grievance shall be filed in Step 2 of the grievance procedure and shall be decided on the basis of the standard referred to in Paragraph 1 above.

e. In the event the Company does not install a new incentive plan on a timely basis, the Local Union Incentive Committee may file a grievance in Step 2 of the grievance procedure requesting that a new plan be installed. Any such grievance shall include a statement of the alleged changed condition(s), including approximate date(s) of such alleged change(s). If the Board decides that a change has occurred which requires new standards, it shall order the Company to develop and install an appropriate new plan and to appropriately compensate the grievant(s).

4. The Company shall be permitted to establish an interim rate which may be used while the new incentive plan is being developed. The interim rate shall consist of, in addition to the applicable Base Rate of Pay, a special hourly interim allowance equal to the percentage equivalent of the straight-time average hourly earnings above the Base Rate of Pay in Appendix A during the six (6) pay periods immediately preceding implementation of the interim rate. If the job involved is a new job, the interim rate shall be the applicable average interim rate found by relating the job requirements of such new job to the job requirements of the existing jobs under the previously existing incentive plan and shall be based solely on the incentive earnings of the related job(s) under the old plan.

Section C. Shift Premium

Employees shall receive a shift premium of twenty-five cents ($0.25) for all hours worked by Employees designated as Shift Workers. Shift Workers are those Employees who are routinely scheduled more than half their shifts on other than the day shift (all eight (8) hour shifts starting between 6:00 a.m. and 9:00 a.m. are defined as the day shift).

Section D. Sunday Premium

All hours worked by an Employee on Sunday, shall be paid for on the basi~6fone and one-half times the Employee's Regular Rate of Pay. For the purpose of this .Section, Sunday shall be deemed to be the twenty-four (24) hours beginning with the shift change hour nearest to 12:01 a.m. Sunday.

Section E. Profit Sharing

1. Introduction

The parties agree to establish a profit sharing plan (the Plan).

2. Level of Payout

The Company agrees that it will create a profit sharing pool (the Pool) consisting of

the following percentages of the Company's Quarterly Profits, as defined below, and to distribute the Pool within forty-five (45) days of the end of each fiscal quarter, in the manner described below. The fourth (4th) quarter payment will be distributed within

fifteen (15) days following the date of the auditor's opinion of the Company's annual audited financial statements, which may include an adjustment for the correction of errors in prior quarters.

a. Five percent (5.0%) of all Profits between $25 and $50 of Profit per Ton

                    Shipped;

b. Seven and one-half percent (7.5%) of all Profits between $50 and $70 of

                    Profit per Ton Shipped; and

c. Ten percent (10.0%) of all Profits above $70 of Profit per Ton Shipped.

3. Calculation of Profits For the purposes of this Plan,

a. Profits shall be defined as Earnings Before Interest, Taxes, Depreciation and Amortization of the Company, calculated on a consolidated basis in accordance with United States Generally Accepted Accounting Principles (GAAP) , with the following exclusions:

(1) income or loss related to any charges or credits (whether or not identified as special credits or charges) for unusual, infrequently occurring or extraordinary items as defined by GAAP, including credits or charges for plant closures, business dispositions and asset sales that are not normal operating charges or credits of the Company;

(2) any cost or expense associated with the Benefit Trust or other

                                    similar vehicle;

(3) any cost or expense associated with the Plan or any other profit sharing or similar plan for any of the Company's employees; (4) any expense attributable to the allocation or contribution of stock

                                    to Company employees;

(5) any payments, fees or other expenses that are not in the normal course of business paid directly or indirectly to any person or entity who directly or indirectly owns or controls any equity or equity-like interest in the Company; and

b. Tons Shipped shall be defined as tons of steel products sold to third

                    parties.

4. Individual Entitlement

The Pool will be divided among all Employees (Participants) on the basis of the Hours (as defined below) of each such Participant in the calendar weeks within each fiscal quarter.

a. Hours shall include the following, but shall not exceed forty (40) hours for any week for any Participant: hours worked (including straight time and overtime hours), vacation and holiday hours at the rate of eight (8) hours for each holiday or day of vacation; hours on Union business; and hours, at

the rate of eight (8) hours a day, while receiving Workers' Compensation benefits (based on the number of days absent from work while receiving such benefits).

b. Any payments made to a Participant pursuant to this Plan shall not be included in the Participant's earnings for purposes of determining any other pay, benefit or allowance of the Participant.

5. Administration of the Plan

a. The Plan will be administered by the Company in accordance with its terms and the costs of administration shall be the responsibility of the Company. Upon determination of each Quarterly Profit calculation, such calculation shall be forwarded to the Chair of the Union Negotiating Committee accompanied by a Certificate of Officer signed by the Chief Financial Officer of the Company, providing a detailed description of any adjustments made to Earnings Before Income and Taxes and stating that Profit was determined in accordance with GAAP and that Quarterly Profit was calculated in accordance with this Section.

b. The Union, through the Chair of its Negotiating Committee or hislher designee, shall have the right to review and audit any information, calculation or other matters concerning the Plan. The Company shall provide the Union with any information reasonably requested in connection with its review. The reasonable actual costs incurred by the Union in connection with any such audit shall be paid from the Pool and deducted from the amount otherwise available under the Pool for distribution to Employees.

c. In the event that a discrepancy exists between the Company's Profit Sharing calculation and the results obtained by the Union's review, the Chairs of the Union and Company Negotiating Committees shall attempt to reach an agreement regarding the discrepancy. In the. event that they cannot resolve the dispute, either party may submit such dispute to final and binding arbitration under the grievance procedure provided in this Agreement.

6. Prompt Payment

Notwithstanding Paragraph 5, the Company shall comply with the requirements of Paragraphs 2 through 4 based on its interpretation of the appropriate payout. If the process described in Paragraph 5 results in a requirement for an additional payout, said payout shall be made no more than fourteen (14) days after the date of the agreed upon resolution or issuance of the arbitrator's decision.

7. Summary Description

The parties will jointly develop a description of the calculations used to derive profit sharing payments under the Plan for each quarter and distribute it to each Participant.

I

Section F. Inflation Recognition Payment

1. General Description

The below general description is qualified in its entirety by Paragraphs 2 through

6 below.

The purpose of the Inflation Recognition Payment (IRP) is to make quarterly lump­sum payments to Employees if cumulative inflation, as measured over the life of the Basic Labor Agreement, exceeds three percent (3%) per year.

At the end of each calendar quarter, the Consumer Price Index (CPI) for the final month of that quarter will be compared to a CPI Threshold (as found in the Table in Paragraph 5 below) which represents what the CPI would be if total inflation since the beginning of the Agreement had averaged three percent (3%) per year. If the actual CPI is higher than the CPI Threshold, a lump sum payment shall be made equal to each full one percent (1.0%) by which the actual CPI is higher than the CPI Threshold, multiplied by the Regular Rate of Pay for each position worked by an Employee for all hours actually worked and overtime allowance (hereafter referred to as "earnings") for the quarter.

Thus, if in a given quarter three percent (3%) annual inflation since the beginning of the Agreement would have produced total inflation of ten percent (10%) and the actual CPI indicates that inflation since the ,beginning of the contract has been twelve percent (12%) and an Employee had earnings as defined in the paragraph above during the quarter of $12,000, then that Employee would receive a lump-sum

payment of two percent (2%) (12% actual inflation minus a 10% CPI Threshold) times $12,000 or $240.

2. IRP Payments

a. Beginning the first full calendar quarter after the Effective Date, the Company shall, on each Payment Date, make to each Employee an IRP payment equal to:

                                           (1) their total earnings as defined above for the Covered Period,

                                    multiplied by

                                 (2) each full percentage (1.0%), by which the CPI for the Measurement

                                    Month exceeds the CPI Threshold for the Measurement Month.

               b. No IRP will be made for any Covered Period unless the CPI for the

                   Measurement Month is greater than the CPI Threshold; in the event the CPI

                   is lower than the CPI Threshold there shall be no recoupment of any kind.

               c. The IRP shall be a lump-sum payment and shall not be part of the

                   Employee's Base Rate of pay or used in the calculation of any other Pay,

                   allowance or benefit.

3. Definitions

a. CPI shall mean the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), U.S. City Average, All Items, Not Seasonally Adjusted (1982-84=100) as published by the Bureau of Labor Statistics. If the Consumer Price Index in its present form and on the same basis as the

last Index published prior to the Effective Date becomes unavailable, this Section shall be adjusted to produce as nearly as possible the same result as would have been achieved using the Index in its present form.

b. Payment Date shall be the forty-fifth (45th) day after the last day of the

Measurement Month.

c. Measurement Month shall be the last month of a Covered Period.

d. Covered Period(s) shall be as shown in Paragraph 5 below.

e. CPI Threshold(s) shall be as shown in Paragraph 5 below, based on the

formula in Paragraph 6 below.

4. Example:

Covered Period

Measurement Month

Hypothetical CPI in Measurement Month

CPI Threshold for the Covered Period

The amount, of full percentage point(s), by which

the CPI for the Measurement Month exceeds the

         CPI Threshold for the Covered Period       ((202.3 - 196.6)/196.6) = 2.0%

         Earnings in Covered Period                                                        $12,000

         IRP Payment                                               ($12,000 x 2.0%) = $240.00

5. Covered Periods and CPI Thresholds

             Covered Period                  CPI Threshold

1 % 1/05 - 12/31/05

          December 2005

                   202.3

                    196.6