Sypris Solutions, Inc. 2005 Incentive Bonus Plan Agreement

1.     ESTABLISHMENT OF PLAN.

          Sypris Solutions, Inc., a Delaware corporation (the “Company”), established this corporate bonus plan effective as of January 1, 2005 (the “Plan”), to provide a financial incentive for employees of the Company to advance the growth and prosperity of the Company.

2.     ELIGIBILITY.

          Employees of the Company who are specifically designated by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) for participation during the current year shall be eligible to participate in the Plan.

3.     PARTICIPANT’S PERCENTAGE SHARE.

          The bonus target for each participant will be established and approved by the Compensation Committee at the beginning of each Plan year. Each participant will be provided with a copy of this Plan, which will include an exhibit that lists the participant’s full name, salary, bonus potential based upon the current year’s operating budget, and his or her objectives for the current year.

4.     Bonus Pool.

          The Bonus Pool will be generated by taking 50% of the consolidated profit before tax (pre bonus accrual) for Sypris Solutions, Inc. in excess of 85% of the 2005 Plan before tax (pre bonus accrual).

5.     Bonus Award.

          Each qualified participant will be eligible for a Bonus Award that is equal to the bonus target, subject to the provisions of Sections 8.1, 8.2, 8.3 and the following:

          Each participant will have two mandatory objectives:

          Both of these objectives will have an established corporate weighting

          5.2 Discretionary Review. The chief executive officer of the Company will have the discretion to increase the actual amount of the awards to be distributed by up to 20% of the participant’s bonus potential, based upon the individual’s specific performance and contribution to the Company. Such discretion will be used sparingly and will generally be limited to the recognition of extenuating circumstances and/or exceptional accomplishments that may or may not have been captured by the Management Objectives.

          5.3 Approval of the Compensation Committee. The Bonus Award for each participant will be subject to the review of and approval by the Compensation Committee.

          5.4 Qualification. Awards will be payable to each eligible participant as soon as administratively practicable after release of the audited annual financial statements of the Company and the approval of the Compensation Committee; provided, however, that the Plan shall be in effect as of the date of payment and such employee shall be employed by the Company as of the date of payment. NO EMPLOYEE SHALL HAVE ANY RIGHT TO PAYMENT OF AN AWARD UNLESS THE PLAN IS IN EFFECT AND THE EMPLOYEE IS EMPLOYED BY THE COMPANY AS OF THE DATE OF PAYMENT.

        5.5 5.6  Caps and Limitations. There will be no caps or other such limitations established with regard to the amount of individual potential Bonus Awards, other than the provisions of Sections 4 and 5, which could result in Bonus Awards that are less in value than those listed on the attached Exhibit A.

6.     METHOD OF DISTRIBUTION.

          Cash awards shall be payable by check in lump sum. All such payments will be subject to withholding for income, social security or other such payroll taxes as may be appropriate.

7.     ADMINISTRATION.

          The Compensation Committee shall administer this Plan. The decisions of the Compensation Committee in interpreting and applying the Plan shall be final.

8.     MISCELLANEOUS.

          8.1 Employment Rights. The adoption and maintenance of this Plan is not an employment agreement between the Company and any employee. Nothing herein contained shall be deemed to give any employee the right to be retained in the employ of the Company nor to interfere with the right of the Company to discharge any employee at any time.

          8.2 Acquisitions and Divestitures. The variables to be used in the calculation of PBT will be prorated for any acquisition and/or divestiture to reflect the timing of such event or events during the current Plan year at the time of such acquisition or divestiture.

          8.3 Amendment and Termination. The Company may, without the consent of any employee or beneficiary, amend or terminate the Plan at any time and from time-to-time.

          8.4 Governing Law. This Plan shall be governed by and construed in accordance with the laws of the State of Delaware.

          8.5 Construction. The headings and subheadings of this Plan have been inserted for convenience for reference only and are to be ignored in any construction of the provisions hereof. The masculine shall be deemed to include the feminine, the singular shall include the plural, and the plural shall include the singular unless the context otherwise requires. The

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invalidity or unenforceability of any provision hereunder shall not affect the validity or enforceability of the balance hereof. This Plan represents the entire undertaking by the Company concerning its subject matter and supersedes all prior undertakings with respect thereto. No provision hereof may be waived or discharged except by a written document approved by the Compensation Committee and signed by a duly authorized representative of the Company.

          The parties indicate their acknowledgement of the terms and conditions of this Plan as of the date first written above.

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