AK Steel Holding (AKS)

Management Incentive Plan

The Company’s Management Incentive Plan (“MIP”) is designed to motivate executive officers to focus on both financial and non-financial annual performance-based goals that directly impact stockholders. In 2005, the weighting of those pre-established goals for determining payment of an incentive award at target was 20% for safety, 20% for quality and 60% for financial performance. Performance against the safety goal was measured by total OSHA recordable-injury statistics. Performance against the quality goal was measured by internal rejection, internal retreat and external claims statistics. The target goals established for safety and quality reflected industry-leading performance. Performance against the financial goal was measured by pre-tax earnings. A threshold financial performance goal was set for payment of any MIP incentive award. An incentive award under the MIP is expressed as a percentage of a participant’s total base compensation for the year. Depending upon the extent to which prescribed targets were achieved or exceeded, in 2005 the MIP incentive award could have varied from zero to as much as 200% of base salary for the President and CEO, and from zero to as much as 100% of base salary for each of the other executive officers.

In 2005, the Company achieved the performance goals for payment of incentive awards under the MIP at the target level with respect to safety and quality. The Company did not achieve the performance goals in 2005 for payment of the financial component of the MIP and no payment was approved or made with respect to such financial component. However, the Committee did approve, and the Board ratified, the payment of incentive

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awards with respect to the safety and quality components of the MIP for the 2005 performance period. Accordingly, after applying their respective target percentages, Mr. Wainscott received an MIP award for the 2005 performance period equal to 40% of his base salary and Messrs. Ferrara, Gant, Kaloski and Horn each received an MIP award for the 2005 performance period equal to 20% of his base salary.

In approving these incentive awards, the Committee exercised its discretion to waive, solely as it applied to the payment of the safety and quality components of the MIP, a threshold financial performance goal which the Committee previously had elected to set for the 2005 performance period. The Committee decided to do so because the Company had its best-ever safety and quality performances in 2005, but experienced extraordinary circumstances beyond its control that prevented it from reaching the threshold financial performance goal. Those circumstances included record-high costs for key raw materials and energy, due in part to the impact of Hurricanes Katrina and Rita, and a significant drop in steel spot market selling prices. The Committee also recognized that, despite these obstacles, in 2005 the Company’s management team led the Company to record annual shipments and revenues, significantly improved the Company’s liquidity and balance sheet, and made substantial progress in the goal of returning the Company to sustained profitability.

Management Incentive Plan

The Company’s MIP is designed to motivate executive officers to focus on both financial and non-financial annual performance-based goals that directly impact shareholders. In 2004, the weighting of those pre-established goals for determining payment of an incentive award was 20% for safety, 20% for quality and 60% for financial performance. Performance against the safety goal was measured by total OSHA recordable-injury and lost-workday statistics. Performance against the quality goal was measured by internal rejection, internal retreat and external claims statistics. Performance against the financial goal was measured by pre-tax earnings improvement. A threshold financial performance goal had to be achieved for 2004 before any MIP incentive award would be paid. An incentive award under the MIP is expressed as a percentage of a participant’s total base compensation for the year. Depending upon the extent to which prescribed targets are achieved or exceeded, in 2004 the MIP incentive award could have varied from zero to as much as 150% of base salary for the President and CEO, and from zero to as much as 100% of base salary for each of the other executive officers.

In 2004, the Company met or exceeded the annual target performance goals established for safety and quality and substantially exceeded the maximum goal established for financial performance. The target goals established for safety and quality reflected industry-leading performance levels. Because the Company exceeded its maximum financial performance goal, participants in the MIP qualified for the maximum incentive award available under the MIP. The Committee therefore approved, and the Board ratified, the payment of maximum incentive awards for 2004 to all participants in the MIP. Mr. Wainscott received an MIP incentive award of 150% of his 2004 base salary and Messrs. Ferrara, Gant, Kaloski and Horn received an MIP award of 100% of their respective 2004 base salaries.