<PAGE>
 
                                                                  Exhibit 10.39

                                   AGREEMENT



                                    BETWEEN



                        THE CARBIDE/GRAPHITE GROUP, INC.



                                      AND



                      INTERNATIONAL, UNION OF ELECTRICAL,

                        TECHNICAL, SALARIED MACHINE AND

                               FURNITURE WORKERS

                            AFL-CIO LOCAL UNION 502



                                  JUNE 3, 1996
<PAGE>
 
                            CONTENTS - ALPHABETICAL


Article   Subject                                               Page

19        Arbitration                                      
6         Call-in Pay                                      
24        Change in Method of Payment                      
35        Company Policy Regarding Supervisory Personnel   
42        Conflict of Laws                                 
12        Decrease in Work Force                           
14        Discharges                                       
34        Employee Ratings                                 
27        Establishing the Standard                        
43        Expiration and Renewal                           
36        Family Leave                                     
32        Funeral Leave                                    
18        Grievances                                       
38        Group Insurance                                  
9         Holidays                                         
4         Hours                                            
23        Incentive Pay                                    
11        Job Bidding                                      
13        Job Description and Evaluation                   
31        Jury Duty                                        
17        Leaves of Absence                                
26        Making the Time Study                            
20        Management                                       
29        New Products                                     
33        No Discrimination                                
3         Notices                                          
8         Overtime and Night Bonus                         
39        Pensions                                         
1         Recognition                                      
5         Reporting Pay                                    
7         Rest Periods                                     
28        Retiming of Jobs                                 
21        Safety and Health                                
44        Schedule l - Rate Schedule                       
45        Schedule 2 - Wage Schedule                       
46        Schedule 3 - Supplements                         
41        Scope of Agreement                               
10        Seniority                                        
37        Stewards                                         
22        Strikes and Lockouts                             
30        Temporary Time Values                            
25        Time Studies                                     
16        Transfers                                        
2         Union Security and Checkoff                      
15        Vacations                                        
40        Wages                                             

                                       1
<PAGE>
 
                                     INDEX

Article   Subject                                               Page

1         Recognition                                       
2         Union Security and Checkoff                       
3         Notices                                           
4         Hours                                             
5         Reporting Pay                                     
6         Call-in Pay                                       
7         Rest Periods                                      
8         Overtime and Night Bonus                          
9         Holidays                                          
10        Seniority                                         
11        Job Bidding                                       
12        Decrease in Work Force                            
13        Job Description and Evaluation                    
14        Discharges                                        
15        Vacations                                         
16        Transfers                                         
17        Leaves of Absence                                 
18        Grievances                                        
19        Arbitration                                       
20        Management                                        
21        Safety and Health                                 
22        Strikes and Lockouts                              
23        Incentive Pay                                     
24        Change in Method of Payment                       
25        Time Studies                                      
26        Making the Time Study                             
27        Establishing the Standard                         
28        Retiming of Jobs                                  
29        New Products                                      
30        Temporary Time Values                             
31        Jury Duty                                         
32        Funeral Leave                                     
33        No Discrimination                                 
34        Employee Ratings                                  
35        Company Policy Regarding Supervisory Personnel    
36        Family Leave                                      
37        Stewards                                          
38        Group Insurance                                   
39        Pensions                                          
40        Wages                                             
41        Scope of Agreement                                
42        Conflict of Laws                                  
43        Expiration and Renewal                            
44        Schedule l - Rate Schedule                        
45        Schedule 2 - Wage Schedule                        
46        Schedule 3 - Supplements                           

                                       2
<PAGE>
 
                                   AGREEMENT

AGREEMENT, made this 3rd day of June, 1996, between THE CARBIDE/GRAPHITE GROUP,
INC, (the Company) and the LOCAL UNION 502, affiliated with the International
Union of Electrical, Technical, Salaried, Machine and Furniture Workers, AFL-CIO
(the Union), as agent for and on behalf of all the Company's production and
maintenance employees (the employees) at the St. Marys, Pennsylvania facility.

The purpose of the Agreement is to provide orderly collective bargaining
relations between the Company and the Union, to secure a prompt and equitable
settlement of grievances, and to establish and maintain fair wages, hours and
working conditions for the employees covered by this Agreement.

It is acknowledged by both parties that C/G is an ISO9000 certified producer of
Carbon and Graphite products and will strive to function within the criteria as
set forth to achieve and sustain this certification.

                                       3
<PAGE>
 
                                   ARTICLE 1
                                  RECOGNITION

1.   The Company recognizes the Local Union 502 affiliated with the
     International Union of Electrical, Technical, Salaried, Machine and
     Furniture Workers, AFL-CIO, and the sole collective bargaining agent for
     all production and maintenance hourly employees, except foremen, assistant
     foremen, supervisors, timekeepers, clerks, laboratory assistants, time
     study, development and method employees, guards and/or watchmen, with
     respect to rates of pay, wages, hours of employment and all other
     conditions of employment.

2.   It is agreed that no activities pertaining to the Union will be permitted
     during working hours, it being understood that this clause does not include
     matters under the grievance procedure.

3.   (a)  The Company and Union agree that it is desirable for C/G employees to
          perform maintenance work in the plant where practical.  Management,
          however, reserves the right to subcontract for legitimate business
          reasons.

     (b)  If the Union desires, an explanation about a maintenance job
          subcontracted will be provided by the appropriate department or
          maintenance superintendent.  This explanation will include the reasons
          for subcontracting, such as

          (1) Unavailability of properly qualified employees

          (2) Unavailability of equipment or facilities

          (3) The allowable duration for completion of such work

          (4)  Cost considerations

          (5)  Emergencies

          (6) Other legitimate business reasons

     (c)  After receiving the answer in (b) above the Union may request such
          answer in writing.  If so requested the Company will respond in
          writing.

4.   The Carbide/Graphite Group, Inc. will create a new Pension Plan covering
     hourly employees which will be a mirror image of the language of the BOC
     Plan, effective the date The Carbide/Graphite Group, Inc. takes over.

     BOC stipulates that the assets in the BOC Pension Plan covering the
     participants at the St. Marys Carbide/Graphite Plant are more than
     sufficient to pay all the accrued benefits, both vested and non-vested
     under the Plan as of December 31, 1987.

     BOC has entered into similar pension arrangements in the following company
     locations: Airco Alloys (Niagara Falls, NY), Airco Alloys (Charleston, SC),
     Airco Alloys (Mobile, AL) and Airco Welding Products (Cleveland, OH).

     In each of these instances, there has never been a case where a BOC Plan
     has failed to meet the agreed upon pension obligations.  It is the
     Company's intention that they will not fail at St. Marys as they have not
     failed at the other locations.

     Continuous service with BOC will be added to the continuous service of The
     Carbide/Graphite Group, Inc. for purposes of determining vesting
     eligibility.

                                       4
<PAGE>
 
     In the event that The Carbide/Graphite Group, Inc. Pension Plan for the
     bargaining unit St. Marys employees is terminated, the BOC Plan for St.
     Marys employees will vest all unvested Participants (those hired prior to
     the Closing Date of the sale and still in the employ of The
     Carbide/Graphite Group, Inc. on the date The Carbide/Graphite Group, Inc.
     Plan terminates.)

     Example
     -------

     Assume that the sale of the St. Marys Plant from BOC to The
     Carbide/Graphite Group, Inc. closes on July 1, 1988.  Assume that the per
     month per year of service benefit in the bargaining unit pension plan is
     $15 on that date and changes to $16 on July 1, 1990.  Assume that a
     bargaining unit employee retires on July 1, 1990 at age 65 with twenty
     years of credited service.

     That employee will receive a total pension benefit of $320 a month.  The
     BOC Pension Plan's responsibility will be frozen as of the terms of the
     pension plan on July 1, 1988, and the employee service as of that date (18
     years x $15 = $270).  The Carbide/Graphite Group, Inc.'s Pension Plan will
     be responsible for the employee service after July l, 1988 and for any
     benefit levels negotiated after July 1, 1988 (2 years x $16 + $18 = $50).

     Continuous service with BOC will be added to the continuous service of The
     Carbide/Graphite Group, Inc. for purposes of determining vesting
     eligibility.

                                       5
<PAGE>
 
                                   ARTICLE 2
                          UNION SECURITY AND CHECKOFF

1    Union Shop - Every employee who is a member of the Union on the date this
     Agreement becomes effective shall be required as a condition of continued
     employment to remain a member of the Union for the term of this Agreement.
     Every employee who is not a member of the Union on such effective date
     shall be required, as a condition of continued employment, to become a
     member of the Union on the 480 hours worked after such effective date and
     to remain a member of the Union in good standing for the term of this
     Agreement.  (Note:  Dues shall be deducted following 480 hours actually
     worked.)  Every person who is hired on a job, after this Agreement has
     become effective, shall be required, as a condition of continued
     employment, to become a member of the Union after 480 hours actually worked
     from the date of hire and shall remain a member in good standing for the
     term of this Agreement.

2.   During the life of this Agreement the Company agrees to make monthly
     deductions for the dues and for the Union initiation fee for each employee
     who signs a deduction authorization.  Such deductions will be paid monthly
     to the Financial Secretary of the Union.  The Union agrees to furnish the
     Company written notice of the amount to be deducted for initiation fees and
     dues, and of the identity of the Union official authorized to receipt for
     such deductions.  The Union shall report monthly to the Company all amounts
     owing as dues to the Union from employees for whom no dues were deducted in
     the preceding month, and such amounts shall be deducted with the employee's
     next regular dues deduction.

                             LOCAL 502, IUE-AFL-CIO
                       INDIVIDUAL CHECKOFF AUTHORIZATION

     To:                                  Effective Date:
        ----------------------                           ------------------
         (Name of Company)

     I authorize and direct you to check off from my pay each month the sum of
     $      as my monthly Union Membership dues (agency equivalent fee),
      -----
     including initiation fee of $      (if payable), and promptly to remit same
                                  -----
     to Local 502, IUE-AFL-CIO.

     This check-off authorization shall continue until revoked and may be
     revoked only at the times and in the manner provided below and shall be
     irrevocable for a period of one year from              19  , or until the
                                               ------------   --
     expiration of the Agreement between the Company and the Union (whichever
     occurs sooner), and shall be irrevocable for each succeeding year
     thereafter, or until the expiration of the said successive applicable
     Agreement between the Company and the Union (whichever occurs sooner),
     unless it is revoked by me within the seven (7) days preceding the end of
     such period of irrevocability.

     Revocation shall be effective only if I give you and Local 502 written
     notice by individual registered mail, return receipt requested, and it is
     received or postmarked during the period specified above.


                               ---------------------------
                                 (Employee's Signature)

     LOCAL 502
     IUE-AFL-CIO              Dept.              Clock No.
                ------------       ------------           ------------

                                       6
<PAGE>
 
3.   (a)  Temporary employees (college summer help) as a condition of
          employment, shall, upon accumulation of 960 hours after the date of
          hiring, become members of the Union and remain members in good
          standing during the remainder of their temporary employment. Such
          employees may be terminated by the Company at any time during such
          temporary employment and not guaranteed re-employment. Neither shall
          such employees have seniority rights over any permanent employee. Such
          temporary employee shall acknowledge in writing, within 120 hours of
          their employment, their understanding of this Article 2 and its
          applicability to them.

     (b)  The wage of temporary employees will be $8.50 per hour.  On 6/8/97 the
          rate will be $8.75.  On 6/7/98 the rate will be $9.00 per hour.

4.   No temporary employees will be hired while permanent employees are on
layoff.

                                       7
<PAGE>
 
                                   ARTICLE 3
                                    NOTICES

The Union shall have the right of free use of Union bulletin boards in the
Company's plants for notices in regard to meetings, social gatherings,
collecting dues, names of candidates and other notices, provided all such
notices are first submitted to and approved by the Human Resources Manager.

                                       8
<PAGE>
 
                                   ARTICLE 4
                                     HOURS

1.   Forty (40) hours of work per week, consisting of five (5) days:  Monday,
     Tuesday, Wednesday, Thursday and Friday, not exceeding eight (8) hours per
     day, shall constitute a normal week's work, except for employees engaged in
     continuous operations.

2.   "Continuous operations," as used in this Agreement, shall be jobs that
     normally require work seven (7) days a week, such as furnace firemen,
     boiler firemen, pitch impregnating and graphitizing crews.

     (a)  The Company is not opposed to dupont shifts as a matter of principle.
          When the Management feels that a situation is appropriate for dupont
          shifts, and a majority of a crew agrees, the Department Superintendent
          may implement such shifts.

3.   The above provisions are not intended as a guarantee of eight (8) hours
     work per day or forty (40) hours of work per week.

4.   A maximum of fifteen minutes may be permitted for shower time at the end of
     a complete shift, however, this allowance shall not be used to interrupt
     the completion of a job or assignment.

                                       9
<PAGE>
 
                                   ARTICLE 5
                                 REPORTING PAY

1.   Any employee who reports for work as scheduled and has not been given at
     least six (6) hours notice not to report shall receive four (4) hours of
     available work or pay, and employees working the Dupont shift will receive
     six (6) hours of available work or pay, at the discretion of the Company.
     This provision shall not apply in the event any of the following conditions
     interfere with work being provided; power failures, machine breakdowns,
     fires, disasters, etc.

2.   Employees who are absent on any day for any reason shall not be eligible
     for reporting pay, if upon their return no work is available, unless the
     employee was excused in advance.

3.   It is the employee's responsibility to insure that his current address and
     telephone number are on file with his immediate supervisor.

                                       10
<PAGE>
 
                                   ARTICLE 6
                                  CALL-IN PAY

An employee who has completed his regularly scheduled shift and is contacted to
return to work within the next sixteen (16) hours, either voluntarily or as
directed, shall receive at least four (4) hours work or pay at the discretion of
the Company.  Employees who are called to work outside of their regular shift or
schedule shall be paid at the rate of double time for such hours worked, and
straight time hourly rate for the balance of the four (4) hours if not worked.
Employees shall receive shower time on call-in if they work at least four (4)
hours.  Also, if an employee works at least four (4) hours on the call-in, he
will receive a ten (10) minute rest period and, if he continues an additional
four (4) hours, he will be entitled to an additional ten (10) minute rest
period.

                                       11
<PAGE>
 
                                   ARTICLE 7
                                  REST PERIODS

The Company shall grant all employees rest periods totalling twenty (20) minutes
for each eight (8) hour shift; wherever practical during such periods, employees
shall be free to leave their work places.  Hourly workers shall be paid for this
time.

                                       12
<PAGE>
 
                                   ARTICLE 8
                            OVERTIME AND NIGHT BONUS

1.   All work performed in excess of eight (8) hours in any one workday, or in
     excess of forty (40) hours in any regularly scheduled workweek, and all
     work performed on Saturday, Sunday and holidays, as listed below, shall be
     paid for at the rate of time and one-half.

2.   Employees engaged in noncontinuous operations shall be paid at double time
     for all work performed on Sunday.

3.   Overtime work shall be divided as equally as possible among employees who
     regularly perform a similar class of work.  In the event all employees in a
     job classification on a shift are scheduled to work overtime and additional
     employees are necessary, employees from within the job classification will
     be scheduled in preference to employees from other job classifications,
     except if call-in pay is necessary to effect a cross-shift assignment the
     Company may select another employee from within the shift.  In the event a
     temporary vacancy has been filled in accordance with the provisions of
     Article 11, Section 2, 2(a) and 2(b), the temporary replacement will be
     assigned to work the overtime.

     (a)  Each foreman will maintain a record of overtime and furnish a copy of
          that record to the Department Steward upon reasonable demand.

     (b)  Failure to work overtime shall be recorded as having been worked.

     (c)  In the event an absence occurs due to accident, injury or illness,
          said employee will be charged for overtime as follows:

          (i)  If employee is off less than fourteen (14) days there will be no
               charge of overtime if the employee was not asked.

          (ii) If employee is off more than fifteen (15) days the employee will
               be charged the average overtime worked during his absence upon
               his return.

4    A list of qualified people in the groups listed below will be maintained
     and, if all bid-in employees have been asked and refused the overtime, then
     Miscellaneous employees will be canvassed, and then qualified employees
     listed will be canvassed, without the necessity for call-in pay.  If no
     qualified employees are willing to work the overtime, the bid-in
     employee(s) who is low in overtime will be required to work.

     Groups as used in this section are:
          1.   Plant 3 (Dept. 18, 19, 22, and 49)
          2.   Bake (Dept. 20 and 23)
          3.   Acheson Graph (Dept. 01, 17, 21, and 28)
          4.   Plant 607 (Dept. 47)
          5.   Electricians
          6.   Mobile Mechanics
          7.   Maintenance Mechanics
          8.   Outside Maintenance

     In the event qualified employees are selected to work overtime in place of
     bid-in employees, they will be charged for the overtime.  Similarly,
     employees from the qualified list will be charged overtime if they refuse.

                                       13
<PAGE>
 
5.   When an employee completes a full eight (8) hour shift and is obliged to
     work overtime for a period of four (4) hours or more, he may take a half
     hour lunch period for which he shall be paid.  At the end of eight (8)
     hours he either gets a half hour lunch period or, if he must work through
     twelve (12) hours, he will receive a half hour extra pay.  If he is working
     with a crew which receives a break, he will also be permitted the break.

6.   It is agreed that overtime pay shall not be pyramided.  In all cases
     concerning pyramiding, the highest premium rate only shall be paid.

7.   Employees, when working overtime, shall be paid the overtime rate on their
     earnings during that overtime period.

8.   All employees working the second and third shifts shall be paid at the rate
     of time and one-tenth.  This shall also apply to incentive and overtime.
     Third shift employees working overtime hours, consecutive with their
     regular shift hours, will be paid at the rate of time and one-tenth for all
     overtime hours worked.  First shift employees working twelve (12) or more
     consecutive hours will be paid at the rate of time and one-tenth for all
     overtime hours worked.

9.   Wherever possible, except in an emergency, all employees will be notified
     seventy-two (72) hours in advance that they will be called on to perform
     work on Saturday and Sunday.

10.  An employee who is scheduled to work on Saturday and is absent from work on
     Friday shall be considered to be unavailable for Saturday overtime if he
     does not report off by his or her mid-shift on Friday.

11.  All Union employees will be canvassed within the group as defined in
     Article 8 - Section 4 before any probationary employees.

                                       14
<PAGE>
 
                                   ARTICLE 9
                                    HOLIDAYS

1.   The following holidays shall be designated as "paid" holidays from June 3,
     1996 to June 7, 1999:

     Independence Day                     December 24
     Labor Day                            Christmas Day
     Veterans Day                         New Year's Day
     Thanksgiving Day                     Good Friday
     Day after Thanksgiving               Memorial Day
     First day of Buck Hunting Season

2.   Whenever possible, the Company will notify the Union three (3) working days
     in advance of a designated holiday whether or not work will be performed on
     that holiday in the plant or certain departments.

3.   Continuous operators shall be paid even though the holiday falls on a
     scheduled day off.

     (a)  Employees working the DuPont schedule who do not work their scheduled
          holiday due to plant/department shutdown will be paid 12 hours at the
          reduced rate.

4.   All employees working on a paid holiday shall be paid, in addition to eight
     (8) hours straight time pay, time and one-half for all hours worked.

5.   Any employee who is in the first step of the absentee disciplinary
     procedure and is absent the day before or the day after an observed paid
     holiday, unless excused otherwise by Management, shall not receive any pay
     for said holiday.

     (a)  In order to be eligible to receive pay for a holiday not worked, an
          employee will be required to have a punch sometime in the pay period
          in which the holiday falls.

     (b)  "Inactive employees will be ineligible for holiday pay under the
          following conditions":

          (i)  New Hires who start after the holiday.

          (ii) Voluntary quits prior to the holiday if they do not work on their
               scheduled day immediately preceding the holiday.

         (iii) Employees discharged for cause prior to the holiday if the
               discharge is upheld.

6.   In the event an employee is injured or is ill during the pay period in
     which the holiday falls, said employee will nevertheless be paid for such
     holiday, if he works at all during that pay period.  The Company may
     require medical proof of such injury or illness.

7.   Employees who are scheduled to work on a paid holiday and fail to report
     for work shall not receive any pay for said holiday, unless said employee
     notifies the Company not later than noon of the day before the holiday and
     is excused from reporting.

8.   It is understood and agreed that Saturdays, Sundays and holidays shall
     begin with the morning shift and shall continue for twenty-four (24) hours
     thereafter.

9.   When a paid holiday falls on a Saturday it will be celebrated on Friday;
     when a paid holiday falls on a Sunday it will be celebrated on Monday.

                                       15
<PAGE>
 
10.  Any continuous or maintenance employees, who work a paid holiday, may elect
     to take another day off without pay within sixty (60) days following that
     holiday at the discretion of the Company, with seniority being the basis
     for consideration.

11.  The First Day of Buck Hunting Season and Christmas holidays will be
     considered restricted workdays except for Power Monitors and Kiln
     Attendants.  The Company will, to the greatest extent practical, minimize
     the work requirements on these days.  If the Company is unable to fill all
     of the requirements deemed necessary on a voluntary basis, junior qualified
     employees will be directed to work.

                                       16
<PAGE>
 
                                   ARTICLE 10
                                   SENIORITY

1.   The Company agrees to recognize the principle of seniority insofar as it
     applies to regular employees who have been employed by the Company for more
     than the probationary period.

2.   Any new employee hired by the Company shall be placed on a probationary
     period consisting of 480 hours actually worked.  During this time, the
     Company will have the sole right to determine whether employment will be
     continued.  Upon completion of this probationary period, the new employee
     shall automatically receive the applicable miscellaneous rate in Article 40
     hereof.

3.   Seniority shall not apply during an employee's probationary period, and any
     employee may be discharged during such probationary period, but when an
     employee has remained in continuous employment and has actually worked 480
     hours or more, said employee's seniority shall be computed from the date
     first hired.

4.   In all cases of layoffs, recall, transfers and promotions, length of
     service and ability shall govern.  "Seniority", as used herein, shall mean
     length of service, qualifications and ability.  Qualifications, previous
     experience with the Company or elsewhere, education, skill and ability,
     related work, etc., shall be determined by the Company, subject to the
     grievance procedure.

     (a)  The only jobs requiring the passing of an aptitude test will be those
          in Group III Power Monitor and Kiln Attendant or those that are
          progression jobs which lead to a job listed under Group III.
          Employees who have bumped or are recalled will be subject to 120 hours
          qualifying period, (200 Hours for Group III Power Monitor and Kiln
          Attendant).

     (b)  Employees may request a review of the results of the aptitude test
          with a Union representative present at the time the results are
          reviewed.

5.   An employee's seniority will end and he will be considered terminated if
     he:

     (a)  voluntarily quits, or
     (b)  is discharged or released for proper cause
     (c)  has not worked for the Company for thirty-six (36) consecutive months,
          or
     (d)  fails to comply with the layoff-recall provisions of Article 12,
          Sections 3 and 4.

6.   Seniority shall be maintained, but shall not accumulate beyond thirty-six
     (36) consecutive months absence due to illness, when supported by a
     doctor's certificate.  In all cases of absence due to illness, the Company
     may require the said employee to be examined by another physician; and, in
     the event said employee refuses to submit to such examination, or after
     examination is certified as able to perform available work and said
     employee declines such work, he shall be discharged and his seniority shall
     cease.

7.   The Company agrees that it will furnish the Union each month with a list of
     all employees hired, laid off, recalled, transferred from one department to
     another and/or promoted out of the bargaining unit.

8.   An employee who is transferred out of the bargaining unit shall accumulate
     seniority following such transfer for an additional period, not to exceed
     one year, and have the right in the event of a layoff or abolishment of his
     job to return to available work in the bargaining group in line with his
     accumulated seniority as described above.  Employees who return to
     available work in the bargaining unit will not be permitted to bid for a
     period of six (6) weeks.  Employees transferred prior to the 1969 Agreement
     shall have accumulated seniority, for purposes of this Article only, to
     October 15, 1970.

                                       17
<PAGE>
 
     (a)  An employee transferred out of the bargaining unit after March 9, 1984
          shall accumulate seniority following such transfer for an additional
          period not to exceed one year.  Such transferred employees must decide
          at this time whether or not they wish to return to the bargaining
          unit.  If their choice is to remain out of the bargaining group they
          relinquish all rights to return to that unit.  If their choice is to
          return to the bargaining unit the conditions set forth in 8. above
          will apply.

                                       18
<PAGE>
 
                                   ARTICLE 11
                                  JOB BIDDING

1.   The following increase in work force procedure will be followed for all
     plants:

     (a)  The Company shall post all bid jobs factory-wide for a period of seven
          (7) calendar days, and any employee may apply for them.  Such bid jobs
          must be posted within fourteen (14) calendar days after the vacancies
          exist.  In the case of a retirement, the job will be posted twenty-one
          (21) calendar days prior to the effective retirement date.

     (b)  Preference will be given the employee with the greatest seniority,
          provided:

          (i)  said employee has not requested and received another job within
               the preceding eight (8) weeks.  The eight (8) weeks shall be
               determined by the removal date on the bid sheet, and

          (ii) said employee is competent to perform the work.  The Company
               shall be the judge of the competency of its employees, subject to
               review under the grievance procedure.

               "Competency" shall be considered to mean ability to do an
               available job in a workmanlike manner and in the event any
               employee because of inability whether due to lack of experience,
               physical unfitness or otherwise is unable to perform available
               work in a workmanlike manner, the job will be re-bid.

         (iii) A successful bidder is required to complete any physical
               testing requirements within six (6) calendar days of the date the
               job is removed from bid.  If the successful bidder does not
               comply, he shall remain on his job, his vacancy shall be
               cancelled, and the job shall be awarded to the next senior
               qualified bidder.

          (iv) Employees on S&A who bid and are awarded the job must be able to
               perform the job duties within four (4) weeks of removal of bid.
               If not able to perform the job, the job will be re-bid.

     (c)  In the event an employee voluntarily requests and is granted a
          transfer to another plant, said employee shall comply with Sections
          (b) (i) and (ii) above before bidding.  All voluntary straight out
          transfer requests must be honored before recalling any junior employee
          from layoff or new hire to fill the job.  This employee shall be
          considered as the junior miscellaneous employee in that department for
          a period of six (6) weeks from the date of the transfer, for the
          purpose of premium assignments.  The Union agrees that this language
          will not be used to the extent of hindering the Company's production
          requirements in any Department.

     (d)  The Company agrees that it will transfer the successful bidder to the
          bid job within a period no greater than four (4) weeks.

     (e)  When the Engineering Department turns over new equipment to the
          Production Department and the equipment is approved by the latter for
          production purposes, then the Company shall post a bid, if a vacancy
          exists, within seven (7) calendar days after the acceptance of the new
          equipment by the Production Department.

     (f)  When a bid job has been posted for a period of seven (7) calendar days
          and no bids have been received, then the job shall be filled at the
          discretion of the Company with rights as though bid, except that
          Section (b) (i) above shall not apply if he elects to bid another job.

                                       19
<PAGE>
 
     (g)  Applications to fill vacancies must be in writing and shall be
          deposited in a sealed box to be provided by the employer and placed in
          the various plant offices.  The employer and the Union shall jointly
          open the sealed box and examine the applications for the job
          vacancies.

     (h)  In the event an employee is a successful bidder and he declines to
          accept, he shall be transferred, as soon as practical but never longer
          than four (4) weeks later, to miscellaneous in the plant he is part of
          at the time of bidding, and he shall be prohibited from any further
          bidding for a period of six (6) months.  Furthermore, this employee
          shall be considered as the junior miscellaneous employee in that
          department for a period of three (3) months from the date the employee
          is transferred to miscellaneous for the purpose of premium
          assignments.

2.   In the event a temporary vacancy occurs due to accident, injury, illness,
     contested discharge or suspension, or other absence of a regular employee,
     the job will not be posted but filled by an available employee who shall
     continue as the temporary replacement for the remainder of the vacancy.

     (a)  The employee will not assume the seniority of the employee he is
          replacing.

     (b)  In the event of a layoff or reduction of work in the job
          classification, the temporary employee will first be removed.

     (c)  If an employee's physical condition is such that it is medically
          certified that the employee will never be able to return to his bid
          job, the job will be posted for bid.

3.   When it becomes necessary to reduce permanent classified jobs (not
     miscellaneous jobs) in Plant 3, Mass and Sagger Bake and Inspection,
     Graphitizing Department, Pitch Impregnating, Central Cleaning Department,
     and Plant 607 due to a long term lack of work, such jobs shall not be
     posted for bid, and the employees holding these jobs shall be returned to
     their positions without virtue of bid when the jobs are re-established.  If
     a person is holding job rights under this paragraph, he is the youngest
     miscellaneous employee, unless he agrees to give up job rights, then he
     falls back in line with seniority.

     When a permanent vacancy(s) occurs within a plant complex, the jobs will be
     offered out in line with seniority.  All miscellaneous employees in the
     complex shall be canvassed for the opening(s), with employees retaining
     rights to bid jobs being asked last.  If all employees refuse the
     opening(s), the youngest employee(s) in line with regular seniority will be
     assigned to the vacancy(s).

     A permanent vacancy is defined as any job normally posted for bid.  A
     temporary vacancy(s) will be filled according to the miscellaneous
     agreement (Article 11, paragraph 2).

4.   A bid job shall be considered permanent only after it has continued in
     operation for a period of more than three (3) weeks after the bid notice
     has been taken down.

     (a)  In the event that an employee is removed from a bid job within the
          three (3) weeks because the job is abolished, he will return to his
          old bid job in his original plant.  If the employee's prior job was
          miscellaneous work, he will return to his original plant.

5.   In an effort to clarify the practice of filling temporary vacancies in the
     Plant, it is hereby understood and agreed that the following procedures
     shall apply for employees holding "bid rights" within a department.

                                       20
<PAGE>
 
     (a)  When two or more employees holding "bid rights" are working in their
          bid-in-department on a temporary basis, the junior in seniority will
          be removed first and returned to the miscellaneous workforce,
          irregardless of who was first to fill a vacancy.

     (b)  When one employee holds "bid rights" and is working a temporary
          vacancy in his bid-in department, and the other employee is
          miscellaneous, the miscellaneous employee will be returned to
          miscellaneous first.

     (c)  When two or more miscellaneous employees are filling temporary
          vacancies, the miscellaneous employee shall continue as the temporary
          replacement for the remainder of the vacancy.

     It is understood that in the event of cross-shift assignments in the case
     of a. or b. above, it may be necessary to retain the junior "bid rights"
     holder or miscellaneous employee for a day in order to effectively change
     the shift of the senior employee.

6.   Vacancies of one (1) day or less which occur with or without advance notice
     will be filled from the miscellaneous workforce in accordance with normal
     canvassing procedures.  Vacancies of two (2) days or longer will be filled
     with the senior bid-in operator holding rights.  Vacancies which occur as a
     result of absences on a day-to-day basis without notice, will be filled
     from the miscellaneous workforce by following normal canvassing procedures.
     It is also understood that in the event of cross-shift assignments it may
     be necessary to retain the junior bid-rights holder or miscellaneous
     employee for a day in order to effectively change the shift of the senior
     employee.

                                       21
<PAGE>
 
                                   ARTICLE 12
                             DECREASE IN WORK FORCE

1.   In the event of transfers or layoffs due to a reduction in the work force,
     seniority will govern.  Employees will be permitted to displace other
     employees, except those jobs listed in Group III and listed below, provided
     those retained are competent to perform the work.

     (a)  Employees may displace a junior employee in Group III, or those listed
          in paragraph l.b. only if they previously held that classification and
          when they would be placed on layoff from the factory.

     (b)  The Protected Jobs are:

          365  Kiln Attendant
          719  Power Monitor

2.   The following reduction in force procedure will apply for all plants as set
     forth in Section 9 of this Article.

     (a)  An employee affected under this Section will be placed on available
          work within his plant.  If there is no available work, he will
          displace the least senior employee within the plant.

     (b)  An employee removed from his plant under Section (a) or unable to bump
          under Section (a) will then be placed on available work factory-wide.
          If there is no available work factory-wide, he will displace the least
          senior employee factory-wide.  Rather than exercise this bump, the
          employee may elect to take a layoff.

     (c)  The least senior employee factory-wide who is affected by bumping will
          then be placed on layoff.

     (d)  An employee's election not to bump under Section (b) above shall be
          construed to mean that the employee is not suited for the work offered
          and will not prejudice his right to receive benefits under the
          Unemployment Insurance Program in the state of Pennsylvania.

3.   Employees, if able to perform the job, will be recalled from layoff in line
     with their seniority and without regard to their former plants.  However,
     employees exercising the option in Section 2(b) above must specify at time
     of layoff to which plants (other than the one for which a bumping
     opportunity was refused) he or she would be willing to accept recall.  In
     the event of a recall opportunity to any of those plants for which a
     preference was indicated, the employee must either accept the recall or be
     terminated.

4.   In the event a laid off employee fails to report for work at the time said
     employee is directed to do so and should such employee also fail to notify
     the Company of any reason for failing to report as directed, then, in such
     event, the Company is under no obligation to offer such employee an
     opportunity to return to work, and such employee shall lose all seniority
     rights.  At least five (5) days notice, by registered mail, to the
     employee's last known address shall be sufficient for the purpose of this
     Section.  A copy of the notice will be sent to the local Union.

5.   If a laid off person is recalled any time within thirty-six (36) months
     from his date of layoff, he will receive seniority credit for the actual
     time laid off.

6.   Except in cases of classifications where in the judgment of the Company
     special fitness or skill is required, no new employee will be hired until
     all laid off employees with seniority rights who are capable of efficiently
     performing the work have been given an opportunity to return to work.

                                       22
<PAGE>
 
7.   When an employee is removed from his plant due to a decrease in work force
     other than layoff, said employee may request a transfer back to his
     original plant from the foreman in his new department.  This request will
     be filed with the Human Resources Office within fourteen (14) days of his
     removal and a copy shall be given to the Union.

     (a)  When vacancies occur in his former plant, Management, before hiring
          any new applicant or recalling a junior  employee from layoff for such
          vacancy, will honor, by seniority, a written request for transfer back
          to such plant from any employee who was transferred from such plant
          through no fault of his own, provided said employee is competent to
          perform the work.

     (b)  In the event an employee bids and secures a job in his new plant, his
          right to transfer back to his original plant shall cease.

     (c)  When an employee takes a voluntary layoff he will be treated as a
          decrease in workforce upon his return from the voluntary layoff.

8.   (a)  A "temporary layoff" shall be defined as any layoff not exceeding four
          (4) days in duration because of lack of work, power failures, machine
          breakdowns, fires, disasters, etc. In such event, employees of the
          affected job classification on a shift shall be laid off in seniority
          order but without bumping opportunities in the case when the events
          leading to the temporary layoff became known after the beginning of
          the workday. If such temporary layoff continues into the next workday,
          the application of seniority will be within the job classification
          without regard to shift. Such shift reassignments as are required to
          effect these seniority provisions shall not result in premium or call-
          in pay. When the temporary layoff is concluded, the employees first
          recalled will be those who are regularly assigned to the first full
          shift scheduled. If other work is available in any plant, it will be
          distributed in accordance with seniority, as above defined. This
          temporary layoff provision will not be used to effect work sharing or
          to avoid a permanent layoff because of a sustained reduction in the
          work load.

     (b)  For DuPont shift workers, a temporary layoff shall continue to be
          defined as four (4) days, however:

          (i) The first three (3) days shall be exactly as defined above.

          (ii) At the time of layoff, each employee will be canvassed as to his
               desire to work on the fourth day.  For those desiring to work,
               the Company shall provide available work.

9.   For the purpose of decrease in work force or such other purposes as are
     expressly provided for in this Agreement, it is agreed that The
     Carbide/Graphite Group is divided as follows:

          Plant 3 - Double Deck and Miscellaneous;

          Carbottom, Mass and Sagger Bake, and Miscellaneous;

          Pitch Impregnating Department, Central Cleaning Department, and
          Graphitizing (Acheson and Longitudinal) Department and Miscellaneous;

          Plant 607 (Department 47) and Miscellaneous;

          Mechanical Maintenance;

                                       23
<PAGE>
 
          Electrical Maintenance;

          Outside Maintenance;

          Mobile Maintenance.

     Each of the above groups shall be interpreted as a plant.

10.  If an employee elects to take a voluntary layoff in accordance with this
     Article, the employee shall have the opportunity of exercising bumping
     privileges into his seniority unit at thirteen (13) week intervals from the
     last day worked, or upon expiration of such employee's Unemployment
     Compensation benefits provided his seniority so permits, and the employee
     provides two (2) weeks notification to the Company of the Unemployment
     Compensation benefit expiration and his intention to return.

     In the event the seniority of the employee on voluntary layoff status would
     not permit the employee to be working, that status will convert to
     involuntary layoff, and all benefits shall revert to those benefits as
     provided for with involuntary layoff.

     Any employee who elects a voluntary layoff shall have insurance coverages
     for medical, surgical, hospitalization, major medical, prescription drug
     and life insurance continued for a maximum of thirty-nine (39) weeks from
     the last day worked.  The employee may continue such coverage for the
     thirty-nine (39) week duration by payment of the contractually specified
     amount for the same to the Company.

                                       24
<PAGE>
 
                                   ARTICLE 13
                         JOB DESCRIPTION AND EVALUATION

1.   It is agreed and understood that the wage structure for this plant is based
     upon job evaluation.

2.   The present job evaluation plan shall be used in evaluating the new jobs
     and in reevaluating existing jobs when changes in job content occur.  In
     the event no agreement is reached, it is agreed it shall be handled under
     the grievance procedure.

3.   Classifications and the establishment of new classifications shall be
     subject to negotiation and agreement by and between the employer and the
     Union.  Disputes shall be subject to the grievance and arbitration
     procedure.

4.   The Company agrees to notify the Union of new job evaluations and changes
     in existing evaluations.  The Company will furnish the Union with copies of
     job descriptions, and they will be deemed a part of this Agreement.  Job
     descriptions and evaluations shall be kept up to date.

5.   Where certain jobs were granted an inequity increase by the Company, and
     which was added to the evaluated classified wage rate, then a reevaluation
     of any such job shall not be cause for the Company to take away the
     inequity increase granted such job.

6.   It is understood that the Company is presently engaged in a program to
     update job descriptions and evaluations for existing job classifications.
     In case a job is reevaluated at a lower rate of pay, the employee presently
     on that job shall receive no reduction in his classified wage rate.  Any
     employee whose current rate exceeds the evaluated job rate shall continue
     to be paid the current rate until such time as the employee leaves the job
     or the job is abolished.  All other employees hereafter assigned to the job
     shall receive the evaluated job rate.

7.   The members of the Union Shop Committee shall also act as the members of
     the Union Job Evaluation Committee.  Time lost by the members of the
     Committee on problems dealing with job evaluation shall be paid for by the
     Company in the same manner as provided for under Article 37, Section 7, in
     the current Agreement.

                                       25
<PAGE>
 
                                   ARTICLE 14
                                   DISCHARGES

1.   Any employee guilty of habitual absenteeism, who does not report for work
     for a period of five (5) days, may be dropped from the Company's payroll
     and said employee's services and seniority terminated.

2.   Any employee who is absent from work for a period of ten (10) days without
     a justifiable reason or excuse may, upon proper notification from the
     Company, be dropped from the Company's payroll and said employee's services
     and seniority terminated.

3.   (a)    Discharge of regular employees may be made subject to cause only,
            and all discharges   are subject to review between the Union and the
            Company under the grievance   procedure.

     (b)    In the event that after a discharge or a suspension pending a
            discharge the Company reinstates any employee so involved, it may do
            so with full or part pay, or without any pay whatsoever, for the
            period of the suspension or discharge.

     (c)    In the event that any discharge becomes the subject of arbitration
            and if reinstatement is ordered, the arbitrator may provide for
            reinstatement with full or partial pay, or with no pay whatsoever,
            for the period of the discharge.

4.   It is important that complaints regarding unjust or discriminatory layoffs
     or discharges be handled promptly.  Grievances must be signed by the Chief
     Steward or his designated alternate and filed with the Human Resources
     Department within three (3) working days of the layoff or discharge; the
     Management will review and render a decision on the case within three (3)
     working days of its receipt.  If a decision of the Management in such a
     case is not appealed within three (3) working days, the matter will be
     considered closed.

5.   It is understood that violation of Company rules is proper cause for
     appropriate disciplinary action or discharge, subject to review under the
     grievance procedure.

6.   In the event a discharge becomes the subject of arbitration it must be
     referred to arbitration within seven (7) days, it being understood that the
     purpose of this clause is to have such arbitration held with all reasonable
     dispatch.

                                       26
<PAGE>
 
                                   ARTICLE 15
                                   VACATIONS

1.   Paid vacations shall be granted as follows:

     (a)  Upon completion of one (1) year of employment, but less than two (2)
          years - one (1) week.

     (b)  Upon completion of two (2) years of employment, but less than seven
          (7) years - two (2) weeks.

     (c)  Upon completion of seven (7) years of employment, but less than nine
          (9) years - two (2) weeks, plus one (1) day.

     (d)  Upon completion of nine (9) years of employment, but less than ten
          (10) years - two (2) weeks, plus two (2) days.

     (e)  Upon completion of ten (10) years of employment, but less than sixteen
          (16) years - three (3) weeks.

     (f)  Upon completion of sixteen (16) years of employment, but less than
          seventeen (17) years - three (3) weeks, plus one (1) day.

     (g)  Upon completion of seventeen (17) years of employment, but less than
          eighteen (18) years - three (3) weeks, plus two (2) days.

     (h)  Upon completion of eighteen (18) years of employment, but less than
          nineteen (19) years - three (3) weeks, plus three (3) days.

     (i)  Upon completion of nineteen (19) years of employment, but less than
          twenty (20) years - three (3) weeks, plus four (4) days.

     (j)  Upon completion of twenty (20) years of employment, but less than
          twenty-three (23) years - four (4) weeks.

     (k)  Upon completion of twenty-three (23) years of employment, but less
          than twenty-five years (25) - four (4) weeks, plus two (2) days.

     (l)  Upon completion of twenty-five (25) years of employment, but less than
          twenty eight (28) years - five (5) weeks.

     (m)  Upon completion of twenty-eight (28) years of employment, but less
          than thirty (30) years - five (5) weeks, plus two (2) days.

     (n)  All employees upon completing thirty (30) or more years of employment
          shall be granted six (6) weeks vacation.

2.   Vacations shall be paid at the average earned rate and shall be based on
     the average number of hours worked in the first five (5) pay periods in the
     six (6) pay periods prior to the vacation, but not less than forty (40)
     hours times the classified rate of the job classification existing at the
     time the vacation is taken.

3.   When vacation time includes a paid holiday, an additional day of vacation
     shall be granted.

                                       27
<PAGE>
 
4.   All employees whose services are terminated for any cause whatsoever shall
     receive, with their final pay, their earned vacation allowance.

     (a)  An employee who is placed on layoff prior to September lst of a
          calendar year may request that five (5) vacation days be held in
          anticipation of a recall.

     (b)  Employees electing the option under 4 (a) who are recalled after
          September lst, or not recalled in that year, shall be paid for the
          five (5) days.

5.   Returning veterans shall be treated as having worked continuously for the
     purpose of computing vacations.

6.   Any employee entitled to five (5) weeks vacation may elect to take his or
     her vacation in five (5) periods.

7.   In the event that an employee is laid off and is later recalled, he may be
     required to complete two (2) months of continuous employment before taking
     any vacation to which he may be entitled.

8.   Employees may elect to take one week of vacation pay in lieu of time off at
     the discretion of the Company.

9.   An employee may elect to take his vacation in individual days and receive
     vacation pay for said day in his next regular pay period.

10.  Effective October 1, 1994 the vacation year will begin on October 1 and end
     the following September 30.

     Employees will specify normal vacation preference in writing by September 1
     of each year on forms provided by the Company no later than August 1 of
     each year.  Normal vacation preferences may be changed upon request for
     good and sufficient reasons.

     The Company will notify employees whether their vacation requests are
     granted by October 1 of each year.  It is understood that selections of
     preferred vacation made after October of each year will be on the basis of
     the next senior employee denied the days, then "first come, first served".
     The only time after October 1 that vacation schedules may be altered by the
     Company is by job changes of a senior employee.  The junior employee shall
     then be notified within thirty (30) days that his vacation schedule must be
     altered.

     It is also understood that if a major shift in work schedule occurs (for
     example, continuous shift to Dupont shift or vice versa) after the vacation
     schedule has been completed, it may be necessary to reschedule vacations.

                                       28
<PAGE>
 
                                   ARTICLE 16
                                   TRANSFERS

1.   When an employee is assigned to a job listed in Group 1 (see Schedule 1),
     whether due to bidding, layoff or transfer, said employee shall be paid the
     classified rate of the job or task to which said employee is assigned if
     said employee was previously classified, otherwise said employee will be
     paid the miscellaneous rate until such time as the said employee becomes
     competent to perform the work and is so classified.  An employee who fails
     to qualify for classification in a 120-hour working period (within his
     classification including Saturday, Sunday, sixth and seventh day overtime)
     shall be placed under Section (b).  The Company and the Union may agree to
     extend the 120-hour working period.

     (a)  When an employee is assigned to a job listed in Group II (see Schedule
          1), whether due to bidding, layoff or transfer, said employee shall be
          paid the classified rate of the job or task to which said employee is
          assigned if said employee was previously classified for that job,
          otherwise said employee will be paid the miscellaneous rate until such
          time as the said employee becomes competent to perform the work and is
          so classified.  An employee who fails to qualify for classification in
          a 200-hour working period (within his classification including
          Saturday, Sunday, sixth and seventh day overtime) shall be placed
          under Section (b).  The Company and the Union may agree to extend the
          200-hour working period.

     (b)  In the event that an employee is removed under this Section, he will
          be placed as if he were a miscellaneous employee and he will return to
          miscellaneous work in his original plant.

2.   An employee working on a task for which said employee has not been
     classified and for which a "standard" has been established shall be paid
     the "standard hours" times the rate for the job or task for such time as
     said employee exceeds the standard.

3.   A classified non-incentive employee temporarily assigned at the convenience
     of the Company shall be paid for the remainder of the shift or for the
     first full shift assignment, if the assignment is initially made at the
     beginning of the shift, at the rate of the job on which said employee
     worked immediately before the transfer or the rate of the new job,
     whichever rate is higher.  Classified incentive employees temporarily
     reclassified or transferred from one job to another shall be guaranteed at
     least the average earnings on their former job for the remainder of the
     shift or for the first full shift assigned, if the assignment is initially
     made at the beginning of the shift, provided the transfer is at the
     convenience of the Company.

     In the event the temporarily reassigned employee is replaced on his job, he
     shall be paid the higher of the permanent and temporary rates.
     Reassignments due to lack of work will not be cause for maintaining the
     rate of the job from which transferred.

4.   (a)  Decrease in Workforce - See Article 12 - Paragraph 7 (a), (b) and
          Paragraph 10.

     (b) Regular Transfers - See Article 11 - Paragraph 1.(c).

                                       29
<PAGE>
 
                                   ARTICLE 17
                               LEAVES OF ABSENCE

1.   Any member of the Union (not to exceed two (2) members) being elected to
     permanent or temporary office or selected for appointive office by
     officials of the International Union, shall be guaranteed reemployment on
     his former job of his last employment with full seniority accumulated
     during such absence.

2.   Any member of the Union being elected as a delegate to any Union activity
     necessitating a temporary leave of absence shall be granted such leave and,
     at the end of the mission, shall be guaranteed reemployment with full
     seniority accumulated during such absence.

3.   Any employee may request a leave of absence not to exceed thirty (30) days,
     provided said leave is not for the purpose of working elsewhere.  The
     Company, within its discretion, shall determine the advisability of
     granting such leaves of absence.  The Company will notify the Union
     whenever leaves of absence are granted.

                                       30
<PAGE>
 
                                   ARTICLE 18
                                   GRIEVANCES

1.   A "grievance" shall be defined as a complaint regarding wages, hours of
     employment and/or working conditions.  The grievance must be taken up
     within thirty (30) days of occurrence by the employee(s) involved.

2.   All employee grievances which arise shall be adjusted in the following
     manner:

     (a)  Between the aggrieved employee and the Department Steward or, in his
          absence, the nearest available member of the Union's Shop Committee on
          the one hand and the Department Foreman on the other.  If no
          satisfactory settlement is reached between them within eight (8)
          hours, the complaint shall be reduced to writing and shall be referred
          to:

     (b)  The Chief Steward and/or his designate, the Department Steward in
          which the grievance originated and the Department Superintendent and
          Foreman, who shall meet within seventy-two (72) hours, excluding
          Saturdays, Sundays and holidays.  In the event a satisfactory
          agreement is not reached within twenty-four (24) hours, the matter
          shall be referred to:

     (c)  The Shop Committee and representatives of the Company, who shall meet
          once a week or whenever necessary.  Any issue discussed at one week's
          meeting shall be answered within seven (7) calendar days.  If the
          decision of management in such cases in 2 (b) and 2 (c) is not
          appealed within fourteen (14) calendar days from the date that is
          picked up and signed for at the Human Resource Office by the Chief
          Steward or his designate, the matter will be considered closed.  In
          the event of further failure to settle the grievance, the matter shall
          be referred to:

     (d)  Representatives of the Union and representatives of the Company.  Any
          issue discussed at a Fourth Step Meeting shall be answered within
          seven (7) calendar days.  If a decision of the Management in such a
          case is not appealed within seven (7) calendar days, the matter will
          be considered closed.  Both parties by mutual consent may extend the
          seven (7) day period.

3.   It is agreed that all matters pertaining to policy or to the interpretation
     of any clause of this Agreement shall be dealt with among the Shop
     Committee, representatives of the Union and Management or any person
     designated by Management.

4.   The Company shall supply the Union with all legally required, pertinent
     information in connection with the adjustment of any grievance.

5.   The Company and Union may at any time, by mutual agreement, refer a
     grievance directly to arbitration in accordance with Article 19,
     Arbitration.

6.   The Company will pay any grievance pay within two (2) pay periods of final
     grievance resolution.

                                       31
<PAGE>
 
                                   ARTICLE 19
                                  ARBITRATION

1.   Any dispute, which has not been satisfactorily settled with seven (7) days
     after the fourth step of the grievance procedure, may be submitted to
     arbitration by either party.  In order to initiate this process, either
     party may request, by written notice to the Director of the Federal
     Mediation and Conciliation Service, a panel of names from the lists
     maintained by said Service.  A copy of the communication to said Director
     will be forwarded to the other party to this Agreement at the same time the
     original request is mailed.  Employees covered by this Agreement cannot,
     except through the Union, initiate or invoke the arbitration procedure set
     forth in this Article.

     (a)  The Company and the Union shall attempt to mutually agree in writing
          as to the statement of the issue to be arbitrated and the arbitrator
          shall confine his decision to the particular matter thus specified.
          In the event of a failure of the parties to agree on a statement of
          the issue to be submitted, the arbitrator shall confine his decision
          to the written grievance.

2.   Upon receipt of a request for arbitration, the Federal Mediation and
     Conciliation Service will forward a duplicate panel of arbitrators to both
     Company and Union.  No arbitrator shall be appointed by the Service who has
     not been approved by both parties.  In the event the parties fail to agree
     on an arbitrator after exhausting three (3) panels or within three (3)
     months, whichever occurs first, the Federal Mediation and Conciliation
     Service shall appoint an arbitrator.

3.   Notwithstanding any other provision of this Agreement, no arbitrator shall,
     without specific written agreement from the Company and the Union with
     respect to the arbitration proceeding before him, be authorized to add to,
     detract from or in any way alter the provisions of this Agreement.

4.   Either party may be represented by counsel at any hearing without prior
     notification to the other party or the Service.

5.   The award of the arbitrator shall be in writing and final and binding upon
     the parties to this Agreement.  The award shall be made within thirty (30)
     days from the close of hearing, unless otherwise agreed to by the parties.

6.   The Company and the Union shall bear equally the fee and expenses of the
     arbitrator.

7.   Unless there is written mutual agreement between the parties that more than
     one grievance may be heard by an arbitrator, an arbitrator will be
     restricted to ruling on only one grievance.

                                       32
<PAGE>
 
                                   ARTICLE 20
                                   MANAGEMENT

Management shall have the right to manage the affairs of the Company, subject to
the limitations and the grievance procedure set forth in this contract.

                                       33
<PAGE>
 
                                   ARTICLE 21
                               SAFETY AND HEALTH

1.   The Company shall continue its practice of providing for the safety and
     health of its employees while at work.  Protective devices and other
     equipment required by law to protect employees from injury shall be
     provided by the Company.  The Union agrees that it will encourage all
     employees to work in a safe manner.

2.   The parties agree to cooperate in achieving compliance with governmental
     safety and environmental regulations.

3.   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 Safety Engineer 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 Safety Engineer 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 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.

4.   The Union and Company agree to form a joint committee, which shall be known
     as the Safety and Health Committee as follows:

     (a)  A committee of six (6) employees - two (2) to be appointed by the
          Union, one (1) Shop Committee Member, and three (3) to be appointed by
          the Company.

5.   The Safety Committee shall meet monthly at the call of the designated
     Safety Representative.  The Committee shall discuss Safety and Health
     problems and make recommendations to Management to carry out our expressed
     mutual desire.  Time lost by the employee members of the Committee from
     their regular scheduled hours of work in attendance at Safety Committee
     meetings shall be paid in the same manner as outlined in Article 37,
     Stewards.

6.   If an employee injured on the job disputes a Panel doctor's determination
     that he is capable of returning to work, he may request a second opinion
     from a physician of his choice at Company expense.  The employee is
     expected to report for work while awaiting the second opinion.  The
     employee shall extend his best efforts to arrange an appointment within 48
     hours.  If an appointment cannot be arranged on his own time, the Company
     will pay for reasonable time away from the job for the purpose of having a
     consultation.  In the event the two (2) physicians differ in their opinion
     as to whether the employee is able to return to work, they shall jointly
     select a third physician and the majority decision shall prevail.  The
     expense of the third physician will be paid by the Company.  injured
     employee is required to visit one of the panel physicians for a thirty (30)
     day period.  After this, the employee may select the physician or
     practitioner of his choice.

7.   The Company will provide once per contract year OSHA approved safety
     glasses for employees only.  If the Company's participating Opticians are
     used, then the employee going to any of those locations will be treated as
     in the past.  If the employee wishes to choose an optician of his/her
     choice, then the Company will pay a voucher allowance of seventy-five
     ($75.00) dollars.

8.   The Company will pay a voucher allowance of ninety($90.00) dollars once
     every nine (9) months for safety shoes.  After the second nine (9) month
     period, the voucher allowance will be increased to one hundred ($100.00)
     dollars.

                                       34
<PAGE>
 
                                   ARTICLE 22
                              STRIKES AND LOCKOUTS

1.   The Union will not cause or officially sanction its members to cause or
     take part in any strikes (including sit-downs, stay-ins, slowdowns or any
     other stoppages of work) and will cooperate with the Company in every way
     possible to prevent any such stoppages of work and to terminate such
     stoppages that may occur as soon as possible.  The Company agrees not to
     lock out any of the employees.

2.   Any employee who violates the above provisions or Section shall be subject
     to discipline or discharge.

                                       35
<PAGE>
 
                                   ARTICLE 23
                                 INCENTIVE PAY

1.   Incentive rates shall be so set that the average operator can earn 130% of
     the base rate.

2.   Machine-controlled operations will be set according to the following
     procedure:

     (a)  Manual-controlled elements shall be set so that the average operator
          working at an incentive pace can earn 130% of the base rate.

     (b)  Machine-controlled elements shall be so set that the average operator
          can earn 120% of the base rate.  [See Article 27, Sections 6(a), (b),
          (c) and (d).] It is understood that an operator is not limited to
          earnings of 120%.

3.   There shall be no favoritism in the distribution of incentive work.

                                       36
<PAGE>
 
                                   ARTICLE 24
                          CHANGE IN METHOD OF PAYMENT

There shall be no change in the standard hour method of payment for any
employees covered by this contract without the agreement of the Union.  It is
further agreed that all piece rates and day work, wherever possible, shall be
converted to the standard hour system as soon as is practical.

                                       37
<PAGE>
 
                                   ARTICLE 25
                                  TIME STUDIES

1.   The Company agrees to establish courses in time study techniques in order
     to train Union personnel.  No more than two (2) employees will be trained
     at any one time.  The Union will submit the names of the designated
     employees to the Company.

2.   Time lost attending these courses by such employees shall be paid for by
     the Company at their classified rate.  While attending these courses, such
     employees will be under the supervision of the Control Department.

3.   The Union Time Study man shall be provided with or have access to the
     records (copies) of the Time Study Department.  Other than if it be
     absolutely necessary in the processing of a grievance, the Time Study
     information and records furnished to the Union Time Study Representative by
     the Company cannot be removed from the Company premises.  In the event that
     it is deemed necessary in the processing of a grievance to take such
     records off the premises, the Union Time Study Representative must sign a
     receipt for such written information and records that he requests to remove
     from the Company premises.  In no event will the records or information
     being made available to the Union Time Study Representative be passed on to
     Company competitors.

4.   The Union Time Study man will be assigned to regularly work the first shift
     during the Monday through Friday workweek on a job for which he is
     qualified.

5.   The Union Time Study man and the alternate shall not be subject to the
     layoff provision of the contract, in effect they will have super-seniority
     (only to be exceeded by that of the Shop Committee), but shall be subject
     to all other provisions of the contract.

6.   No Union Time Study man or alternate shall be promoted or transferred out
     of the bargaining unit until he is released by the Plant Shop Committee of
     the Union.

7.   The Steward or, in his absence, the operator shall be informed of any
     proposed time studies and the reason for which the studies are being taken.

8.   When a study is completed, the Time Study Observer will inform the Steward
     or, in his absence, the operator of the following:

     (a)  Name and classification of operator studied.

     (b)  Total time of study.

     (c)  Number of pieces or units produced.

     (d)  The total number of strikeouts used during the study.

     (e)  The performance rating factor for each element.

9.   The Company will furnish the Union with a copy of the operation number and
     standard for all jobs studied.  The Union shall have the right to question
     all time studies and, upon request, the Company will furnish the Union with
     a copy of the time study in issue.  As may be necessary, the Union may
     request to have longer time studies taken on time values that are in issue.

                                       38
<PAGE>
 
                                   ARTICLE 26
                             MAKING THE TIME STUDY

1.   The Time Study Observer will contact the Foreman regarding the operations
     to be studied.  The employee working on the operation will be informed by
     the Foreman that an analysis is to be made and a time study is to be taken.

2.   The Observer will discuss any improvements with the Foreman, and the
     Foreman will instruct the Operator.

3.   Divide the job into its elements and arrange them advantageously on the
     sheet.

4.   Make elements as short as possible without interfering with accurate
     observations.

5.   Describe elements exactly.

6.   Assign numbers to the elements in the order of their first occurrence, as
     1, 2, 3, 4, etc.  If an element is repeated after its first occurrence, use
     the same number that was first used.

7.   At the beginning of the first element to be included in the study, start
     the hour-decimal watch and read the time of day on the ordinary watch.

8.   Record the time of day.

9.   Record the hour-decimal watch reading:

     (a)  At the completion of Element 1, record the watch reading in Column 1
          opposite the heading "Continuous," the reading at the end of Element 2
          in Column 2 opposite heading "Continuous," etc.

     (b)  Allow the watch to run continuously.

     (c)  At the completion of the first piece, allow the watch to run and
          return to column for second piece following the same procedure for
          next pieces.

10.  When an operation is being time studied for the purpose of setting a rate a
     sufficient number of pieces shall be studied, the number to be governed by
     the nature of the job.  In all cases the total number of pieces observed
     shall be at least twenty (20) or the total time of the study shall be at
     least thirty (30) minutes, whichever in the discretion of the Time Study
     Observer is more appropriate.  In the event an operation in its entirety
     takes less than thirty (30) minutes, the entire operation shall be studied.
     When a detailed time study is completed, a rate will be issued.  In the
     event a study is not completed, the Steward will be advised of the reasons
     and the incomplete study will be destroyed in his presence.

11.  At the completion of the last element to be included in the study, record
     the time of day as indicated on any ordinary watch.

12.  Make a note of the effort and skill for each element on the front of the
     sheet by checking the term that applies.

13.  Sign and date the time study.

                                       39
<PAGE>
 
                                   ARTICLE 27
                           ESTABLISHING THE STANDARD

1.   The first step of the computations is to determine elemental elapsed times
     by subtracting successive watch readings.  These times are to be recorded
     in column marked "Individual."

2.   Before taking up the summary of the elapsed times, the study should be
     carefully examined for abnormal values.  If any are found, they should be
     indicated so that they can be readily distinguished and excluded from the
     summary.  No time shall be excluded unless it is noted on the study.  No
     watch readings shall be struck out in the taking of a time study unless a
     clear explanation of the reason for the exclusion appears on the
     observation sheet.  Strikeouts which are decided upon after the Time Study
     Observer has left the department will be shown on the Time Study Summary
     Sheet with the high strikeouts summarized and the low strikeouts summarized
     and the two totals listed separately.  Should there be a dispute as to the
     number of strikeouts, only those values which are more than one standard
     deviation above or below the mean may be eliminated.

3.   After elimination of abnormal values, the elapsed time for occurrence of
     each element is added and the average determined.  The full decimal, to
     four (4) places, should be shown in this average.

4.   The average time for each element will be leveled to an average or normal
     time by multiplying by the leveling factor determined by the following
     chart:

     <TABLE>                                                  
     <CAPTION>                                                
                                                              
     SKILL                           EFFORT
     --------------------------------------------------------- 
     <S>  <C>    <C>          <C>  <C>   <C>                  
                                                              
     +15  A1                  +13  A1                         
     +13  A2     Super        +12  A2    Excessive            
     --------------------------------------------------------- 
     +11  B1                  +10  B1                         
     + 8  B2     Excellent     +8  B2    Excellent            
     --------------------------------------------------------- 
     + 6  C1                   +5  C1                         
     + 3  C2     Good          +2  C2    Good                 
     --------------------------------------------------------- 
       0  D      Average        0  D     Average              
     --------------------------------------------------------- 
     - 5  E1                   -4  E1                         
     -10  E2     Fair          -8  E2    Fair                 
     --------------------------------------------------------- 
     -16  F1                  -12  F1                         
     -22  F2     Poor         -17  F2    Poor                 
     --------------------------------------------------------- 
     </TABLE>                                                 
                                                              
     <TABLE>                                                  
     <CAPTION>                                                
                                                              
     CONDITIONS                   CONSISTENCY
     <S>  <C>    <C>          <C>  <C>   <C>                  
                                                              
     + 6  A      Ideal         +4  A     Perfect              
     --------------------------------------------------------- 
     + 4  B      Excellent     +3  B     Excellent            
     --------------------------------------------------------- 
     + 2  C      Good          +1  C     Good                 
     --------------------------------------------------------- 
       0  D      Average        0  D     Average              
     --------------------------------------------------------- 
     - 3  E      Fair          -2  E     Fair                 
     --------------------------------------------------------- 
     - 7  F      Poor          -4  F     Poor                 
     --------------------------------------------------------- 
     </TABLE>                                                  

     General Rating for Study Skill/Effort/Conditions/Consistency
     ------------------------------------------------------------

5.   Skill and effort ratings were marked at completion of time study.
     Conditions and consistency will be marked after subtraction of elapsed
     time.

6.   The next step is to assign several standard allowances to the normalized
     time for certain factors not taken into consideration by the watch
     readings.

     (a)  Fatigue refers to the physical exertion required by the task.  A
          minimum fatigue allowance of 5% will be made on all elements of
          machine and handling time.

                                       40
<PAGE>
 
     (b)  Personal needs are required since it is necessary for the operator to
          go to the rest room, or secure drink of water, etc.  Minimum allowance
          5%.

     (c)  Contingency refers to possible elements in the operation that are
          reasonably expected to occur but timing and length of occurrence are
          unpredictable.  Lack of material or servicing, minor adjustments and
          power failures of short duration would be properly appraised as
          contingency elements.  Minimum allowance 5%.

     (d)  Machine-Controlled Allowance refers to all elements that are machine-
          controlled.  A 5% allowance will be applied only to the elements which
          are machine-controlled.

7.   The "allowed time" for each element is determined by adding the allowed
     time for personal, fatigue, contingencies, (and machine-controlled
     allowance as may be required) for each element to the normalized time.

8.   The "standard time" for the task is determined by adding the allowed time
     for each element.

                                       41
<PAGE>
 
                                   ARTICLE 28
                                RETIMING OF JOBS

The Union shall be informed of any proposed change before retiming.

1.   Permanent standards once established will not be increased or decreased
     unless there is a definite change in the following:

     (a)  Change in design.
     (b)  Change in materials.
     (c)  Change in tools or equipment.
     (d)  Change in methods.
     (e)  Change in quality standards.
     (f)  Work added to or removed from job.
     (g)  Mathematical errors in setting the timing of the rate are to be
          corrected within ninety (90) days of the effective date of the time
          study or rate.

2.   Whenever any of the above changes take place which affect time values, only
     that portion of the time value affected by the change will be adjusted.
     Sufficient additional elements (which may include all elements) to those
     affected by the change may be studied to determine the effect of the change
     on existing values.  Recorded or standard time values, where established,
     shall not be changed unless there has been a 10% change in the time value
     of the element.  Only the time value of that element will be changed.

3.   When the elements are established for retiming, they shall be as identical
     as possible to prior studies on the operation.  When a change is to be made
     in an operation and the old time value is not broken down into elements, a
     time study may be taken before the change is made in order to establish the
     elements of the existing time value, but the old time value will not be
     changed as a result of this study.  When the change in the operation is
     made, the provisions of Sections 2 and 3 of this Article will apply.

5.   When an old order repeats and there is no original study, the operations
     will be time studied and the rates will not be changed, but inflated to the
     original standard.  When any further change in the operation is made, the
     provisions of Sections 2 and 3 of this Article will apply.

6.   When an old order repeats and there is an original study, provided a change
     occurs, a study will be taken and the language of the present contract will
     apply.

                                       42
<PAGE>
 
                                   ARTICLE 29
                                  NEW PRODUCTS

Whenever the Company makes a change in a product or introduces a new product,
incentive standards for identical operations that existed prior to the change
and are still performed on the changed product or new product shall not be
changed.  Disputes which arise under this Article will be subject to the
grievance procedure, beginning in the third step.

                                       43
<PAGE>
 
                                   ARTICLE 30
                             TEMPORARY TIME VALUES

1.   Temporary or estimated time values established for an item being
     manufactured shall become permanent values at the end of three (3) months
     from the date the item repeats on a new manufacturing order, unless a
     permanent value is established at an earlier date.  If the original order
     is for a large quantity, the employer and the Union shall negotiate for a
     shorter time than three (3) months for the establishment of temporary value
     as the permanent value.

2.   When a production run is interrupted by a short run job on which no time
     values have been established, the employee shall receive no less than his
     average hourly earnings for the production run.

                                       44
<PAGE>
 
                                   ARTICLE 31
                                   JURY DUTY

An employee called for jury duty will be reimbursed the difference between the
amount he is paid for such service, not including transportation allowances, and
his straight time hourly classified rate for time lost from work up to ten (10)
working days.

An employee called as a juror for a coroner's inquest will be reimbursed on the
same basis as above.

                                       45
<PAGE>
 
                                   ARTICLE 32
                                 FUNERAL LEAVE

1.   An employee who has completed his or her probationary period with the
     Company and who is scheduled to work may be excused from work because of a
     death in his or her immediate family.  When excused he or she shall be paid
     an allowance for the hours he or she is scheduled to work on Monday through
     Friday, not to exceed eight (8) times his or her classified rate of pay,
     for each day excused, for not more than three (3) days.

2.   The funeral benefit will terminate at the end of the day of the funeral.
     If the employee does not attend the funeral of the deceased, pay allowance
     as provided herein will not be allowed.

3.   "Immediate family," for the purpose of this Section, is defined as mother,
     father, mother-in-law, father-in-law, spouse, son, daughter, brother,
     sister, grandchild and grandparent.

4.   In the event of the death of a brother-in-law or sister-in-law, an employee
     who has completed his or her probationary period may be excused from work
     on the day of the funeral (or if the funeral is held on Sunday, Monday will
     be the day excused).  The pay for this absence will not exceed eight (8)
     times his or her classified rate of pay.

5.   If the day of the funeral is on a Saturday and the employee is scheduled to
     work on that day, he/she will be paid straight time.

                                       46
<PAGE>
 
                                   ARTICLE 33
                               NO DISCRIMINATION

There shall be no discrimination in the wages, hours or other terms and
conditions of employment on account of sex, race, color, age, creed or national
origin, veterans status, disability, or handicap.  Word used in masculine gender
applies also to the feminine gender.

                                       47
<PAGE>
 
                                   ARTICLE 34
                                EMPLOYEE RATINGS

Hourly employees covered by this Agreement shall be given their ratings in
writing within one hundred twenty (120) hours after any new rating or change in
rating is made.  A copy of the employees' ratings shall be furnished to the
Union.

                                       48
<PAGE>
 
                                   ARTICLE 35
                 COMPANY POLICY REGARDING SUPERVISORY PERSONNEL

Supervisors shall not perform production or maintenance work, except in cases
where circumstances create an emergency.

                                       49
<PAGE>
 
                                   ARTICLE 36
                                  FAMILY LEAVE


The parties agree that they shall comply with the Family and Medical Leave Act
of 1993.

In administering family leave, the Company and Union shall comply with
regulations/directives promulgated by the Federal Government.

The parties agree that maternity shall continue to be treated as a disability in
accordance with Federal/State statutes.

                                       50
<PAGE>
 
                                   ARTICLE 37
                                    STEWARDS

1.   Stewards, including the Chief Steward and the Assistant Chief Steward, in
     their respective departments shall remain in said departments on their
     respective shift and crew until all other employees are laid off (including
     temporary layoffs) or transferred from that department, provided said
     employee is competent to perform the available work.

2.   Shop Committee and Stewards shall be the last to be laid off and the first
     to be recalled on a factory-wide basis, provided said employee is competent
     to perform the available work.

3.   In the event a Department Steward is laid off or transferred out of his
     department due to a lack of work, his rights as Steward shall cease.

4.   The Chief Steward shall have seniority over all employees in the bargaining
     unit, on a factory-wide basis.

5.   A Steward shall be permitted to leave his job for the purpose of assisting
     in adjusting grievances.  In such cases, the Foreman shall be notified,
     and, when necessary, the Foreman shall be given an opportunity to replace
     the Steward with another operator.

6.   Required time lost on Company property by Union representatives in settling
     differences, disputes or grievances shall be paid for by the Company.

7.   Payment for time lost by Stewards in the settlement of grievances shall be
     made as follows:

     (a)  Stewards working on non-incentive operations at the time he or she is
          handling a grievance shall be paid the rate for the job he or she was
          performing.

     (b)  Stewards working on incentive operations at the time he or she is
          called upon to assist in the settlement of a grievance shall
          immediately punch out and his or her average earned rate at the time
          of punching out shall be paid for the time spent in handling the
          grievance.

8.   Payment for time lost at grievance (including arbitration hearings held at
     the Municipal Building) and negotiation meetings with the Company shall be
     limited to six (6) members.

                                       51
<PAGE>
 
                                   ARTICLE 38
                                GROUP INSURANCE

1.   The Company agrees to provide all employees in the bargaining group and pay
     the premium for the following benefits:

     (a)  Life Insurance and Accidental Death and Dismemberment increased as
          follows:

          $26,000 effective July 1, 1996
          $28,000 effective July 1, 1997
          $30,000 effective July 1, 1998

     (b)  Weekly Accident and Sickness benefits for twenty-six (26) weeks as
          follows:

          $255, effective July 1, 1996
          $265, effective July 1, 1997
          $275, effective July 1, 1998

2.   The Company agrees to continue the Blue Cross/Blue Shield Plan of Western
     PA.  The Company agrees to pay the increased costs of the program for its
     employees and dependents.  The employee will pay the premium specified in
     paragraph 38.3.

     If there is a premium increase during the life of this contract, the
     Company reserves the right to change insurance carriers, provided the
     change does not affect the benefit levels set forth in the plans.

     (a)  Cost Containment Provisions

          (i)  Second surgical opinion required for non-emergency elective
               surgery.

          (ii) Ambulatory surgery must be done on an out-patient basis.

          (iii)  Room and board charges on either Friday or Saturday before non-
               emergency elective surgery are not covered.

          (iv) Pre-admission testing must be done on an out-patient basis.  If
               done in-patient, the room and board expense are not covered.

     (b)  Hospital Coverage - 120 day plan, full ward or semi-private; In-
          Hospital extras - unlimited; Surgical - prevailing fee; Maternity - 10
          days plus extra charges.  Eligible dependent children - from date of
          birth to age 19, students to age 23, disabled child to any age.

     (c)  Hospital outpatient surgical - subject to $25 deductible; 3 per family
          annually.  At the Company's request, this deductible can be eliminated
          from the plans.

     (d)  Outpatient Diagnostic X-ray and Diagnostic Medical Laboratory - no
          deductible, no maximum.

     (e)  Home and office visits for employee only when unable to work.  Maximum
          21 visits.  $25 deductible per year.

     (f)  Major medical - $200 deductible individual, two per family per
          calendar year; 80/20 co insurance.  Effective July 1, 1996 the major
          medical maximum is $800,000 (effective 7/1/97 - $900,000; 7/1/98 -
          $1,000,000).

                                       52
<PAGE>
 
     (g)  Major Medical - An annual out-of-pocket maximum under major medical of
          $2000 per individual (20% of $10,000 in major medical charges eligible
          for payment).  This out-of-pocket maximum does not include nor pertain
          to mental/nervous charges.

     (h)  In-Hospital medical benefits (as an overnight patient in an accredited
          hospital because of a disease or injury, such as heart attack,
          pneumonia, diabetes, or contagious disease) are provided for the
          services of a doctor of medicine or of osteopathy up to a maximum of
          120 days for each period of hospitalization - Prevailing Fee.

     (i)  Prescription Plan - Premier plan of Blue Cross/Blue Shield employee
          co-pay $4 generic/$6 name brand.  The Company will also establish a
          mail order drug plan.  Once established, this will require that any
          prescriptions exceeding thirty (30) days be purchased through mail.

3.   The monthly employee contribution for all classes of coverage will be
     $20.00.

4.   Employees laid off will be covered by the Blue/Cross Blue/Shield insurance
     for three (3) months following layoff, provided they continue to contribute
     the amount set forth in Section 3 above.

5.   (a)  The Company will offer continuation of medical insurance (but not the
          prescription drug card) for retirees age 62 to 65 with 25 years of
          continuous service.  This insurance will be effective only while the
          retiree is between the ages of 62 and 65.

     (b)  For the life of this agreement the retiree will contribute 55% of the
          full coverage cost based upon the active and retired groups combined.

     (c)  The Company's contribution for this coverage in the future shall be
          limited to the amount of the Company contribution as of June 3, 1996
          based upon the rate for retirees as a separately rated group.

                                       53
<PAGE>
 
                                   ARTICLE 39
                                    PENSIONS

1.   The Company agrees to keep the pension plan adopted June 1, 1955, in effect
     during the labor contract, together with all the improvements made to date.

2.   The present hourly pension program shall be increased as follows:

     (a)   Effective July 1, 1993 there shall be no maximum service benefit for
           calculation of retirement benefit.  An employee may retire at age 62
           with ten (10) years continuous service with non-reduced benefits.

     (b)   Effective January 1, 1989 vesting in the Carbide/Graphite Pension
           Plan for Hourly Bargaining Unit employees at St. Marys will be
           reduced from ten (10) years of continuous service to five (5) years
           of continuous service.

     (c)   Effective July 1, 1996, the normal retirement benefit will be $23.50
           per month per year of service (an increase of $1.00).

     (d)   Effective July 1, 1997, the normal retirement benefit will be $25.00
           per month per year of service (an increase of $1.50).

     (e)   Effective July 1, 1998, the normal retirement benefit will be $26.00
           per month per year of service (an increase of $1.00).

3.   The complete pension program as amended, will be made available in booklet
     form.

4.   Effective 6/3/96 the paid-up life insurance for retirees will be increased
     by $500.00 to $2000.00.

5.   Effective 6/7/93 the service requirement for Disability Retirement will be
     ten (10) years of continuous service.

                                       54
<PAGE>
 
                                   ARTICLE 40
                                     WAGES

1.   The starting rate for employees hired for "Carbon Manufacturing, Machine
     Finishing and Maintenance" jobs is set forth in Schedule 1.  After
     completing the probationary period, employees shall be paid a minimum of
     the miscellaneous rate as set forth in Schedule 1.

2.   A schedule of the classified rates is attached in Schedule 1 and becomes
     part of this Agreement.

3.   Wages shall not be subject to arbitration.

4.   Annual increases:

     (a)   Effective June 3, 1996, a general wage increase of 3-1/2% percent
           applied to all wage classifications.

     (b)   Effective June 8, 1997, a general wage increase of 3% percent applied
           to all wage classifications.

     (c)   Effective June 7, 1998, a general wage increase of 3-1/2% percent
           applied to all wage classifications.

           Effective June 3, 1996, jobs listed in Group III are granted an
           additional adjustment of twenty-five cents ($.25) per hour.

           Effective June 8, 1997, jobs listed in Group III are granted an
           additional adjustment of twenty-five cents ($.25) per hour.

           Effective June 7, 1998, jobs listed in Group III are granted an
           additional adjustment of twenty-five cents ($.25) per hour.

                                       55
<PAGE>
 
                                   ARTICLE 41
                               SCOPE OF AGREEMENT

1.   This Agreement expresses the understanding of the parties in respect to
     matters deemed by them to be applicable to the bargaining unit, and it
     shall not be changed or modified except by mutual consent in writing.

2.   This Agreement and any supplements which may be added to this Agreement
     shall supersede all previous agreements.

                                       56
<PAGE>
 
                                   ARTICLE 42
                                CONFLICT OF LAWS

It is mutually agreed that if the adoption or amendments of any State or Federal
law conflict with or are contrary to any provision of this Agreement,
negotiations will be opened to make necessary adjustments, but the negotiations
will be confined to changes necessary to comply with the new or amended law.

                                       57
<PAGE>
 
                                   ARTICLE 43
                             EXPIRATION AND RENEWAL

This Agreement shall remain in effect from June 3, 1996, to 12:01 A.M. June 7,
1999, and shall thereafter automatically renew for one (1) year from year to
year, unless either party gives written notice to the other at least sixty (60)
days prior to any expiration time of intention to modify or terminate the
Agreement.  In the event such a notice is received, then, upon request, a
conference shall be arranged between the parties for within ten (10) days after
receipt of such notice.

The parties having met for the purpose of negotiating a Collective Bargaining
Agreement, declare that the foregoing represents the sole and complete Agreement
between the Company and the Union for the period of June 7, 1996 to and
including midnight, June 7, 1999, and further that each had the opportunity to
bargain on all issued and matters during negotiations and that all other
requests and proposals made by both of the parties are waived and withdrawn
herewith, and each party relieves the other of any obligation it might have to
bargain with the other during the term of this Agreement on matters not
specifically included in this Agreement.

THE CARBIDE/GRAPHITE GROUP    INTERNATIONAL UNION OF ELECTRICAL,
ST. MARYS PLANT               TECHNICAL, SALARIED, MACHINE, AND
                              FURNITURE WORKERS, AFL-CIO,
                              LOCAL UNION 502

W. E. Damian                  E. J. Greenawalt
J. A. Ditson                  D. T. Herzing
T. F. Gregorchik              B. J. Sherry
P. E. Younghans               D. A. Kopp
                              S. P. Herzing
                              R. A. Larkin
                              W. F. Gausman
                              D. Gustafson

Each party had the opportunity to bargain on all issues and alter the language.
All other requests and proposals made by both parties are hereby waived and
withdrawn.

-------------------      -------------------- 
W. E. Damian             E. J. Greenawalt
-------------------      -------------------- 
J. A. Ditson             D. T. Herzing
-------------------      -------------------- 
T. F. Gregorchik         B. J. Sherry
-------------------      -------------------- 
P. E. Younghans          D. A. Kopp
                         -------------------- 
                         S. P. Herzing
                         -------------------- 
                         R. A. Larkin
                         -------------------- 
                         W. F. Gausman
                         -------------------- 
                         D. Gustafson

                                       58
<PAGE>
 
                                   ARTICLE 44
                                   SCHEDULE 1
                                 RATE SCHEDULE

It is understood and agreed that the Starting and Miscellaneous Rates in CARBON
MANUFACTURING, MACHINE FINISHING AND MAINTENANCE JOBS are:

<TABLE>
<CAPTION>
 
                                  START   MISC.
                                  ------  ------
<S>                               <C>     <C>
 
         (a)  Effective 6/3/96    $10.85  $12.05
         (b)  Effective 6/8/97    $11.18  $12.41
         (c)  Effective 6/7/98    $11.57  $12.84

</TABLE>

The Classified Rates for the jobs are:

                                       59
<PAGE>
 
<TABLE>
<CAPTION>
 
GROUP I
 
                                         6/3/96  6/8/97  6/7/98
Job                                      Class.  Class.  Class.
No.  Title                               Rate    Rate    Rate
<C>  <S>                                 <C>     <C>     <C>
 
020  Sweeper                              12.05   12.41   12.84
034  Shipping Equipment Operator          12.38   12.75   13.20
149  Granular Materials Operator          12.39   12.76   13.21
201  14" Press Mixer                      12.35   12.72   13.17
205  14" Press Operator                   12.52   12.90   13.35
211  14" Press Tubman                     12.32   12.69   13.13
227  Clean Plates                         12.05   12.41   12.84
233  Tube Driller Operator                12.13   12.49   12.93
275  Miscellaneous Labor                  12.05   12.41   12.84
303  Universal Mill Operator              12.45   12.82   13.27
304  Outside Mill Operator                12.45   12.82   13.27
306  Inspector/Relief Operator            12.55   12.93   13.38
310  48 Press Operator                    12.51   12.89   13.34
311  48 Mixer Loader/Unloader             12.39   12.76   13.21
312  48 Scrap Crusher                     12.49   12.86   13.31
313  48 Mix Weigher                       12.39   12.76   13.21
319  Equipment Operator                   12.22   12.59   13.03
323  Double Deck Operator                 12.38   12.75   13.20
327  Opening Kilns                        12.05   12.41   12.84
333  Cleaning Rods by Hand                12.05   12.41   12.84
336  Carbottom Utility Operator           12.36   12.73   13.18
338  Cleaning Plates by Hand              12.05   12.41   12.84
354  25 Press Operator                    12.51   12.89   13.34
355  25 Mix Weigher                       12.35   12.72   13.17
356  25 Scrap Crusher                     12.40   12.77   13.22
357  25 Tubman                            12.23   12.60   13.04
416  Stock Clerk                          12.22   12.59   13.03
602  Crushing Graphite                    12.05   12.41   12.84
605  Crushing Lampblack                   12.05   12.41   12.84
610  Sludge Operator                      12.10   12.46   12.90
640  Product Processor                    12.52   12.90   13.35
642  Picking Up Graphite                  12.05   12.41   12.84
643  Prod. Proc. Wheelabrator             12.22   12.59   13.03
650  Picking Up Bake Scrap                12.05   12.41   12.84
663  Banding Rods                         12.05   12.41   12.84
664  Sand House Operator                  12.16   12.52   12.96
700  Pitch Impregnator Operator           12.65   13.03   13.49
701  Pitch Impregnator Helper             12.51   12.89   13.34
712  Sand Drag                            12.73   13.11   13.57
715  Hyster Operator                      12.22   12.59   13.03
720  Keener Cleaner Operator              12.15   12.51   12.95
721  Process Materials Operator           12.73   13.11   13.57
722  Custom Furnace Loader & Unloader     12.42   12.79   13.24
723  Kostkutter Loader/Unloader           12.30   12.67   13.11
724  Copper Cleaning                      13.08   13.47   13.94
725  Clean Graphitized PI Material        12.05   12.41   12.84
726  Wheelabrator Operator                12.28   12.65   13.09
727  Wheelabrator Helper                  12.22   12.59   13.03
746  Rail Car Unloader                    12.29   12.66   13.10
747  KVS Crusher Operator                 12.19   12.56   13.00

</TABLE>

                                       60
<PAGE>
 
<TABLE>
<C>        <S>                               <C>     <C>     <C>
      749  Mass Furnace Loader-Setter         12.38   12.75   13.20
      750  Mass Furnace Loader                12.29   12.66   13.10
      751  Mass Furnace Unloader              12.22   12.59   13.03
      760  Sagger Utility Operator            12.31   12.68   13.12
      794  Shotblast Cleaning                 12.31   12.68   13.12
      831  Utility Operator                   12.51   12.89   13.34
      833  Saw Operator                       12.21   12.58   13.02
      835  Screen Operator                    12.21   12.58   13.02
      837  Janitor/Equip. Operator            12.22   12.59   13.03
      913  Mill Payloader Operator            12.17   12.54   12.98
      915  Payloader Operator                 12.17   12.54   12.98
 
 
GROUP II

<CAPTION>
 
                                              6/3/96  6/8/97  6/7/98
      Job                                     Class.  Class.  Class.
      No.  Title                              Rate    Rate    Rate
<C>        <S>                               <C>     <C>     <C>
 
      066  Bricklayer Helper                  12.60   12.98   13.43
      067  Maintenance Parts Attendant        13.66   14.07   14.56
      071  Oiler                              13.38   13.78   14.26
      076  Building Maintenance               13.52   13.93   14.42
      360  Universal Kiln Attendant           13.07   13.46   13.93
      615  Maintenance Equipment Operator     13.18   13.58   14.06
      620  Vacuum Operator                    13.18   13.58   14.06
      706  Graphite Crane Operator            12.51   12.89   13.34
      719  Power Monitor                      13.30   13.70   14.18
 

GROUP III

<CAPTION> 
 
                                             6/3/96  6/8/97  6/7/98
      Job                                    Class.  Class.  Class.
      No.  Title                              Rate    Rate    Rate
<C>        <S>                               <C>     <C>     <C>
 
      069  Maintenance Mechanic A             15.20   15.91   16.73
      070  Maintenance Electrician A          15.22   15.93   16.75
      072  Mobile Mechanic A                  15.91   16.64   17.48
</TABLE>

Employees moved out of progression where an established progression system
exists will be treated as Group II employees.

                                       61
<PAGE>
 
                                   ARTICLE 45
                                   SCHEDULE 2
                                 WAGE SCHEDULE


                           ELECTRICAL APPRENTICE AND
                              MACHINIST APPRENTICE

<TABLE>
<CAPTION>

         6       1     1.5    2      2.5    3      3.5    4
Start    Months  Year  Years  Years  Years  Years  Years  Years
-------  ------  ----  -----  -----  -----  -----  -----  -----
<S>      <C>     <C>   <C>    <C>    <C>    <C>    <C>    <C>
82.5     83.75   85    87.5   90     92.5   95     97.5   100

</TABLE>


                           MAINTENANCE MECHANIC, AND
                           MOBILE MECHANIC APPRENTICE

<TABLE>
<CAPTION>
         6       1      1.5    2      2.5    3
Start    Months  Year   Years  Years  Years  Years
-------  ------  -----  -----  -----  -----  -----
<S>      <C>     <C>    <C>    <C>    <C>    <C>
82.5      84.35  86.20  89.90  93.60  97.30    100

</TABLE>

                                       62
<PAGE>
 
                                   ARTICLE 46
                                   SCHEDULE 3


                       SUPPLEMENTS TO THE LABOR AGREEMENT
                                    BETWEEN

                        THE CARBIDE/GRAPHITE GROUP, INC.

                                      AND

                       INTERNATIONAL UNION OF ELECTRICAL,
               TECHNICAL, SALARIED, MACHINE AND FURNITURE WORKERS
                            AFL-CIO LOCAL UNION 502



                                    CONTENTS

SUPP NO.  SUBJECT

1         Classification Reinstatement
2         Graphitizing PMO
3         Maintenance Banding
4         Overtime Canvassing - Maintenance Outside, & Mechanical
5         Substitution of Rates - Plant 3
6         Miscellaneous Labor - Processing
7         25 Inch and 48 Inch Extrusion Press Incentive
8         Incentive System - Pitch Treater
9         Dupont Shift Agreement Sample
10        Cleaning Area Product Processor Incentive
11        Custom Crew Incentive Provisions - Acheson Graph
12        Universal Mill Operator Incentive
13        Longitudinal Graphitizing Crew Incentive Plan
14        Mechanical & Electrical Maintenance Overtime Agreement
15        48" Press Incentive Agreement

                                       63
<PAGE>
 
                          CLASSIFICATION REINSTATEMENT
                                SUPPLEMENT NO. 1

Any classifications or plants that are deleted from this contract, shall be
reinstated as in previous contract, if the job is reinstated during the life of
this agreement, and any wage increases will be applied to the classification.
The effective date of this supplement is June 3, 1996 through June 7, 1999.

                                       64
<PAGE>
 
                                GRAPHITIZING PMO
                                SUPPLEMENT NO. 2


1.   This Supplement entered into in August of 1970, by the Company and the
     Union is hereby extended for the duration of the present labor Agreement
     existing between the parties.  The effective dates of the Supplement are
     June 3, 1996 through June 7, 1999.

2.   To the extent necessary the provisions of the parties' present labor
     Agreement are amended or expanded to provide the following.

3.   Both parties recognize that it is impractical to install a standard hour
     element system for the Process Material Operators in the Graphitizing
     Department.  Consequently, it is agreed to place in effect an incentive
     system based on the following:

     (a)   The Average Monthly Incentive Earnings of all Acheson Graph Loading
           and Unloading Crews.
 
     (b)   PMO Earnings = classified rate x % from table below:

           One shift operation
           10 furnaces    = 100% of crew rate
           9 furnaces    =  90% of crew rate
           8 furnaces or less  =  80% of crew rate

     The above table applies when the Graph is operating five days a week, one
     shift and one PMO.

           Two Shift operation
           20 furnaces     = 100% of crew rate
           19 furnaces    =  95% of crew rate
           18 furnaces    =  90% of crew rate
           17 furnaces    =  85% of crew rate
           16 furnaces    =  80% of crew rate
           15 furnaces or less  =  75% of crew rate

     The above table applies when the Graph is operating five days a week, two
     shifts and two PMO's.

           Three Shift operation
           30 furnaces    = 100.0% of crew rate
           29 furnaces    =  96.7% of crew rate
           28 furnaces    =  93.3% of crew rate
           27 furnaces    =  90.0% of crew rate
           26 furnaces    =  86.7% of crew rate
           25 furnaces    =  83.4% of crew rate
           24 furnaces or less  =  80.0% of crew rate

     The above table applies when the Graph is operating five days a week, three
     shifts and three PMO's.

     NOTE:  If the maximum number of furnaces is exceeded during a month, the
     number exceeded by will be added to the following month.

     (c)   When additional help on the shift is required, the helper shall not
           receive any incentive.

                                       65
<PAGE>
 
     (d)   When an operator transfers out of the PMO classification he shall
           continue to be paid at the incentive he earned as a PMO operator for
           one month from the time he leaves the classification.  The new
           operator will begin to receive incentive earnings when the previous
           operator's earnings terminate.

     (e)   Attached is a general list of operator duties.  It should be noted
           that these can be reduced or increased at any time Management so
           desires.  Cleaning of pits and unloading of trucks and railroad cars
           shall not be part of the operator's incentive duties.  These may be
           performed by any miscellaneous man without affecting his earnings.
           However, the miscellaneous man shall not be paid incentive for
           performing these jobs.

           Samples which must be taken:

          (i)    One composite on each round of 75/25 mix.
          (ii)   One weekly composite of sideblock cycle mix.
          (iii)  One sample of each round of regular pack when equipment is in
                 place, PMO will reject or accept on his own screen analysis.
          (iv)   One weekly sample of buckwheat, regular fines and custom
                 fines.
 
     (f)   Changes in method of payment, system, or the complete elimination of
           this system shall be a management decision.  However, the Union shall
           be notified in advance.

           Specification for 75/25 insulation mix is to have a silicon to carbon
           ratio of 1.5 to 2.0.  The formula is silicon/(carbon + 1/3*sawdust).

           If the results fall below 1.1 or above 2.2, three months in a row,
           there will a 7% penalty on the PMO earnings.  If equipment failure is
           the cause of a problem, the PMO should make sure both parties meet in
           the first month that the problem occurs.
<TABLE>
<CAPTION>
 
Example       Crews  Fce. Loaded   75/25 Result        Earnings
------------  -----  -----------  --------------  ------------------
<S>           <C>    <C>          <C>             <C>
 
Jan.            3           27     1.445          90% of crew rate      
Feb.            3           26     0.998          86.7% of crew rate    
March           3           22     0.886          80% of crew rate      
April           3           28     0.999  (-7%)   93.3% of crew rate    
May             3           28     1.775          93.3% of crew rate     

</TABLE>

     NOTE: If Management determines it will run without sand, cycle mix or
           sawdust, those results will not be included for determining if there
           is a penalty.

4.   The following will apply effective June 3, 1996 and shall be in force
     whenever the department is on continuous shift:

     a.   The Graphitizing PMO will be paid the same incentive percent as his
          crew as long as they remain on continuous shifts.

          NOTE:

          i)   The PMO will receive the one month in arrears incentive due.

          ii)  Any number of furnaces banked will be recorded.

     b.   It is understood that the PMO may assist Utility Operators (in such
          instance these hours will go into the numerator and denominator at the
          incentive formula).

                                       66
<PAGE>
 
     c. When additional help on a shift is required, the helper shall not
        receive any incentive.

          i)   When running a four shift (continuous) operation and the PMO is:
 
               1. hauling crushed bake scrap from the KVS
                              or
               2. loading RP coke into hoppers at Plant 3,

               If additional help is required and authorized by the Graph
               Supervisor, the additional help will receive incentive for those
               hours in 1 & 2 above.

     d. If the department come off continuous shift the present Supplement 2
        shall apply.

          NOTE:  In this instance the furnaces previously banked shall be
          reinstated.

5.   This Supplement supersedes all other Supplements, written agreements or
     oral understandings between the parties with reference to the subject
     matter herein.

                                       67
<PAGE>
 
                              MAINTENANCE BANDING
                                SUPPLEMENT NO. 3

The repair of all banders from this date will be offered to the senior employee
in the Maintenance Department.  Seniority will prevail.  The employee is also to
repair nailguns, airdrills, port-a-powers, jack hammers, etc.  The employee will
normally work day shift.  The employee is to fall in line for overtime during
the week, Saturday and Sunday.  The employee may also be called upon to perform
other duties deemed necessary by the Company.

This amendment is entered into on the 7th day of June, 1993 by the Company and
the Union and is hereby extended for the duration of the present Labor Agreement
existing between the parties.  The effective dates of the Supplement are June 3,
1996 to June 7, 1999.

                                       68
<PAGE>
 
                   OVERTIME CANVASSING - MAINTENANCE OUTSIDE,
                                   MECHANICAL
                                SUPPLEMENT NO. 4


The procedure for overtime canvassing in Maintenance as described above shall be
conducted as follows:

1.    If work required is estimated to be one (1) hour or less duration, then
      any qualified personnel may be assigned to perform the work without
      resorting to call-in pay.

2.    If the work estimate exceeds one (1) hour, then normal overtime canvassing
      will be performed.

3.    If the work required exceeds one (1) hour, then the low employee(s) on the
      overtime list will be compensated at time and one-half (1-1/2) (if work
      would have been covered by scheduled overtime) or two (2) times (if a
      call-in would have been required) for the actual hours worked.

This amendment is entered into on the 7th day of June, 1993 by the Company and
the Union and is hereby extended for the duration of the present Labor Agreement
existing between the parties.  The effective dates of the Supplement are June 3,
1996 to June 7, 1999.

                                       69
<PAGE>
 
                        SUBSTITUTION OF RATES - PLANT 3
                                SUPPLEMENT NO. 5


1.   This Supplement entered into this 20th day of October, 1972, is for the
     purpose of setting forth and continuing the past practice of substitution
     of rates in Plant 3.  The effective dates of this Supplement are June 3,
     1996 through June 7, 1999.

2.   To the extent necessary the provisions of Article 30 of the parties' labor
     Agreement are amended or expanded to provide the following:

3    The past practice of substituting rates on incentive jobs in Departments 17
     (Cleaning), 19 (Extrusion), 20 (Baking) and 49 (Banding) of Plant 3 will be
     continued in the following manner.

4.   For jobs not currently on incentive in these Departments, the Company will
     immediately start a review to determine whether they can be placed on
     incentive.

5.   While the Company will make every effort possible to take time studies
     establishing permanent rates and eliminating substitution, the parties to
     this Supplement recognize that substitution may have to be resorted to in
     the Departments listed in Section 3 above where A grades (for extrusion
     only), short runs, mixed or partial decks or cleaning or banding
     insufficient material to time study are involved.

6.   Employees desiring a substituted rate must request such from Time Study
     through their foreman.  Final determination of the rate to be substituted
     will be the responsibility of the Time Study Department.

7.   A substituted rate will be on a one-time only basis, i.e., remain in effect
     only for the duration of the particular job for which it was requested.  If
     an identical job repeats, a substitute rate must be requested again.

8.   The Article 30 (Temporary Time Values) has not been considered applicable
     to this practice and will not be so considered.

9.   The parties agree and understand that substitution of rates is not to be
     considered a factory-wide general practice.  The scope of this Supplement
     is limited to Departments and jobs set forth in Sections 3 and 5 above.

                                       70
<PAGE>
 
                        MISCELLANEOUS LABOR - PROCESSING
                                SUPPLEMENT NO. 6


1.   This Supplement entered into on the 1st day of February, 1978, by the
     Company and the Union is hereby extended for the duration of the present
     labor Agreement existing between the parties.  The effective dates of the
     Supplement are June 3, 1996 through June 7, 1999

2.   To the extent necessary the provisions of the parties' present labor
     Agreement are amended or expanded to provide the following.

3.   It is agreed by both parties that all premium jobs will be offered to
     miscellaneous laborers in accordance with their seniority.

4.   The foreman shall give the employee, in line of seniority, the jobs
     available at the start of the shift and the number of days on each job when
     possible.

5.   An employee may refuse a premium job, but, when he refuses, he shall be
     deprived of all incentive jobs for that day.

6.   If the job is refused down the line of seniority, the junior qualified
     employee must accept the job assignment.

7.   When the list of miscellaneous employees has been exhausted and additional
     premium jobs occur, canvassing will revert to the senior miscellaneous
     employee not assigned to a premium job at that time consistent with #5 and
     #6 above.

8.   An employee filing in long term will immediately be credited with average
     overtime hours.  An employee filling in day-to-day will be credited with
     average overtime hours after fourteen (14) calendar days.

9.   This Supplement supersedes all other Supplements, written agreements or
     oral understandings between the parties with reference to the subject
     matter herein.

                                       71
<PAGE>
 
                 25 INCH AND 48 INCH EXTRUSION PRESS INCENTIVE
                                SUPPLEMENT NO. 7


1.   This Supplemental Agreement is entered into on this 22nd day of April,
     1981, between Airco Carbon, A Division of Airco, Inc., with respect to that
     portion of its manufacturing facilities located in St. Marys, Pennsylvania,
     and the International Union of Electrical, Radio, Machine and Furniture
     Workers, AFL-CIO and its Local Union 502.  The effective dates of this
     supplement are June 3, 1996 through June 7, 1999.

     (a)  The capacity (or Choke point) of the system will be determined for
          each size, and/or Grade if applicable, that is extruded on the 25 Inch
          Press or the 48 Inch Press.

     (b)  The rate will be established so that when production reaches a rate
          which is 95% of the capacity of the press system the crew members can
          earn 150% of their base rate.  This Agreement, does not apply to the
          Inside Mill Operator and Mill Payloader Operator.

     (c)  In case of equipment failure or breakdown the above mentioned level of
          earnings will not apply.

     (d)  "Down Time" such as clean up, lunch time, die changes, equipment
          failure, etc., will be paid at the appropriate  classified rate,
          unless covered in other agreements.  Shower time will be paid
          according to the present agreements (regular policy for the 25 Inch
          Press and "Hands On-Hands Off" policy on the 48 Inch Press).

     (e)  Should there be any changes affecting these presses, such as new or
          changed equipment, changes in formulation, or changes in mix size
          which affect the capacity (or Choke point), the new capacity will be
          determined and a new rate established using the 95% of capacity equals
          150% earnings relationships.

     (f)  Should the extrusion press revert back to "Bulk Pitch" this agreement
          will be void and the existing methods of determining earnings will
          apply.

     (g)  Present methods of paying for scrap pieces, or mixes, will apply.

     (h)  Rate changes for these two (2) presses will be made according to the
          provisions of Article 28 of the present Labor Agreement.

     (i)  If a change is made in the operation of a press, such as going on
          continuous shift or going off continuous shift then the shower time
          allowance will be changed if warranted.  The shower time will be paid
          according to the applicable policy (Regular or "Hands On-Hands Off").

2.   This Supplement supersedes all other Supplements, written agreements or
     oral understandings between the parties with reference to the subject
     matter.

                                       72
<PAGE>
 
                        INCENTIVE SYSTEM - PITCH TREATER
                                SUPPLEMENT NO. 8


1.   This Supplement entered into on the 9th day of February, 1973, by the
     Company and the Union is hereby extended for the duration of the present
     labor Agreement existing between the parties.  The effective dates of the
     Supplement are June 3, 1996 through June 7, 1999.

2.   To the extent necessary the provisions of the parties' present labor
     Agreement are amended or expanded to provide the following:

3.   Both parties recognize that it is impractical to install a standard hour
     element system at the Pitch Treater.  Consequently, it is agreed to place
     in effect an incentive system based on the following:

     (a)    Baskets unloaded per day.
     (b)    Pounds unloaded per day.
     (c)    Crew size.

           Example
           -------
           Four man crew/2 sides - 12 baskets/day unloaded
           Three man crew/2 sides - 8.16 baskets/day unloaded
           Five man crew/3 sides - 16.70 baskets/day unloaded

4.   The average weight/basket will be recalculated at the beginning of each
     month using the previous month production figures.  Any change in cycle
     time, or any other change in loading-unloading procedures, or basket size
     would warrant a recalculation of the rate.

5.   For other information concerning methods of payment, "Down-Time," "Blue-
     Dot" material, etc., refer to agreements dated 2/9/73 and 8/12/80 and all
     pertinent information associated with these agreements.

6.   Unique to the Pitch Treater incentive system, the base incentive rate will
     be equivalent to the classified rate.

7.   The Supplement became effective on March 5, 1973, and will remain in effect
     until the expiration of the present Contract.  Thereafter, upon the
     expiration of the Labor Agreement, either party may reopen the Supplement
     for the purposes of amendment or termination.  In the event that the
     Supplement is not reopened, it will automatically renew itself and remain
     in effect through the expiration date of the then existing Labor Agreement.

8.   This Supplement supersedes all other Supplements, written agreements or
     oral understandings between the parties with reference to the subject
     matter herein.

                                       73
<PAGE>
 
                                  DUPONT SHIFT
                                SUPPLEMENT NO. 9

This Supplemental Agreement, dated             , is between The Carbide/Graphite
                                  -------------
Group, Inc. (hereinafter referred to as the "Company") and the International
Union of Electrical, Technical, Salaried, Machine and Furniture Workers, AFL-CIO
Local Union 502 (hereinafter referred to as the "Union").

Objective.  This Supplemental Agreement is entered into in order to temporarily
modify certain terms and conditions of the Agreement between the parties
dated             , to permit adoption of the so-called 12-Hour Schedule for a
     -------------
temporary period and involving only certain employees of the
                        .
------------------------
 
Duration.  This Supplemental Agreement shall be in effect from           to and
                                                              -----------
including            , except that either party may give written notice to the
          -----------
other to terminate the Supplement Agreement.  To become effective such
termination notice must be received two weeks preceding the Monday when it is
desired to terminate the Supplemental Agreement and revert fully to the terms of
the basic Agreement.

The basic Agreement is modified for the purposes of this experiment as follows:

     ARTICLE 4 - Hours
     -----------------

     Section 4.  "12-hour shift schedule" as used in this Agreement shall be
     jobs that normally require work of three 12-hour or four 12-hour days a
     week.

     ARTICLE 7 - Rest Periods
     ------------------------

     Participating employees will be granted rest periods totaling 30 minutes
     for each 12-hour shift, wherever practical during such periods.

     ARTICLE 8 - Overtime and Night Bonus
     ------------------------------------

     Section 5.  Participating employees upon completing a full 12-hour shift
     and obliged to work   overtime for a period of four (4) hours may take a
     30-minute lunch period for which he will be paid.

     ARTICLE 9 - Holidays
     --------------------

     Section 10.  Participating employees will not have the option of taking
     another day off without pay.

     ARTICLE 15 - Vacations
     ----------------------

     It is agreed for the purpose of this Agreement that a day's vacation (12
     hours) will be counted as a day and one-half towards his/her allotted time.

     ARTICLE 32 -Funeral Leave
     -------------------------

     Section 1.  Participating employees when excused shall be paid an allowance
     not to exceed 24 hours at the classified rate of pay he/she is scheduled
     to work.

     ARTICLE 40 - Wages
     ------------------

     "12-Hour Shift Wage Schedule".  A reduction factor will be applied to the
     base rate of a classification.

                                       74
<PAGE>
 
Scope of the Supplemental Agreement.  It is understood and agreed that no
-----------------------------------                                      
obligation exists on either party to continue either temporarily or permanently
the 12-hour shift schedule beyond the period set forth in this Supplemental
Agreement, or to utilize a similar schedule with other groups of bargaining unit
employees.

The above represents the general overview of a Dupont schedule agreement which
replaces a normal 8-hour continuous shift schedule.  Specific agreements within
a plant, department, or classification will be posted in that area under glass.

                                       75
<PAGE>
 
                   CLEANING AREA PRODUCT PROCESSOR INCENTIVE
                               SUPPLEMENT NO. 10

A.   This supplement entered into on the 3rd day of June, 1991 by the Company
     and the Union is hereby extended for the duration of the present labor
     agreement existing between the parties.

     Effective 6/3/91 the Product Processor (Job #640 in the Wheelabrator
     Department, #17 only) will be paid on an incentive system when required to
     identify material by virtue of physical identification, utilizing an
     electric grinder with a Carborundum wheel, drill or other techniques.

     The physical identification operation is to be performed as the material
     exits the cleaning machine and the Product Processor's incentive earnings
     will be calculated by multiplying the base rate of Job #640 by the earned
     percentage of the Wheelabrator operator (Job #726) for the cleaning
     operation.

     This policy is valid only when the physical identification is being
     performed as previously stated and it is to be understood that any changes
     to methods, tools or physical identification requirements will void this
     agreement, subject to review by the Company for an amended policy.

B.   Effective 3/13/95 the Product Processor (Job #640 in the Wheelabrator
     Department, #17 only) will be paid on an incentive system whenever the
     Central Cleaning Crew (Wheelabrator Operator, Job #726 and Wheelabrator
     Helper, Job #727) is on incentive.

     The Product Processor's incentive earnings will be calculated by
     multiplying the base rate of Job #640 by one half (fiftypercent) of the
     earned percentage of the Wheelabrator operator (Job #726) for the cleaning
     operation.

     It is agreed by the Union that this supplement will not be considered as a
     basis for incentive pay for Product Processors in other plants.

     This supplement entered into on the 13th day of March, 1995 by the Company
     and the Union is hereby extended for the duration of the present labor
     agreement existing between the parties.  The effective dates of this
     Supplement are June 3, 1996 to June 7, 1999.

                                       76
<PAGE>
 
                CUSTOM CREW INCENTIVE PROVISIONS - ACHESON GRAPH
                               SUPPLEMENT NO. 11


1.   (a)  The Company will provide an incentive program for Job #722, Custom
     Furnace Loaders and Unloaders, based on the following:

               60 earned hours to load a LLB furnace
               60 earned hours to unload a LLB furnace
               40 earned hours to load a coke furnace
               40 earned hours to unload a coke furnace
               60 earned hours to load a Wagstaff furnace
               40 earned hours to unload a Wagstaff furnace

     (b) Effective 5/26/92, Substrate Furances are added to Job #722.

               60 earned hours to load a Substrate furnace
               40 earned hours to unload a Substrate furnace

2.   On a daily basis the percent of completed furnace will be determined by
     foreman and crew to the nearest 5%.  Completed furnace is 100%.

Examples

<TABLE>
<CAPTION>

                         Total                          %
  People     Hrs.         Hrs.       Job              Done        Earnings
  -------    ---        -----        ---              ----        --------
<S>          <C>        <C>          <C>              <C>         <C>
  A    2     7.42       14.84        Load LLB          30%        .30 x 60  = 1.21
                                                                  --------
                                                                    14.84
 
  B    2      7.42      18.65        Unload Wagstaff   40%        .40 x 40  =  .86
                                                                  --------
              3.83                                                  18.65
                                                                    No Incentive
 
  C    2      9.42      18.84        Load Coke         70%        .70 x 40  = 1.49
                                                                  --------
                                                                   18.84
</TABLE>

3.   From the date of this agreement until November 6, 1991 this program may be
     revoked by the Company.

4.   Article 30, "Temporary Time Values" does not apply to this agreement.  The
     Company reserves the right to time study the operation at any time in the
     future.  The Company will continue to pay by this scale until it completes
     time studies for each section.

5.   The Craneman (Job No. 706) will be paid the rate of the custom crew for the
     hours he spends in the crane loading, unloading or setting the custom crew
     up.

6.   Removing pallets from furnace is not part of the custom crews job.

7.   This Supplement was entered into agreement on July 24, 1991.  The effective
     dates of this supplement are June 3, 1996 through June 7, 1999.

                                       77
<PAGE>
 
                       UNIVERSAL MILL OPERATOR INCENTIVE
                               SUPPLEMENT NO. 12


1.   This Supplement entered into on the 1st day of April, 1987, by the Company
     and the Union is hereby extended for the duration of the present labor
     Agreement existing between the parties.  The effective dates of this
     supplement are June 3, 1996 through June 7, 1999.

2.   To the extent necessary the provisions of the parties' present labor
     Agreement are amended or expanded to provide the following.

3.   The Company and Union mutually agree that the continuous shift universal
     mill operator who supplies materials to the presses will be paid incentive
     as follows:.

     (a)   If two or more presses are operating, the payment will be the average
           incentive produced by those presses; total hours earned on all
           presses divided by number of presses in operation.

     (b)   If the 48" press only is operating, the payment will be the incentive
           rate produced on that press.

     (c)   If the 25" press only is operating, the payment will be the incentive
           rate produced on that press.

     (d)   If the 14" press only is operating, the payment will be as follows:

           14" Press Incentive  Mill Incentive

           Less than 100%       No Incentive
           100% - 109%          103%
           110% - 119%          106%
           120% - l29%          109%
           130% - l39%          112%
           140% - 149%          115%
           150% - 159%          118%
           160% or greater      121%

     (e)   When the 14" press is not running but the outside mill is running,
           (Example: milling graphite for Plant I) no incentive will be paid.

4.   This Supplement supersedes all other Supplements, written agreements or
     oral understandings between the parties with reference to the subject
     matter herein.

                                       78
<PAGE>
 
                           LONGITUDINAL GRAPHITIZING
                              CREW INCENTIVE PLAN
                          SUPPLEMENT NO. 13 EXTENSION

It is agreed and understood by the parties that the conditions set forth in the
Supplemental Agreement for the Longitudinal Graph, dated November 24, 1980, be
extended through June 7, 1999.

Multiple time studies to determine permanent rates were begun in June, 1981.  As
permanent rates for individual operations are set, they will replace temporary
standards presently being used.

Although a Saw Operator job was established, Utility Operators will continue to
be utilized to operate the saw if the need arises.

                                       79
<PAGE>
 
                           MECHANICAL AND ELECTRICAL
                         MAINTENANCE OVERTIME AGREEMENT
                               SUPPLEMENT NO. 14

                     OVERTIME WILL BE CANVASSED AS FOLLOWS
                     -------------------------------------

1.   Offered to the employee on the job for the first day only.

2.   Offered to the low person on the shift overtime occurs by shift.

3.   Weekend and Holiday overtime will be offered to low person in the
     department.

4.   All work assignments on Sunday will be canvassed from low person on Sunday
     list.

5.   In the event of a force, low person on shift available for canvassing.

6.   If employee has boxed vacation, he cannot be asked or forced.


                              OVERTIME IS CHARGED

1.   If employee works overtime.

2.   If employee refuses overtime.

3.   Overtime will be charged for only the overtime hours that he is canvassed,
     worked, or refused.


                            OVERTIME IS NOT CHARGED

1.   If employee is not available on the day of canvassing.

2.   If employee is on vacation or has weekend boxed.

3.   Overtime canvassing will be performed to satisfy contract Article 8.

4.   Overtime is calculated on a weekly basis.

                                       80
<PAGE>
 
                                   48" PRESS
                              INCENTIVE AGREEMENT
                               SUPPLEMENT NO. 15



1.   This plan is applicable to 14" diameter and larger electrodes, and Grade
     876 mold stock utilizing six mixers.  It will also apply to these products
     if one or two mixers are inoperable.  The number of mixes required will be
     reduced by 1/6 or 2/6, respectively.  Additional grades and/or sizes may be
     included in the plan by mutual agreement of the Company and the Union.

2.   The full 12-hour shift incentive opportunity will be as follows:

     a.   140-143 mixes will earn 155% as the base condition.

     b.   144 mixes will earn 157%.

     c.   Each mix above 144 will increase earnings by 4%.

     d.   Each mix below 140 will reduce earning by 1%.

     e.   The mix loader will be provided an extra 10 minute relief.

     The base mix requirement will be reduced appropriately for shifts in which
     die changes and breakdowns occur.

3.   Die changes will earn 155% if performed within the standard time, where
     standards exist.

4.   Downtime periods for breakdowns begin with the end of the last piece pushed
     and end when the first mix begins dumping from the cooler after the
     interruption.  The downtime period for mold stock sizes and grades not
     included in this plan will end with the restart of the weighout.

5.   If manual scribing is required because the scribing machine is inoperable,
     a person will be assigned to help scribe 14" and 16" electrodes.  If the
     machine is operable but is incapable for keeping up with press output, in
     the judgment of management, an extra scribing person will be assigned.

6.   If the mill cannot supply sufficient materials for weighout, as determined
     by management, a rate of 155% will be paid during the period of deficiency.
     If the mixing cycle time is increased so 140 mixes cannot be achieved, the
     155% rate applies.

7.   This plan applies to the extrusion of pit scrap in the above stated
     electrode sizes and any mold stock sizes mutually agreed to by the Company
     and the Union.

8.   Incorrect mixes caused by actions of the crew will be excluded from the
     incentive earnings calculation.  Examples are a weightout mistake or a mix
     loader incorrectly matching mix hoppers.

9.   The objective of this plan is to maximize the productivity of the 48" press
     without sacrificing quality.

                                       81