned in this Article are specified for the purpose of
    expeditiously disposing of grievances and disputes, but may be extended in
    writing by mutual agreement. However, the waiver by the Employer or the
    Union of any such time limits in any case shall not constitute a waiver by
    the Employer or the Union of any such time limits or its right to insist on
    adherence thereto in any subsequent case. Failure to abide with time limits
    by either party forfeits the grievance.

8.  The words "by arrangement with his/her supervisor" contained in (b) and (c)
    above shall be construed to mean that the supervisor will make such
    arrangement within an hour after the request unless it is mutually agreed to
    extend such time limits, by the Union Representative designated in the
    specific step and the Management person designated in that step.

9.  The Union will not intentionally gut any shift in the processing of
    grievances. Except in the case of arbitration, the Union will expect to use
    all witnesses and have them available as the Union deems necessary.

                                  ARTICLE XV

                               SAFETY AND HEALTH

1.  Employees will at all times 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 purpose of first aid to the injured.

2.  The Company agrees to furnish protective helmets, goggles, fire retardant
    clothing, and

                                       46
<PAGE>
 
    lumbar support belts.

    The Company expects to issue such equipment to employees and maintain such
    equipment, but will deduct from an employee's pay when he/she is separated
    from the employ of the Company, the value of any such equipment not turned
    back to the Company.

3.  The Company will furnish all hourly rated maintenance and production
    employees gloves of the quality and number required for the work performed.

    In furnishing all the above gloves, it is understood and agreed that
    employees may be required to turn in their old gloves in order to receive a
    new pair.

4.  The wearing of safety shoes is a condition of employment. If an employee so
    chooses, he/she may purchase shoes via a shoe vendor in the Plant and can
    receive up to a value of $115.00 toward the purchase price. The Company
    assumes responsibility to ensure that safety shoes from the shoemobile will
    satisfy Company requirements. The Company will pay up to $95.00 per year
    toward the purchase of safety shoes when employees purchase shoes from a
    vendor of their choice. Payment to be made in February of contract year.

    Employees working less than (6) months shall not be entitled to any rebate
    on the purchase of safety shoes. After the employee has completed six (6)
    months of services, the Company will refund to him/her up to $95.00 toward
    the purchase of safety shoes.

                                       47
<PAGE>
 
5.  The Company will pay for the cost of prescription lenses for those employees
    who require corrective lenses in their safety goggles. Safety goggles that
    may become broken in the normal course of work are to be replaced without
    cost to the employee while safety goggles misplaced or otherwise damaged
    through carelessness by the employee shall be charged to the employee. When
    it is necessary to change lenses, the old goggles must be turned in at the
    Safety Office.

    Employees will be allowed to order prescription safety glasses from the
    employee's personal doctor or business of choice. The glasses must comply
    with plant safety standards. If so ordered, the Company will reimburse the
    employee the following amounts:

<TABLE>
<S>                                 <C>
          Single Vision............ $ 60.00
          Bi-Focals................ $100.00
          Tri-Focals............... $120.00
</TABLE>

          These glasses will be subject to the reorder provisions of the above
          paragraph.

6.  The Company will meet and follow OSHA standards for all OSHA mandated
    reports/logs, etc.

7.  An employee on light duty will be paid as if he remained on his shift. In
    this way, he will receive shift differentials, holiday pay, and the extra
    scheduled day per month as received by other members of the same shift for
    that same period.

                                       48
<PAGE>
 
    A light duty employee may be assigned such work as he/she can reasonably
    perform. This may involve alternatives to bargaining unit/production work.

8.  A safety advisory committee shall be established consisting of up to twelve
    (12) members, six (6) to be selected by the Company and six (6) to be
    selected by the Union. Meetings may be held monthly as determined by the
    committee. Their duties shall be to make recommendations to the Plant
    Management for changes or improvements of safety.

9.  Should any questions arise as to the work load of an individual or a group,
    then the Company agrees to discuss this matter with the Union. If the
    question is not settled by such conference, then it shall be referred to the
    grievance procedure.

10. If an employee has good reason to believe that an assigned job may involve
    imminent danger to life or limb, the foreman and Union Steward will be
    notified immediately. If the matter is not resolved, it will be taken up
    with the Plant Manager or his designee for the purpose of resolving the
    dispute. If the dispute is not then resolved, Management shall make an
    immediate investigation of the imminent danger complaint, including
    consideration as to the advisability of stopping the job pending final
    determination of the dispute where in the opinion of Management such action
    is warranted. If the decision of Management is that the job is safe, the
    employee must perform the assigned job. If the employee still feels an
    imminent danger exists, the Plant Manager or his designee and the
    responsible Union Safety Representative shall meet for the purpose of taking
    prompt action to determine whether the condition is one involving imminent
    danger. It is agreed that neither the Company nor the

                                       49
<PAGE>
 
    Union will accept or tolerate employee claims of imminent danger which are
    capricious or otherwise not based on an actual fear that imminent danger
    does exist.

                                  ARTICLE XVI

                              COMPENSATION MAKEUP

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

1.  If the doctor sends the employee back to work that day with a statement to
    the effect that his/her injury was bona fide and required medical attention
    the employee shall be credited with the time required for the visit to the
    doctor; otherwise, the employee shall be given an opportunity to make up
    time lost due to his/her visit to the doctor.

2.  If the doctor sends the employee home, the employee shall be paid for the
    full number of hours in his/her shift on the day on which the injury
    occurred at his/her rate on that day. Such time paid for will be credited
    for the purpose of determining weekly overtime.

3.  Any employee who is absent from work because of an occupational injury
    incurred while on duty at the plant and who reported the injury to his/her
    supervisor and who has been examined by the Company doctor at the Company's
    request immediately following the injury during the shift or day the injury
    occurred and declared unable to work unless the injury was purposely self-
    inflicted, or due to wilful misconduct, violation of plant rules, or refusal
    to use

                                       50
<PAGE>
 
    safety appliances, will be excused from work. When properly approved by the
    Company, the employee will be paid for time lost during the normal seven (7)
    day waiting period provided by the Kentucky Industrial Compensation Board.
    The maximum amount payable to the employee during this seven (7) day period
    will not exceed an amount equal to forty (40) hours at the employee's then
    straight time base rate. The above provision shall not apply in case of back
    injuries.

4.  The following steps are to be taken by an injured employee in order to be
    eligible for payment for time lost during the seven (7) day waiting period
    provided by the Kentucky Industrial Compensation Board, based on the intent
    of Article XVI Compensation Makeup in our present agreement.

    (a)  Employees must promptly report any injury to his/her supervisor.

    (b)  Employee must report to the First Aid Department for treatment.

    (c)  The First Aid Department will determine whether or not the injured
         employee is to be sent to the Company doctor.

    (d)  The Company doctor shall make the decision on whether or not the
         employee is able to work.

    (e)  The Company will investigate the cause of the injury. Payment will not
         be made if the

                                       51
<PAGE>
 
         injury was self-inflicted, due to wilful misconduct, due to violation
         of plant rules, or refusal to use safety appliances.

    (f)  In the event that an injured employee reports to First Aid and is not
         sent to the Company doctor and in the event the employee's injury
         should worsen while off duty, the employee may consult another doctor
         in order to get immediate relief. The employee must, however, report to
         the Plant First Aid Department, as soon as possible, for examination by
         that department and/or the Company doctor.

         In the event that the non-company doctor should confine the injured
         employee to bed or to a hospital, the employee must notify the Company
         by telephone so that the employee may be visited by the Company doctor.
         The following phone numbers must be called to make such report:

                      Worker's Comp Administrator
                                or
                      Human Resources...........................395-4143

         In off hours, call the Shift Supervisor on duty. If no Shift Supervisor
         is on duty, notify the First Aid Attendant on duty.

    (g)  Payments provided in this section will only be made if the injured
         employee reports to the Plant First Aid Department for treatment at or
         before the employee's regular starting time each work day unless
         excused by the Company doctor.

                                       52
<PAGE>
 
5.  If the disability shall continue for more than three (3) weeks and the
    employee receives compensation from the Kentucky Industrial Compensation
    Board for the seven (7) day waiting period, then the amount to be paid by
    the employer shall be reduced by the difference between the amount received
    by the employee and the amount the employer paid to the employee as provided
    in this section. Said payments in this section will only be made if the
    injured employee reports to the Plant First Aid Department for treatment at
    or before the employee's regular starting time each work day unless excused
    by the Company doctor.

6.  If time lost as a result of a compensable injury extends beyond the seven
    (7) day waiting period, then the employer will make up the difference
    between what the employee would have earned at the employee's straight time
    rate per hour and the amounts of money received by the employee from the
    Kentucky Industrial Compensation Board as payment for time lost as a result
    of a compensable injury. The employer will only make up such difference up
    to a period of twenty-five (25) weeks beyond the initial seven (7) day
    waiting period. The basic intent of this article is to provide that the
    employee sustaining a compensable injury shall not suffer any diminution in
    his/her normal straight time hourly earnings for an aggregate period of
    twenty-six (26) weeks as a result of such injury. Any time paid for under
    this section will be credited for the purpose of determining weekly
    overtime.


7.  All disability payments provided for in this contract shall be reduced by
    the amount or amounts of any other benefits which might be provided through
    state or federal legislation for the same type of disability and for the
    same period of absence.

                                       53
<PAGE>
 
8.  Any wilful abuse of this section by the employee will result in an immediate
    dismissal of the employee by the Company.


                                 ARTICLE XVII

                                BULLETIN BOARDS

The employer will provide four (4) bulletin boards in mutually agreeable
locations to be used for Union notices.  These notices will be posted by the
Union and signed by a union official.  Union notices shall be restricted to the
following:

1.  Notices of Union recreational and social affairs.

2.  Notices of Union elections, appointments and results of Union elections.

3.  Notices of Union meetings.

                                       54
<PAGE>
 
                                 ARTICLE XVIII

                                 FUNERAL LEAVE

An employee shall be protected against loss of pay for such time as may be
needed for the purpose of attending the funeral of a member of the employee's
immediate family up to a maximum of three (3) scheduled working days at his/her
then regular straight time hourly rate during the period beginning with the day
after death and ending with the day after funeral.  Immediate family is
interpreted to cover husband, wife, father, mother, child, stepchild, brother,
sister, mother-in-law, father-in-law, grandchildren, grandfather and
grandmother.

One day's pay will be paid for sister-in-law, brother-in-law, stepmother, and
stepfather for purpose of attending funeral.

Any time paid for under this provision, not exceeding three (3) scheduled
working days per work week, will be counted as time worked for the purpose of
determining weekly overtime.

                                  ARTICLE XIX

                                   JURY DUTY

An employee who is called for jury duty may be excused from work upon
presentation of court notice to the employee's immediate supervisor.  The
employee who has been so excused will be paid the difference between his/her
normal straight time earnings and the fees received from the court, provided the
employee submits evidence of the amount received from the court. Only the number

                                       55
<PAGE>
 
of his/her scheduled work days actually spent in court are counted in
calculating payment. Such days will be credited at eight (8) hours each for
overtime purposes.

                                  ARTICLE XX

                                    LUNCHES

1.  (a)  A lunch allowance of $4.00 will be given to any employee who has worked
         twelve (12) continuous hours.

    (b)  Payment in cash shall be made to the employee on the next payday.

2.  Vending facilities will be provided for employees electing to secure meals
    from within the plant. If vending machines are out of order or adequate food
    not available, reasonable efforts will be made for food to be made
    available.

                                  ARTICLE XXI

                                WORK STOPPAGES

1.  It is agreed on the part of the Union that there shall be no strikes,
    slowdown, sitdowns, walkouts, or other interferences with work during the
    term of this agreement and on the part of the Employer it is agreed that
    there shall be no lockouts during the term of this agreement. Both parties
    agree to make every reasonable effort to adjust any grievance which may
    arise

                                       56
<PAGE>
 
    in accordance with the remedy provided in the grievance procedure. The
    employer shall have the absolute right, in its discretion, to take
    disciplinary action up to and including discharge against any or all
    employees who participate in or who aid, abet or encourage others to
    participate in an unauthorized strike, sitdown, or work stoppage. Any
    employee so discharged shall forfeit seniority and any other right or
    privilege he/she may otherwise enjoy under this agreement. Any question as
    to whether a particular employee was involved therein may be submitted to
    the grievance procedure.

2.  In the event of an unauthorized strike, sitdown, slowdown or work stoppage,
    the Union will promptly disclaim responsibility by having an official or
    committee member so inform the Employer and the Union will also use its best
    efforts to get the employees back to work. If the Union immediately takes
    the above action there shall be no financial liability on the part of the
    Oil, Chemical and Atomic Workers International Union, Local 3-556, or any of
    its officers or agents. The sole recourse and exclusive remedy of the
    Employer in the event of such unauthorized strike or work stoppage is to
    impose disciplinary action as heretofore mentioned.

                                 ARTICLE XXII

                                    PENSION

1.  Employees covered by the Agreement shall be eligible at their option to
    participate in The Carbide/Graphite Group, Inc. Non-Contributory Retirement
    Income Plan in accordance with

                                       57
<PAGE>
 
terms and provisions of this Plan.  However, the adjustments in the amounts
of pensions payable under this Plan by reasons of the 1965 and 1968 amendments
to the Social Security Act, or any other amendments during the term of this
Agreement, shall be waived.

2.  Effective February 1, 1996, the pension benefit multiplier will increase
    from twenty-two dollars ($22.00) to twenty-six dollars ($26.00) per month
    for all years of credited service.

    Effective February 1, 1997, the pension benefit multiplier will increase to
    twenty-seven dollars and fifty cents ($27.50) per month for all years of
    credited service.

    Effective February 1, 1998, the pension benefit multiplier will increase to
    twenty-nine dollars ($29.00) per month for all years of credited service.

    Effective February 1, 1999, the pension benefit multiplier will increase to
    thirty-one dollars ($31.00) per month for all years of credited service.

    Effective February 1, 2000, the pension benefit multiplier will increase to
    thirty-three dollars ($33.00) per month for all years of credited service.

3.  A participant who retires on an early retirement date and elects to receive
    a retirement income shall receive retirement income reduced in accordance
    with Plan provisions, unless the participant retires on or after the date on
    which the participant attained age and years of

                                       58
<PAGE>
 
    credited service that total 85, in which case there is no reduction for
    early retirement.

                                 ARTICLE XXIII

                     COMPREHENSIVE MEDICAL INSURANCE PLAN

During the term of this Agreement, the provisions of the Comprehensive Medical
Plan will be guaranteed by the Company.

If an employee is temporarily laid off or on an authorized leave of absence, the
employee's insurance will be continued until the end of the third policy month
following the policy month in which the layoff or leave starts.

The maximum allowance payable pursuant to the terms and conditions of the
Comprehensive Medical Plan shall be $1,000,000.  Beginning February 1, 1996, the
monthly employee contribution will be $9.00 for employee only coverage, $18.00
for employee plus one dependent, and $25.00 for employee plus two or more
dependents.

The deductible for in-network will be $300.00 per individual per calendar year
with a maximum of two per family per calendar year. The deductible for out-of-
network will be $500.00 per individual per calendar year with a maximum of two
per family per calendar year. The out-of pocket maximum (inclusive of
deductible) for in-network will be $500.00 for an individual or $1,000.00 for
the employee and all eligible covered dependents per calendar year. The out-of-
pocket maximum 

                                       59
<PAGE>
 
(inclusive of deductible) for out-of-network will be $1,000.00 for an individual
or $2,000.00 for the employee and all eligible covered dependents per calendar
year.

The co-payment percentage that will be paid by the insurance (subject to
deductibles and limited to eligible expenses) will be 85% for in-network
hospitals and other services, 65% for out-of-network hospitals, and 60% for
other services out-of-network.

Deductibles and out-of-pocket maximums for active employees and retirees under
this Plan will therefore be those established by future negotiations.

Active eligible employees retiring after February 1, 1996, will be covered by
The Carbide/Graphite Group Comprehensive Medical Plan.

Employees retiring September 1, 1993, or later will pay premiums equal to active
employees. After age 65, the contribution will be one-half of active rate.

1.  Sickness and Accident Benefit - The Sickness and Accident benefit shall be
    -----------------------------                                             
    for a maximum period of twenty-six (26) weeks.

    (a)  For employees actively at work who go out on Sickness and Accident
         Benefits after February 1, 1996, increase the Sickness and Accident
         benefits from $260 to $270.

    (b)  For employees actively at work who go out on Sickness and Accident
         Benefits after

                                       60
<PAGE>
 
         February 1, 1997, increase the Sickness and Accident benefit from $270
         to $280.

    (c)  For employees actively at work who go out on Sickness and Accident
         Benefits after February 1, 1998, increase the Sickness and Accident
         benefit from $280 to $290.

    (d)  For employees actively at work who go out on Sickness and Accident
         Benefits after February 1, 1999, increase the Sickness and Accident
         benefit from $290 to $300.

    (e)  For employees actively at work who go out on Sickness and Accident
         Benefits after February 1, 2000, increase the Sickness and Accident
         benefit from $300 to $310.

2.  Life Insurance - The amount of Group Life Insurance for each employee is
    --------------                                                          
    $24,000. The amount of Accidental Death and Dismemberment Insurance for each
    employee is $12,000. Effective February 1, 1997, the amount of life
    insurance for each employee will increase to $27,000 and the amount of
    Accidental Death and Dismemberment Insurance for each employee will increase
    to $13,500. Effective February 1, 1998, the amount of life insurance for
    each employee will increase to $30,000 and the amount of Accidental Death
    and Dismemberment Insurance for each employee will increase to $15,000.
    Effective February 1, 1999, the amount of life insurance for each employee
    will increase to $32,000 and the amount of Accidental Death and
    Dismemberment Insurance for each employee will increase to $16,000.
    Effective February 1, 2000, the amount of life insurance for each employee
    will increase to $35,000 and the amount of Accidental Death and
    Dismemberment Insurance for each employee will increase to $17,500.

                                       61
<PAGE>
 
3.  Dental Plan - Effective November 1, 1992, those employees and eligible
    -----------                                                           
    dependents enrolled in The Carbide/Graphite Group Comprehensive Medical Plan
    shall have Dental Insurance in accordance with the following plan at no
    additional cost:

<TABLE> 
<S>                                  <C> 
     Lifetime Maximum.........................................NONE
     Calendar Year Maximum..................................$1,000
     Calendar Year Deductible*......................$25/per person
                                                    $50/per family
                                                  (Aggregate Max.)

     Covered Expenses...................80% Reasonable & Customary

     Orthodontics.......................................50% of UCR
                                     reimbursement $1,000 lifetime
                                            maximum per individual
</TABLE> 

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

    Employees will be eligible for dental coverage when they become eligible for
    medical insurance under the Comprehensive Medical Plan.

    All other terms of the existing plan will remain unchanged (active employees
    and eligible dependents only).

                                 ARTICLE XXIV

                    MAINTENANCE TOOL ALLOWANCE AND TESTING

                                       62
<PAGE>
 
1.  The Company will replace, as soon as possible, tools that are broken, worn
    out, lost and other tools required to do maintenance work for Maintenance
    Department employees at work up to a maximum amount of $100.00 per year.
    This applies to employees that have completed their probationary period.
    Payment to be made in August of contract year.

2.  Employees from other job groups who bid on posted jobs in the first class or
    second class maintenance classification shall be required to pass the
    examination test for the job bid on.

3.  The Company may hire skilled workers directly from the outside into the
    first class and second class maintenance classifications. It is understood
    that such hiring will not affect the opportunities for advancement of the
    employees in these classifications.

4.  The testing will start with senior second class employees and work downward.

5.  New hires will be given the same test as an employee already in the plant,
    excepting plant knowledge.

6.  Welding tests will be conducted in accordance with A.W.S. standards.

7.  An employee for any job group bidding for a posted maintenance job must pass
    the following tests:

                                       63
<PAGE>
 
<TABLE> 
<CAPTION> 
   Specialty                                          Test
   ---------                                          ----
<S>                                            <C> 
     Mechanical Maintenance....................General Maintenance

     Mechanic.............................................Mechanic
                                               General Maintenance

     Equipment Operator...................................Operator
                                               General Maintenance

     Welder.................................................Welder
                                               General Maintenance

     Electrical Maintenance.....................General Electrical

     Instrument Mechanical..............................Instrument
                                                General Electrical
</TABLE> 

    If the employee fails the test in a particular skill, the employee cannot
    take another test in that skill for three (3) months.

8.  The Union recognizes and agrees that at some future date a full complement
    of first class maintenance employees will be reached and at such time there
    will be no employees in the second class classification.

                                  ARTICLE XXV

                               ACTING SUPERVISOR

1.  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 Supervisors to fill

                                       64
<PAGE>
 
    temporary vacancies in the supervisory force or to enlarge the supervisory
    force to meet a temporary need. It is, therefore, agreed that such Acting
    Supervisors will not lose any seniority rights by having so served.

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

    (a)  To fill in for regular supervisors who are not on the job because of
         vacations, illnesses, leaves of absences or other such reasons, plus
         the utilization of Acting Supervisors to fill in situations where
         schedule considerations leave a day or so 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.

3.  In carrying out these policies, the Company will make assignments of Acting
    Supervisors in such a fashion that no single Acting Supervisor will serve in
    such capacity in excess of ninety (90) working days in a calendar year.

4.  The filling of the position of Acting Supervisor shall comply with the
    following:

    (a)  Probationary employees shall not be used.

    (b)  Upgrades to Acting Supervisor shall be for a minimum of one day.

                                       65
<PAGE>
 
    (c)  The upgraded employee will not work overtime as an hourly employee
         immediately after the end of the upgraded shift.

                                 ARTICLE XXVI

                             MAJOR DISASTER CLAUSE

In the event work is not available because of a major disaster caused by an
earthquake, power failure, flood, fire, explosion, enemy attack, Act of God, or
other like events that would cause partial or complete evacuation of the plant,
then Paragraph 8 of Article V - Hours of Work and Overtime and Article IX -
Reporting Pay shall be suspended for the duration of the situation.

It is further understood between the parties that during any such disaster as
set forth above that the Company must use available employees for whatever work
appears to be important to save life; to minimize loss or to prevent the spread
of the disaster.  Strict rules of seniority shall not be observed until such
availability of work has passed, after which all provision of the agreement
shall again be in full force and effect.

                                 ARTICLE XXVII

                              OUTSIDE CONTRACTORS

The Local Union President will be notified before any outside contract work is
performed in the plant and will have the right to discuss such work before
started by the contractor.

                                       66
<PAGE>
 
After such discussion, the Union President may discuss the matter with the Plant
Manager if deemed necessary by the Union.


The Company will use its best efforts to have its employees perform bargaining
unit work; however, it is recognized that certain work may have to be
subcontracted because the Company does not have qualified employees, actively
working, available to do the work and/or proper tools, equipment or facilities
to perform the work efficiently.  It is further recognized that other legitimate
business reasons such as emergencies and/or the immediate necessity for start-up
or completion of a job may also require a job to be subcontracted.

                                ARTICLE XXVIII

                           TERMINATION AND DURATION

This agreement expresses the full and complete understanding of the parties on
the subjects of working conditions, hours of work and other conditions of
employment, including method of wage payment.  Any subject matter not mentioned
herein is hereby specifically waived.  It is therefore agreed that this
agreement will become effective as of 11:01 p.m. January 31, 1996, and remain in
effect until 11:00 p.m. January 31, 2001 and for the annual periods running from
January 31 to January 31 thereafter unless sixty (60) days prior to any
expiration date either party notifies the other in writing of its desire to
terminate on the expiration day.

It is agreed that neither the Union or the Company will present any demands or
claims not included

                                       67
<PAGE>
 
herein during the life of this agreement unless it is agreed by the parties that
changes in or amendments to this agreement are desirable.

Executed this 31st day of January, 1996:

THE CARBIDE/GRAPHITE GROUP, INC.                  OIL, CHEMICAL & ATOMIC WORKERS
                                                  INTERNATIONAL UNION 3-556

/s/ R.G. Pepler              /s/ H.E. Littlejohn


/s/ W.E. Damian              /s/ L.J. York


/s/ M.B. Armstrong           /s/ J. O. Haley


/s/ G.F. Weyer               /s/ C.L. Heath

                             /s/ R. Duncan

                             /s/ G. J. Madison

                                       68
<PAGE>
 
                                                                    ADDENDUM "A"

                            MEMORANDUM OF AGREEMENT

                             Effective May 19, 1993

                            Revised February 1, 1996



The Union and Company agree on the following procedure to be used in the Furnace
Department regarding overtime and progression:

                          FURNACE ATTENDANT - GROUP 3
                          ---------------------------

If overtime requirements are realized eight (8) hours or less prior to the
overtime shift but more than four (4) hours, you will:

    1.   Assign the overtime to the available Furnace Attendant (if in the
         "preferred" overtime rack), or offer to the available Furnace
         Attendants in the "non-preferred" rack.

    2.   If the Group 3, Furnace Attendants, elect not to work the overtime, the
         Company will then use the progression step and assign the Group 4,
         Utility (charge floor) employee to the Furnace Attendant's job for that
         shift only.

    3.   If less than three (3) working hours are needed, the Supervisor will
         decide if they need to call in another person or work short during that
         period of time.

    3A.  If a Utility progresses to the Furnace Attendant job, and a qualified
         Yard employee is available on shift to cover the utility vacancy
         without overtime, the overtime procedure stops. If no Yard employee is
         available, proceed to Step 4.

    4.   If coverage is needed, the Company would call the "prefer" then "non-
         preferred" Group 3, Furnace Attendants that are not on duty. If filled,
         the progression step would be reversed.

    5.   If the Furnace Attendant elects not to cover the overtime, you will go
         to the Group 4, Utility, overtime rack and offer the Utility overtime
         to the employees that have their cards in the "prefer" overtime rack.
         If coverage is still needed, go to the "non-preferred" overtime rack.

    6.   If the Utility elects not to cover the Utility overtime needed, the
         Company would then call the "prefer" then "non-preferred" Group 3A,
         Tappers, that are not on duty.

    7.   If you do not obtain overtime coverage from any Group in the Furnace,
         you then go to Group 10, Yard, employees in the "prefer" then "non-
         preferred" overtime rack. The Yard person would fill the Utility
         position needed.

                                       69
<PAGE>
 
If overtime requirements are known more than eight (8) hours prior to the
overtime shift, but not more than three (3) days, you will:

    1.   Assign the overtime to the Furnace Attendant with the least amount of
         overtime hours in the "prefer" overtime rack.

    2.   Offer the overtime to any Furnace Attendants for which the overtime is
         needed that have their cards in the "non-preferred" overtime rack.

    3.   If the Group 3, Furnace Attendant, elect not to work the overtime, the
         Company will then use the progression step and assign the Group 4,
         Utility (charge floor) employee to the Furnace Attendant's job for the
         shift when it occurs.

    4.   At this point, the prescheduling should be done for Group 4, Utility,
         for this shift. You will then go to the Group 4, Utility, overtime rack
         and assign the overtime to the employee with the least amount of
         overtime hours in the "prefer" overtime rack.

    5.   If you do not obtain coverage from the above, you will then offer the
         overtime to any employees in the "non-preferred" overtime rack in Group
         4, Utility.

    6.   At this point, the Company would then call the "prefer" and "non-
         preferred" Group 3A, Tapper, that are not on duty and offer the Utility
         overtime.

    7.   If you do not obtain coverage in the Group 4, Utility, you then go to
         Group 10, Yard, "prefer" overtime rack. If you do not fill the vacancy
         in the "prefer" overtime rack, then offer the overtime to the employees
         in the "non-preferred" overtime rack. The Yard person would fill the
         Utility position needed.

The same procedures are to be followed for the Group 3A, Tapper, except use
Group 4, Utility (ground floor).

The same procedures are to be followed for the Group 4, Utility, using Group 3,
Furnace Attendant first; then if no coverage is obtained, Group 3A, Tapper.


THE CARBIDE/GRAPHITE GROUP, INC.    OIL, CHEMICAL & ATOMIC WORKERS
                                    INTERNATIONAL UNION 3-556

/s/ R.G. Pepler                /s/ H.E. Littlejohn

/s/ W.E. Damian                /s/ L.J. York

/s/ M.B. Armstrong             /s/ J.O. Haley

/s/ G.F. Weyer                 /s/ C.L. Heath

                               /s/ R. Duncan

                               /s/ G.J. Madison

                                       70
<PAGE>
 
                                                                    ADDENDUM "B"


Items defined as Instrument work relating to Article V, Section 10, Subsection
C(b) are as follows:

          1.   Gas Analyzer(s)

          2.   Scale(s)

          3.   Time Clock(s)

          4.   Meter Reading(s)

                                       71
<PAGE>
 
                                                                    ADDENDUM "C"


                              LETTER OF AGREEMENT

                               VOLUNTARY LAYOFFS

                            Effective June 25, 1991

                            Revised February 1, 1996


It is mutually agreed that during a fluctuation in the level of operations the
following moves may be made which will determine who is to be laid off:

    1.   Senior employees in Groups 2-Desulf Operation, 2A-Pack, 3-Furnace
         Attendants, 3A-Tappers, 4-Utility, 5-Calcine Coal, 6-Acetylene
         Attendant, 7-Paste, and 11-Coke Attendant may take a layoff in lieu of
         working. The total number taking layoffs cannot exceed the total number
         which would be laid off from that department. If no employee is reduced
         from a Job Group, no employee from that Job Group may take a voluntary
         layoff.

    2.   Senior Janitors, Truck Drivers, and Yard Department employees may take
         a layoff in lieu of working. When there is a fluctuation in the Yard,
         Group 10, (when the furnace is running) one employee in the bid job of
         Janitor and one employee in the bid job of Truck Driver will be allowed
         to take a voluntary layoff if there are employees fluctuated from the
         Yard. In the periods of time when the carbide furnace is not running,
         there will be no limit as to the number of Truck Drivers or Janitors
         that will be allowed to take voluntary layoffs. Other jobs within Group
         10 will be handled as in #1 above.

    3.   Senior Group 1-Maintenance and Group 1A-Electricians may take a layoff
         in lieu of working. The total number taking layoffs cannot exceed the
         total number which would be laid off from that department.

    4.   If there is a need for employees to assist Maintenance during a
         fluctuation in the level of operations, the reduced production
         employees may elect to assist in the Maintenance Department. Those
         employees who do not elect to assist in Maintenance will be reduced to
         the Yard Department. However, a less senior production employee cannot
         remain in Maintenance if a more senior involuntarily reduced production
         employee is laid off out the gate. The Union agrees it will not permit
         a more senior employee who refused Maintenance work to file a grievance
         seeking production pay because a less senior employee was working in
         Maintenance.

    5.   Employees desiring to take a layoff in lieu of working must notify the
         Human Resources Department on or before the 20th of each month.

    6.   The length of layoffs in lieu of working shall be for a minimum of one
         month's duration (28 days). If the layoff is for a longer period than
         one month, the employee on layoff must renew his layoff five days
         before the end of the first month. Any employee desiring a layoff in
         lieu of working during the second month shall notify the Human Resource
         Department before the 20th day of the first month's layoff.

    7.   In the event production is resumed prior to the original specified
         time, all employees will return when requested by the Company and all
         moves and trades will cease as of that date.

                                       72
<PAGE>
 
    8.   The laid-off employee may file for Unemployment Insurance and the
         Company will not contest the claim.

    9.   Management's ability to grant voluntary layoffs will be subject to our
         ability to have and/or recall a replacement.

    10.  Voluntary layoffs are granted on a first-come, first-serve basis.

    11.  If any new jobs are created, they will follow the same guidelines as
         those listed in #1 of this Agreement.

    12.  Under no circumstances will employees from other job groups be allowed
         to work in a department where employees are on voluntary layoff except
         for the purpose of filling vacations, sick leave, or leave of absence.

This Agreement voids the 1964 Agreement, the letter dated November 8, 1982, and
the Notice dated September 20, 1984.


THE CARBIDE/GRAPHITE GROUP, INC.      OIL, CHEMICAL & ATOMIC WORKERS
                                      INTERNATIONAL UNION 3-556

/s/ R.G. Pepler              /s/ H.E. Littlejohn

/s/ W.E. Damian              /s/ L.J. York

/s/ M.B. Armstrong           /s/ J.O. Haley

/s/ G.F. Weyer               /s/ C.L. Heath

                             /s/ R. Duncan

                             /s/ G.J. Madison

                                       73
<PAGE>
 
                                                                    ADDENDUM "D"

                          SHORT-TERM VOLUNTARY LAYOFF

                                  GUIDELINES

                           Revised February 1, 1996

For a short-term voluntary layoff to occur, the following conditions must be
met:

    1.   The Company must post notice of workload reduction and that layoffs are
         a probability in affected departments. The approximate period of time
         the workload reduction will be in effect will be indicated, although
         employees should realize timing is subject to change.

    2.   Layoffs will be granted up to the number the Company decides can be off
         and still achieve its objectives for work to be accomplished. In the
         event more layoffs are requested than the Company can grant, then
         first-come, first-served will be used in granting the employee's
         request.

    3.   Voluntary layoffs will be granted in one-week increments, with one week
         (5 working days) being the minimum. Layoffs will not be granted after a
         pay week has begun.

    4.   Employees must notify the Personnel Department to request a layoff.
         Preferably, the employee should request the layoff before Tuesday at
         8:00 a.m. In cases where notice of a workload reduction is posted after
         Tuesday, then employees should notify Personnel as soon as possible.
         Once an employee requests and is granted a layoff, the employee cannot
         change their mind and cancel the layoff before the start of the next
         work week.

    5.   Once an employee starts a layoff, they will be expected to return to
         work on the date scheduled unless they contact Personnel to request,
         and are granted, an extension to the layoff.

    6.   Under no circumstances will employees from other job groups be allowed
         to work in a department where employees are on voluntary layoff except
         for the purpose of filling vacations, sick leave, or leave of absence.


THE CARBIDE/GRAPHITE GROUP, INC.    OIL, CHEMICAL & ATOMIC WORKERS
                                    INTERNATIONAL UNION 3-556

/s/ R.G. Pepler                /s/ H.E. Littlejohn

/s/ W.E. Damian                /s/ L.J. York

/s/ M.B. Armstrong             /s/ J.O. Haley

/s/ G.F. Weyer                 /s/ C.L. Heath

                               /s/ R. Duncan

                               /s/ G.J. Madison

                                       74
<PAGE>
 
                                                                    ADDENDUM "E"


                            MEMORANDUM OF AGREEMENT

                               POLLING PROCEDURE

                           Effective February 1, 1996


The Union and Company agree on the following rules regarding scheduling which
are not otherwise covered by the Labor Contract:

    1.   The Union and the Company agree that any shifts worked must conform to
         the current language of the Labor Contract. Shift schedules may be
         changed if requested by a majority of the employees in the department
         involved and subsequently agreed to by the Union and the Company.
         Employees on a rotating shift schedule will not poll for shifts within
         the schedule chosen.

    2.   Alternate schedules for seven (7) day continuous operations:

         a.   Include no more than eight (8) hours of scheduled overtime
              assuming four (4) shifts are available to cover one hundred sixty-
              eight (168) hours in a week.

         b.   Alternate schedules will be in effect for one (1) year from the
              date of implementation. At the end of that year, employees will
              be given the opportunity to stay with or change their schedule as
              determined by majority.

         c.   If the alternate schedule does not include rotation, the
              employees on the shift schedule will repoll for shift preference
              annually based on seniority.

         d.   Repolling will also be conducted should there be changes in staff
              levels or scheduling of shifts within the department.

    3.   Alternate schedules for non-continuous operations:

         a.   The number of people, days, and shifts of operation will be set by
              Management based on operational priorities.

         b.   A majority of employees may make a request to change schedules in
              their department as long as it meets the operational needs of the
              department. If no request is made, Management will set the work
              schedule.

         c.   Repolling for shift schedule preference in non-continuous
              operations will be conducted when there are any changes in
              staffing levels or a schedule change is needed in the department.

    4.   Polling in the Maintenance Department (Groups 1 and 1A):

                                       75
<PAGE>
 
         a.   Shift schedules must conform to the coverage deemed necessary by
              the Company.

         b.   Polling for available shifts will be conducted every two (2)
              months, within each Group, by seniority.


THE CARBIDE/GRAPHITE GROUP, INC.    OIL, CHEMICAL & ATOMIC WORKERS
                                    INTERNATIONAL UNION 3-556

/s/ R.G. Pepler              /s/ H.E. Littlejohn

/s/ W.E. Damian              /s/ L.J. York

/s/ M.B. Armstrong           /s/ J.O. Haley

/s/ G.F. Weyer               /s/ C.L. Heath

                             /s/ R. Duncan

                             /s/ G.J. Madison

                                       76
<PAGE>
 
                                                                    ADDENDUM "F"


                             SUPPLEMENTAL AGREEMENT

                               OUTSIDE PURCHASES

                           Effective February 1, 1996


1.   The Union President (or designated alternate) will be notified of outside
     purchases which involve metal working/construction of manufacturing process
     equipment which has been historically performed by Plant Maintenance.

2.   The Union will be given an opportunity to discuss this outside purchase.

3.   It is recognized by all parties that there are occasions where in the
     interest of cost containment, quality, speed of production, etc., outside
     purchases will occur.

4.   Such outside purchases will only be conducted through legitimate vendors.

5.   This Agreement will not pertain to standard items (as customarily listed in
     catalogues/price lists) from legitimate vendors.


THE CARBIDE/GRAPHITE GROUP, INC.    OIL, CHEMICAL & ATOMIC WORKERS
                                    INTERNATIONAL UNION 3-556

/s/ R.G. Pepler              /s/ H.E. Littlejohn

/s/ W.E. Damian              /s/ L.J. York

/s/ M.B. Armstrong           /s/ J.O. Haley

/s/ G.F. Weyer               /s/ C.L. Heath

                             /s/ R. Duncan

                             /s/ G.J. Madison

                                       77
<PAGE>
 
                            MEMORANDUM OF AGREEMENT

                                BUY-OUT PROGRAM

                          Effective February 1, 1996


This program is a one-time opportunity for employees to fully terminate from C/G
and receive a cash payment for all rights, including pension rights.

1.   An individual must declare his/her intention between February 1, 1996, and
     February 15, 1996.

2.   A mutually agreed upon date for severing employment will be reached.  Such
     date may not be later than April 15, 1996.

3.   An individual so resigning and forfeiting any future benefits (including
     pension) will receive:

     a.   One (1) week's pay for every two (2) full years of service.

     b.   Payment of any earned vacation.

     c.   A lump-sum pension payout (to be calculated by the actuary) which
          reflects the present value of his/her pension.

4.   Any individual electing this benefit will not be eligible for any other
     benefit as a result of C/G or BOC service.

THE CARBIDE/GRAPHITE GROUP, INC.    OIL, CHEMICAL & ATOMIC WORKERS
                                    INTERNATIONAL UNION 3-556


_____________________________________    _____________________________________


_____________________________________    _____________________________________


_____________________________________    _____________________________________


_____________________________________    _____________________________________


_____________________________________    _____________________________________


_____________________________________    _____________________________________

                                       78
<PAGE>
 
                               MEDICAL AGREEMENT

                           Effective February 1, 1996


1.   No later than April 1, 1996 (sooner if possible), go to Option 2000.

2.   Join the Health Design Plus Alliance.

3.   When the Alliance product is ready, but no earlier than January 1, 1997,
     the Union may request which plan (Alliance or Option 2000) they prefer to
     be on. To assist that choice, the Union will be given an opportunity to
     learn the details of each option.

4.   The Union request (#3 above) will not be denied unless the difference in
     cost exceeds 10%. If this occurs, a meeting will take place to resolve
     differences.

5.   Employee contribution for life of the agreement:

               Single                       $9.00/mo.
               Employee + One              $18.00/mo.
               Family                      $25.00/mo.


6.  Plan Design:  Co-Pay

<TABLE> 
<CAPTION> 
                                   Hospital           Other
                                   --------           -----
<S>                               <C>                 <C>   
          In Network                   85%                 85%
          Out of Network          65%                 60%
</TABLE> 

7.  Deductible:

<TABLE> 
<CAPTION> 
                              Individual              Family
                              ----------              ------
<S>                           <C>                     <C>  
          In Network                  300                       600
          Out of Network      500                     1000
</TABLE> 

8.  Out-of-Pocket (inclusive of deductible):

<TABLE> 
<CAPTION> 
                              Individual              Family
                              ----------              ------
<S>                           <C>                     <C> 
          In Network                  500                     1000
          Out of Network      1000                    2000
</TABLE> 

9.  All employees will be presumed to have satisfied the in-network deductible
    (300/600) on the change-over (see #1 above) date.

                                       79
<PAGE>
 
                                  SCHEDULE A


<TABLE>
<CAPTION>
PRODUCTION                GROUP  Effective 2/1/96  Effective 2/1/97  Effective 2/1/98  Effective 2/1/99  Effective 2/1/00 
----------                -----  ----------------  ----------------  ----------------  ----------------  ---------------- 
<S>                       <C>    <C>               <C>               <C>               <C>               <C>
Furnace Attendant          3         $16.96              17.46             18.01             18.61              19.21
Tapper                    3A          16.91              17.41             17.96             18.56              19.16
Desulf Operator            2          16.91              17.41             17.96             18.56              19.16
Packer                    2A          16.81              17.31             17.86             18.46              19.06
Utility                    4          16.81              17.31             17.86             18.46              19.06
Paste Attendant            7          16.81              17.31             17.86             18.46              19.06
Calcine Coal Attendant     5          16.81              17.31             17.86             18.46              19.06
Coke Attendant            11          16.81              17.31             17.86             18.46              19.06
Acetylene Attendant        6          16.96              17.46             18.01             18.61              19.21
Yard                      10          16.53              17.03             17.58             18.18              18.78
Yard Truck Driver         10          16.63              17.13             17.68             18.28              18.88
Janitor                   10          16.53              17.03             17.58             18.18              18.78
First Aid Attendant        8          16.71              17.21             17.76             18.36              18.96
Storekeeper               10          16.63              17.13             17.68             18.28              18.88
</TABLE>
                            (Continued on next Page)

                                       80
<PAGE>
 
                             SCHEDULE A (Continued)



<TABLE>
<CAPTION>
MECHANICAL
MAINTENANCE                GROUP  Effective 2/1/96  Effective 2/1/97  Effective 2/1/98  Effective 2/1/99  Effective 2/1/00
-----------                -----  ----------------  ----------------  ----------------  ----------------  ---------------- 
<S>                       <C>    <C>               <C>               <C>               <C>               <C>
Second Class               1          16.95              17.45             18.00             18.60              19.20
First Class                1          17.12              17.62             18.17             18.77              19.37
                                                                                                                
Equipment Operator -                                                                                            
     Second Class          1          16.95              17.45             18.00             18.60              19.20
Equipment Operator -                                                                                            
     First Class           1          17.12              17.62             18.17             18.77              19.37

<CAPTION> 
ELECTRICAL
MAINTENANCE
-----------
<S>                       <C>    <C>               <C>               <C>               <C>               <C>
Second Class              1A          16.95              17.45             18.00             18.60              19.20
First Class               1A          17.12              17.62             18.17             18.77              19.37
</TABLE> 

Any production employee hired after February 1, 1984, will be paid $3.00/hour
less than the current appropriate wage rate in Schedule A for his/her first six
months of employment. Upon attaining six months of employment, he/she will
receive a $.50/hour wage increase ($2.50 less than the current appropriate rate
in Schedule A). Upon attaining 12 months of employment, he/she will receive a
$.50/hour wage increase ($2.00 less than the current appropriate rate in
Schedule A). Upon attaining 18 months of employment, he/she will receive a
$.50/hour wage increase ($1.50 less than the current appropriate rate in
Schedule A). Upon attaining 24 months of employment, he/she will receive a
$.50/hour wage increase ($1.00 less than the current appropriate rate in
Schedule A). Upon attaining 30 months employment, he/she will receive a
$1.00/hour wage increase which will be the appropriate wage rate as listed in
Schedule A.

Employees who are in the progressive pay system while in the Tapper
classification on a permanent basis or while filling a temporary job for more
than four (4) weeks will be paid one dollar ($1.00) more per hour until he/she
has progressed to the current appropriate rate for the Tapper classification as
listed in Schedule A.

                                       81