INCENTIVE PLANS

The local parties have negotiated individual Incentive Plans at each Plant location. Any changes or modifications of the Plans will be governed by Article Nine - Section B of this Agreement.

Memorandum between International Steel Group, Inc. and United Steelworkers of America, AFL-CIO-CLC Concerning

Acquisition of Bethlehem Steel Assets Understandings between the Parties Regarding the Effects of the Acquisition on the Union-Represented Workforce of Bethlehem

A. ICD (Institute for Career Development)

ISG agrees that the currently approved 2003 ICD budgets shall remain in effect at all locations, subject to the budget review process in the normal course of business by the Local Joint Committee.

B. Letter of Agreement

Certain portions of the December 15, 2002, letter of agreement between David McCall and Thomas Wood, shall not be applicable to the Bethlehem facilities in the Acquisition. Specifically, the restrictions relative to the number of weeks of Vacation an Employee may schedule in any given year and the modification to Article Five, Section C. 6, will not be applied to Employees of the Bethlehem facilities. However, the Parties recognize that Alternative Work Schedules can be conducive in supporting the redesigned work structures and the effectiveness of workplace enhancements in the CC-CBA. The Parties agree to establish a process between the Chairmen of the Negotiating Committee to identify areas where by mutual agreement Alternative Work Schedules would be effective. At the Bethlehem facilities, during the IS-month period from the Effective Date wherever such schedules may provide such enhancements, the Co-Chairs of the Negotiating Committee shall identify and mutually agree to such areas of opportunity. The implementation of such Work Schedules will require approval of a simple majority of the affected Employees at a former Bethlehem plant and will remain installed for a period of up to 12 months.

C. O&T Positions

All office and technical work falling within the scope of the Recognition and Coverage section of Article Two of the Combined Company CBA will be converted to an hourly rate of pay and will be designated into three (3) job classifications as either Technical, Plant Technical or Administrative Technical. The parties have developed appropriate

job descriptions (attached as Exhibit A-9). Technician Employees will receive Pay Grade 3, Plant Technician Employees will receive Pay Grade 2 and Administrative Technician Employees will receive Pay Grade 1.

The parties have developed specific departmental lines of progression (LOP's) in the plants that include, the jobs of Technician, Plant Technician or Administrative Technician Employees. The Office and Technical labor agreement will be eliminated, and all bargaining unit Employees at the plant will be covered under the scope and full terms of the Basic Labor Agreement and its related Benefit and Pension Agreements. It is understood that during the development of the lines of progression certain technical functions were most appropriate for inclusion in the plant Production and Maintenance (P&M) line of progression in a specific department. Where the parties identify and agree upon such inclusion, those Employees incumbent to those positions may become incumbent to the appropriate P&M LOP's.

The Technician jobs not incorporated into a P&M LOP but who continue to work in the Department shall receive the same percentage incentive coverage as that paid to the units they support. The parties shall meet to determine an incentive plan for those Technician Employees who do not directly support an individual unit but whose duties are more plant-wide in nature. Such plan development shall be based on an average of the payments made to those Plant and Administrative Technician Units who have directly measured plans.

The parties, as part of the restructuring described in the second paragraph above, will use Plant Service dates as the date for unit placement and bidding in all instances where formerly separate O&T and P&M seniority units are blended as part of the merging of Off and P&M work into a single contract bargaining unit.

D. Incentive Rates of Pay Issues

Effective with the date of Closing, the parties have agreed to preserve the same incentive earnings for each Employee at the level of performance that he or she had in a representative period (as defined in Article V section 2 (d) (4) of the Bethlehem

Collective Bargaining Agreement) prior to the Closing. In addition, such protection shall include such things as red circled rates, personal incentive additives, and personal out of line differentials. The preservation and protection provisions of this paragraph shall apply to the extent they would exceed what would otherwise be the result under the principles of A-C below.

In addition, a Corporate-wide Incentive Task Force (CITF) will be established. The CITF will consist of four (4) members, two (2) appointed by the Chairman of the Union's Negotiating Committee (under the terms of Article Six Section C of the BIA) and two (2) appointed by the Corporate Manager of Labor Relations. In addition, at each facility, the CITF will be supplemented by two (2) additional participants, one (1) appointed by the Local Union President and one (1) by the General Manager of the plant. The purpose of the CITF will be to develop and implement, only after securing mutual agreement, new incentive plans to achieve the following objectives:

1. A significant reduction in the number of incentive plans;

2. Incentive pay that is a percentage addition to the Base Rate of Pay of each Employee (discontinuation of the ICR);

3. An average incentive opportunity of 20% above the Employee's Base Rate of Pay;

The Parties realize that the red circled rates, personal incentive additives, personal out of line differentials (Protected Rates) must be addressed before implementation of said plans. The remedies must be mutually agreed to and may include but are not limited to the following options:

1. A buyout of the Protected Rates with mutual agreement or;

2. A termination date (sunset clause) for the Protected Rates which will be mutually agreed to by the affected Parties.

Furthermore, the Parties recognize that the preserved earnings for each Employee during the interim period may be adjusted if the shipping levels at a particular plant are significantly lowered due to business conditions beyond the control of

the management. Such adjustments to the preserved earnings will be incrementally. .

decreased based on mutually agreed upon criteria as developed by the CITF within thirty (30) days of the Effective Date. In addition, the CITF will develop at each plant, criteria within thirty (30) days of the Effective Date to allow for increases in the preserved earnings should business conditions or productivity significantly increase.

The CITF shall begin meeting to discuss development of new Incentive plans within sixty (60) days of the ratification. Such meetings shall also include a timetable and priority list of plans to be developed.

E. lines of Progression/Seniority Units

The lines of Progression (LOPs) and the Seniority Units and

Departments that the LOPs are applicable to have been negotiated by the local parties at each location/Plant.

E 401-K

The 401 (k) program offered by ISG will be modified to accept

enrollment of participants upon being hired. Additionally the program will be modified to allow loan rollovers for those rolling over an existing 40 1 (k) under the Bethlehem plan.

G. Bargaining Unit Work

The Parties have agreed the following provisions shall apply at the

Bethlehem facilities with respect to Bargaining Unit Work:

1. Objective: The parties recognize that there exists a significant amount of work inside the Combined Company's Bethlehem plants that is being performed by Outside Entities that does not currently meet an exception provided for in the CC-CBA. The Parties are committed to having all work inside the Combined Company's plants performed by Employees as is required by the CC-CBA.

2. Work Subject to Transfer: The Parties agree that under the provisions of Article 1\vo, Section F (Bargaining Unit Work) there is a substantial level of work inside the Bethlehem facilities that is currently (as of the Effective Date) being performed on a full-time basis pursuant to agreement or by practice by Outside Entities (such work, Work Subject to Transfer or WST)