KENTUCKY ELECTRIC STEEL, INC.
SALARY CONTINUATION PLAN


		The Kentucky Electric Steel, Inc. Salary Continuation Plan
(the "Plan"), effective June 7, 1994, is an employee benefit plan which
provides eligible salaried employees of Kentucky Electric Steel, Inc.
and its majority-owned subsidiaries (collectively referred to herein as
the "Company") with certain severance benefits if the individual's
employment with the Company is terminated under defined circumstances
after a "change in control of the Company."  The details and purpose of
the Plan are more fully explained below.

		SECTION 1.  PURPOSE

		The purpose of the Plan is to reduce employee concerns
about the possibility of a "change in control of the Company."  It is
important that each employee is able to focus his or her full attention
and energy toward the goals and objectives of the Company.  The Plan is
also designed to permit the Company to retain its high quality work
force by increasing stability and improving morale and productivity.
In addition, the Plan will allow the Company to attract and retain new
qualified employees.

		SECTION 2.  ADMINISTRATION

		Kentucky Electric Steel, Inc. ("KESI") shall be the Plan
administrator and shall administer the Plan.  Any determinations by the
Vice President, Administration in carrying out, administering, or
interpreting this Plan shall be final and binding for all purposes and
upon all interested persons and their heirs, successors, and personal
representatives.  All costs associated with the Plan shall be borne by
the Company.

		SECTION 3.  ELIGIBILITY

		An employee who is classified on the records of the Company
as a regular, full-time salaried employee, whether exempt or nonexempt
as specified in the Fair Labor Standards Act, as from time to time
amended, (excluding hourly employees; employees covered by collective
bargaining agreements; employees of subsidiaries, entities, or
partnerships in which the Company has a 50% or less ownership interest;
and international employees, except foreign nationals who are located
in Canada or those who are U.S. expatriates) will be entitled to
participate in the Plan, regardless of length of service.  Employees
who have entered into employment contracts with the Company will not be
eligible to participate in the Plan.

		At any time prior to a "change in control of the Company"
as defined in Section 4(b), KESI reserves, in its complete discretion,
the right to amend the eligible classes of employees.

		SECTION 4.  CONDITIONS FOR BENEFIT PAYMENTS

		(a)	A participant shall not be entitled to receive
benefits under this Plan prior to a "change in control of the Company,"
as hereinafter defined.  Participation in the Plan does not create a
contract of employment between the Company and its employees.  The
Company reserves the right to terminate employees at any time for any
reason, just as employees have the right to terminate their employment
at any time for any reason.

		(b)	The term "change in control of the Company" shall
mean (i) the consummation of (A) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's Common Stock
would be converted into cash, securities or other property, other than
a merger of the Company in which the holders of the Company's Common
Stock immediately prior to the merger have substantially the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange or
transfer (in one transaction or a series of related transactions) of
all or substantially all the assets of the Company, or (ii) the
approval by the shareholders of the Company of any plan or proposal for
the liquidation or dissolution of the Company, other than in connection
with a bankruptcy or reorganization proceeding of the Company under
applicable federal or state bankruptcy laws, or (iii) any "person" (as
such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other than the
Company or a subsidiary thereof or any employee benefit plan sponsored
by the Company or a subsidiary thereof, becoming the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities
of the Company representing 20% or more of the combined voting power of
the Company's then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in
the election of directors, as a result of a tender or exchange offer,
open market purchases, privately-negotiated purchases or otherwise, or
(iv) at any time during a period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company ceasing for any reason to constitute at
least a majority thereof, unless the election or the nomination for
election by the Company's shareholders of each new director during such
two-year period was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of
such two-year period.

		(c)	Benefits shall be payable to a participant under the
Plan after a "change in control of the Company" has occurred if a
participant's employment is terminated by the Company without "cause"
within two (2) years from the date of the "change in control of the
Company."  For purposes of the Plan, "cause" shall mean (i) the wilful
and continued failure of an employee to substantially perform his or
her duties with the Company (other than such failure resulting from the
employee's incapacity due to physical or mental illness), or (ii)
wilful engaging by an employee in gross misconduct materially injurious
to the Company.

		SECTION 5.  AMOUNT OF BENEFITS

		Following a "change in control of the Company" and a
participant's termination of employment within two (2) years thereafter
without "cause," a participant shall be entitled to receive benefits
under the Plan as described below:

		(a)	A participant shall be entitled to be paid in an
undiscounted lump sum, within ten (10) business days after such
participant's termination of employment without "cause," an amount
equal to a specified portion of his or her current base compensation
(excluding any bonus compensation) based upon such participant's
aggregate years and months of service (whether or not continuous) with
the Company as follows:

	Length of Service					Payment

Up to 5 full years				3 months' base compensation
More than 5 and up to 10 full years	      6 months' base compensation
More than 10 and up to 15 full years	1 year's base compensation
More than 15 and up to 20 full years	1-1/2 year's base compensation
More than 20 full years				2 years' base compensation

		For the purpose of this Plan a participant's years and
months of service shall include all periods of employment at the
Company's plant in Boyd County, Kentucky, regardless of whether the
Company was the owner of the plant during the period of employment.

		(b)	At the sole expense of the Company, a participant
shall be entitled to the continuation of his or her medical, dental,
and group life benefits in effect at the time of such participant's
termination of employment without "cause" for a period of six (6)
months following such participant's termination of employment.

		(c)	A participant shall be reimbursed for any legal fees
or expenses incurred by the participant to enforce the payment of Plan
benefits within (10) business days of providing copies of applicable
invoices to the Company.

		(d)	A participant shall be entitled to interest on the
amount of any payments due under the Plan (but not timely paid) in an
amount equivalent to the prime rate of interest (quoted by Citibank,
N.A. as its prime commercial lending rate) on the latest date
practicable prior to the date such payments should have been made, to
and including the date it is made.

		(e)	Within ten (10) business days of the participant's
termination of employment following a "change in control of the
Company," the Company shall provide, at no cost to the participant,
individual outside assistance in finding other employment.  Such
obligation may be fulfilled by the Company through the retention of an
outplacement service for use by individual participants.

		(f)	Participants shall be entitled to receive any
pension, disability, workers' compensation, other Company benefit plan
distribution, payment for vacation accrued but not taken, statutory
employment termination benefit, or any other compensation plan payment
otherwise independently due; however, in no event shall a participant
who receives benefit under this Plan be entitled to additional
severance payment pursuant to any other existing severance policy of
the Company.

		SECTION 6.  ACCEPTANCE OF BENEFITS

		If a participant receives and accepts all of the benefits
provided under  Section 5 of the Plan, he or she shall be deemed
thereby to have waived any right or cause of action against the Company
and its directors, officers, or employees arising from the termination
of the participant's employment.

		SECTION 7.  CLAIMS PROCEDURE

		(a)	Following a "change in control of the Company" and a
participant's termination of employment, the benefits described in
Section 5 of the Plan shall be paid as described therein without any
required action on the part of such participant.

		(b)	If any participant believes that he or she is
entitled to benefits provided under the Plan and has not received such
benefits within the time prescribed by the Plan, such participant may
submit a written claim for payment of such benefits to the Company.  If
such claim for benefits is wholly or partially denied, the Company,
shall, within thirty (30) business days after receipt of the claim,
notify the participant of the denial of the claim.  Such notice of
denial (i) shall be in writing, (ii) shall be written in a manner
calculated to be understood by the participant, and (iii) shall contain
(A) the specific reason or reasons for denial of the claim, (B) a
specific reference to the pertinent Plan provisions upon which the
denial is based, (C) a description of any additional material or
information necessary to perfect the claim, along with an explanation
of why such material or information is necessary, and (D) an
explanation of the claim review procedure, in accordance with the
provisions of this Section 7.

		(c)	Within sixty (60) business days after the receipt by
the participant of a written notice of denial of the claim, or such
later time as shall be deemed reasonable taking into account the nature
of the benefit subject to the claim and any other attendant
circumstances, the participant may file a written request with the
Company that it conduct a full and fair review of the denial of the
claim for benefits.  As a part of such full and fair review, the
participant (or such participant's duly authorized representative) may
review and photocopy pertinent documents (including but not limited to
the participant's personal history file) and subject issues and
comments to the Company in writing.  The Company shall make its
determination in accordance with the documents governing the Plan
insofar as such documents are consistent with the provisions of the
Employee Retirement Income Security Act of 1974.

		The Company shall promptly deliver to the participant its
written decision on the claim (in no event later than thirty (30)
business days after the receipt of the aforesaid request for review,
except that if there are special circumstances (such as a conference
with the participant or his or her representative) which require an
extension of time, the aforesaid thirty (30) business day period shall
be extended to a reasonable period of time not to exceed sixty (60)
business days).  Such decision shall (i) be written in a manner
calculated to be understood by the participant, (ii) include the
specific reason or reasons for the decision, and (iii) contain a
specific reference to the pertinent Plan provisions upon which the
decision is based.  If the decision on review is not furnished within
the time prescribed by this Section 7(c), the claim shall be deemed
granted on review.

		SECTION 8.  AMENDMENTS AND TERMINATIONS

		KESI's Board of Directors shall have plenary authority to
terminate, modify, or amend this Plan in such respects as it shall deem
advisable at any time prior to a "change in control of the Company" as
defined in Section 4(b).

		SECTION 9.  SUCCESSORS BINDING AGREEMENT

		(i)	The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company,
by agreement in form and substance satisfactory to eligible
participants, expressly to assume and agree to provide benefits
pursuant to this Plan in the same manner and to the same extent that
the Company would be required to perform its obligations under the Plan
if no such succession had taken place.  Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
shall be a violation of this Plan and shall entitle eligible
participants to compensation from the Company in the same amount and on
the same terms as the participant would be entitled pursuant to Section
5, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the date of
the participant's termination of employment without "cause."  As used
in this Plan, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this Section 9 or
which otherwise becomes bound by all the terms and provision of this
Plan by operation of law.

		(ii)  This Plan shall inure to the benefit of and be
enforceable by a participant's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
and legatees.  If a participant should die while any amounts would
still be payable to him or her hereunder if he or she had continued to
live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Plan to such participant's
devisee, legatee, or other designee or, if there be no such designee,
to his or her estate.

		SECTION 10.  WITHHOLDING TAXES

		The Company is authorized to withhold any tax required to
be withheld from the amounts payable to a participant pursuant to this
Plan which are considered taxable compensation to the participant.

		SECTION 11.  GOVERNING LAW

		The Plan shall be governed by the laws of the Commonwealth
of Kentucky.

		IN WITNESS WHEREOF, the Plan is adopted and effective
immediately on the day and year first above written.

					KENTUCKY ELECTRIC STEEL, INC.
				    By:  /s/  Charles C. Hanebuth     6/7/94