STEEL OF WEST VIRGINIA INC, PRE 14A, 1995-05-05

STEEL OF WEST VIRGINIA INC
PRE 14A, 1995-05-05
STEEL WORKS, BLAST FURNACES & ROLLING MILLS (COKE OVENS)

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Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant [x]

Filed by a Party other than the Registrant [ ]

Check the appropriate box
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14-11(c) or 240.14a.12

STEEL OF WEST VIRGINIA, INC.
(Name of Registrant as Specified in Its Charter)

STEEL OF WEST VIRGINIA, INC.
(Name of Persons Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0.11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0.11.:

(4) Proposed maximum aggregate value of transaction:

[ ] Check box if any part of the fee is offset as provided by Exchange
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE>
Preliminary Copy

[LETTERHEAD OF STEEL OF WEST VIRGINIA, INC.]

May 19, 1995

Dear Stockholder:

It is our pleasure to invite you to the Annual Meeting of Stockholders
of Steel of West Virginia, Inc. to be held on Thursday, June 29, 1995 at 10:30
a.m. at the Radisson Hotel Huntington, 1001 3rd Avenue, Huntington, West
Virginia.

Whether or not you plan to attend, and regardless of the number of
shares you own, it is important that your shares be represented at the meeting.
You are accordingly urged to sign, date and return your proxy promptly in the
enclosed envelope, which requires no postage if mailed in the United States.

We sincerely hope you will be able to join us at the meeting. The
officers and directors of the Company look forward to seeing you at that time.

Sincerely,

Robert L. Bunting, Jr.
Chairman

<PAGE>
Preliminary Copy
STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

June 29, 1995

The Annual Meeting of Stockholders of Steel of West Virginia, Inc.
(the "Company") will be held at the Radisson Hotel Huntington, 1001 3rd Avenue,
Huntington, West Virginia on Thursday, June 29, 1995, at 10:30
a.m. for the following purposes:

1. To elect directors of the Company for the ensuing year.

2. To approve the Steel of West Virginia, Inc. 1995 Employee Stock
Option Plan, as set forth and described in the attached Proxy
Statement.

3. To approve the Steel of West Virginia, Inc. 1995 Non-Employee
Director Stock Option Plan, as set forth in the attached Proxy
Statement.

4. To approve the amendment of the Company's Certificate of
Incorporation to authorize 4,000,000 additional shares of Common
Stock and to eliminate all of the authorized non-voting common
stock, as set forth and described in the attached Proxy
Statement.

5. To ratify the reappointment of Ernst & Young LLP as independent
accountants for the Company.

6. To transact such other business as may properly come before the
meeting and any adjournments thereof.

The Board of Directors has fixed the close of business on May 15, 1995
as the record date for determination of stockholders entitled to notice and to
vote at the meeting and any adjournments thereof.

IF YOU ARE UNABLE TO BE PRESENT PERSONALLY, PLEASE SIGN AND DATE THE
ENCLOSED PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS, AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.

By Order of the Board of Directors

STEPHEN A. ALBERT
Secretary

May 19, 1995

<PAGE>
Preliminary Copy
STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
June 29, 1995

GENERAL INFORMATION

The accompanying proxy is solicited by and on behalf of the Board of
Directors of Steel of West Virginia, Inc. (the "Company") to be used at the
Annual Meeting of Stockholders to be held at the Radisson Hotel Huntington,
1001 3rd Avenue, Huntington, West Virginia on Thursday, June 29, 1995,
at 10:30 a.m. and any adjournments thereof.

When the enclosed proxy is properly executed and returned, the shares
of Common Stock of the Company, par value $.01 per share (the "Common Stock"),
it represents will be voted at the meeting in accordance with any directions
noted thereon and, if no direction is indicated, the shares it represents will
be voted: (i) FOR the election of the nominees for directors set forth below;
(ii) FOR the approval of the Steel of West Virginia, Inc. 1995 Employee Stock
Option Plan (the "Management Option Plan"); (iii) for the approval of the Steel
of West Virginia, Inc. 1995 Non-Employee Director Stock Option Plan (the
"Director Option Plan" and, together with the Management Option Plan, the
"Option Plans"); (iv) FOR the proposed amendment of the Company's Certificate of
Incorporation to authorize 4,000,000 additional shares of Common Stock and to
eliminate all of the authorized non-voting common stock; (v) FOR the
ratification of the reappointment of Ernst & Young LLP as independent
accountants for the Company; and (vi) in the discretion of the holders of the
proxy with respect to any other business that may properly come before the
meeting. Any stockholder signing and delivering a proxy may revoke it at any
time before it is voted by delivering to the Secretary of the Company a written
revocation or a duly executed proxy bearing a date later than the date of the
proxy being revoked. Any stockholder attending the meeting in person may
withdraw his or her proxy and vote his or her shares.

The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made only by mail; provided, however, that officers and
regular employees of the Company may solicit proxies personally or by telephone
or telegram. Such persons will not be specially compensated for such services.
The Company may reimburse brokers, banks, custodians, nominees and fiduciaries
holding stock in their names or in the names of their nominees for their
reasonable charges and expenses in forwarding proxies and proxy material to the
beneficial owners of such stock.

The approximate mailing date of this Proxy Statement and the
accompanying proxy is May 19, 1995.

VOTING RIGHTS

Only stockholders of record at the close of business on May 15, 1995,
will be entitled to vote at the Annual Meeting of Stockholders. On that date,
there were 6,953,360 shares of Common Stock outstanding, the holders of which
are entitled to one vote per share on each matter to come before the meeting.
Voting rights are non-cumulative. A majority of the outstanding shares will
constitute a quorum at the meeting and abstentions and broker non-votes are
counted for purposes of determining the presence or absence of a quorum for the
transaction of business.

<PAGE>
Directors are elected by plurality vote. The approval of the Option
Plans, the approval of the amendment of the Company's Certificate of
Incorporation, and the ratification of the reappointment of Ernst & Young LLP
will require the affirmative vote of a majority of those shares of Common Stock
present or represented and entitled to vote on the proposal. Abstentions and
broker non-votes will not be counted in the election of directors or in
determining whether such approval or ratification has been given.

PRINCIPAL STOCKHOLDERS

The following table sets forth as of May 15, 1995, the beneficial
ownership of Common Stock of each person known to the Company who owns more
than 5% of the issued and outstanding Common Stock.

Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
- ------------------------------ ----------------------------- -----------
<S> <C> <C>
FMR Corp. 921,100(1) 13.25
82 Devonshire Street
Boston, Massachusetts 02109

Neuberger & Berman 804,100(2) 11.56
605 Third Avenue
New York, NY 10158

Robert L. Bunting, Jr. 526,380 7.57
c/o Steel of West Virginia, Inc.
17th Street and 2nd Avenue
Huntington, West Virginia 25703

Mesirow Asset Management, Inc. 394,600(3) 5.67
350 North Clark Street
Chicago, IL 60610
- ---------------
</TABLE>

(1) Fidelity Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940, is the beneficial owner of 921,100 shares of Common Stock as a
result of acting as investment advisor to several investment companies
registered under Section 8 of the Investment Company Act of 1940. The
ownership of one investment company, Fidelity Low-Priced Stock Fund,
amounted to 600,000 shares of Common Stock outstanding. Fidelity Low-
Priced Stock Fund has its principal business office at 82 Devonshire
Street, Boston, Massachusetts 02109. Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the Funds each has sole power to
dispose of the 697,900 shares owned by the Funds. Neither FMR Corp. nor
Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or
direct the voting of the shares owned directly by the Fidelity Funds, which
power resides with the Funds' Board of Trustees. Fidelity carries out the
voting of the shares under written guidelines established by the Funds'
Board of Trustees. Fidelity Management Trust Company, 82 Devonshire
Street, Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp.
and a bank as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, is the beneficial owner of 223,200 shares of Common Stock as a result
of its serving as investment manager of the institutional account(s).
Edward C. Johnson 3d and FMR Corp. through its control of Fidelity
Management Trust Company, has sole voting and dispositive power over
223,200 shares of Common Stock owned by the institutional account(s) as
reported above. Edward C. Johnson 3d and Abigail P. Johnson each own 24.9%
of the outstanding voting common stock of FMR Corp. Mr. Johnson 3d is
Chairman of FMR Corp. Various Johnson family members and trusts for the
benefit of Johnson family members own FMR Corp. voting common stock. These
Johnson family members, through their ownership of voting common stock,
form a controlling group with respect to FMR Corp. The information set
forth herein is based on a Schedule 13G dated February 13, 1995 filed by
FMR Corp. with the Securities and Exchange Commission.

<PAGE>

(2) Neuberger & Berman ("Neuberger") has (i) sole voting power with respect to
492,100 shares of Common Stock, (ii) shared voting power with respect to
115,000 shares of Common Stock, and (iii) shared dispositive power with
respect to 804,100 shares of Common Stock. The information set forth
herein is based on a Schedule 13G dated February 10, 1995 filed by
Neuberger with the Securities and Exchange Commission.

(3) Mesirow Asset Management, Inc. ("MAM"), an investment advisor registered
under Section 203 of the Investment Advisor Act of 1940, serves as
investment advisor to Skyline Fund Special Equities Portfolio, a
Massachusetts Business Trust; Mesirow Growth Fund, L.P., an Illinois
limited partnership; and certain client accounts over which MAM has
discretion. MAM has (i) shared voting power with respect to 394,600 shares
of Common Stock, and (ii) shared dispositive power with respect to 394,600
shares of Common Stock. The information set forth herein is based on a
Schedule 13G dated February 13, 1995 filed by MAM with the Securities and
Exchange Commission.

PROPOSAL 1. ELECTION OF DIRECTORS

At the Annual Meeting of Stockholders, the entire Board of Directors,
consisting of five members, is to be elected. In the absence of instructions to
the contrary, the shares of Common Stock represented by a proxy delivered to the
Board of Directors will be voted FOR the five nominees named below. Each
nominee named below is presently serving as a director of the Company and is
anticipated to be available for election and able to serve. However, if any
such nominee should decline or become unable to serve as a director for any
reason, votes will be cast instead for a substitute nominee designated by the
Board of Directors or, if none is so designated, will be cast according to the
judgment in such matters of the person or persons voting the proxy.

The tables below and the paragraphs that follow present certain
information concerning the nominees for director and the executive officers of
the Company. Each elected director will serve until the next Annual Meeting of
Stockholders and until his successor has been elected and qualified. Officers
are elected by and serve at the discretion of the Board of Directors. None of
the Company's directors or executive officers has any family relationship with
any other director or executive officer.

Nominees for Directors
- ----------------------
<TABLE><CAPTION>
Shares of
Common Stock
Years Beneficially
Positions with Owned as of Percent
Name Age with Company Company May 15, 1995 of Class
- ---------------------- --- ---------------------- ------- -------------- --------
<S> <C> <C> <C> <C> <C>
Robert L. Bunting, Jr. 61 Chairman of the Board, 12 526,380(2) 7.57
Chief Executive
Officer and President

Stephen A. Albert 42 Secretary and Director 8 0 0

Albert W. Eastburn(1) 66 Director 2 2,500 *

Daniel N. Pickens(1) 45 Director 2 1,000 *

Paul E. Thompson(1) 64 Director 1 0 0

All directors and executive
officers as a group 554,660 7.98
</TABLE>

- ---------------------------
* Less than one percent

(1) Member of the Compensation and Benefits Committee and theAudit Committee.
Mr. Thompson became a director of the Company in January, 1994. He filed
a Form 3 with the Securities and Exchange Commission in respect to
becoming a director on January 24, 1994.

<PAGE>

(2) Of this amount, 233,710 shares are held in a trust for the benefit of Mr.
Bunting's wife, Nancy L. Bunting, and 237,577 shares are held in a trust
for the benefit of Mr. Bunting. Mr. and Mrs. Bunting are co-trustees of
each of said trusts. These shares were transferred to the trusts by Mr.
Bunting in December 1994. Mr. Bunting filed a Form 4, and each of the
trusts filed a Form 3, with the Securities and Exchange Commission in
respect of such transfers on April 26, 1995.

Executive Officers who are not Directors
- ----------------------------------------
<TABLE><CAPTION>
Shares of
Common Stock
Beneficially
Positions and Offices Executive Owned as of Percent
Name with the Company Age Officer Since May 15, 1995 of Class
- --------------- ------------------------- --- ------------- --------------- --------
<S> <C> <C> <C> <C> <C>
Timothy R. Duke Vice President, Treasurer 43 1988 17,140 *
and Chief Financial
Officer

Larry E. Gue Vice President of Human 53 1988 7,140 *
Relations

T. Elton North President, Marshall 47 1993 500 *
Steel, Inc.
</TABLE>

- ---------------------------------------
* Less than 1%

Business Experience of Nominees and Executive Officers
- ------------------------------------------------------

Robert L. Bunting, Jr. has been Chairman of the Company, SWVA, Inc.
("SWVA") and Marshall Steel, Inc. ("Marshall"), the Company's wholly-owned
subsidiaries, since April 1993, President, Chief Executive Officer and a
director of the Company since December 1986 and President, Chief Executive
Officer and a director of SWVA since its organization in 1982. Mr. Bunting was
Works Manager of the Company's mini-mill before it was owned by SWVA. Before
becoming President of the mini-mill, Mr. Bunting held various positions in
the steel industry over a period of 27 years. Mr. Bunting received a bachelor
of metallurgical engineering from Cornell University in 1955.

Stephen A. Albert has been a director of the Company since December
1986. Since February 1989, Mr. Albert has been special counsel to the law firm
of Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Company. Prior
thereto, Mr. Albert was a member of the law firms of Feit & Ahrens and Feit &
Shor, which were counsel to the Company until January 1989. Mr. Albert has been
engaged in the practice of law in New York City since 1977.

Albert W. Eastburn has been a director of the Company since April
1993. Mr. Eastburn was President and Chief Operating Officer of the Steel Group
of Lukens, Inc., a leading specialized manufacturer of steel plate and stainless
steel products ("Lukens"), from November 1988 until his retirement in 1991.
Prior thereto, Mr. Eastburn held various positions at Lukens, which he joined as
methods engineer in 1955.

Daniel N. Pickens has been a director of the Company since April 1993.
Mr. Pickens has been a Senior Vice President in the Corporate Finance Department
of Wheat First Securities, Inc. ("Wheat First") since 1989. Prior thereto, Mr.
Pickens held various positions at Wheat First, which he joined in 1981. Before
joining Wheat First, Mr. Pickens practiced as an attorney in Philadelphia,
Pennsylvania.

Paul E. Thompson has been a director since January 1994. From 1986
until his retirement in 1992, Mr. Thompson was a Sub-District Director, District
23, of the United Steel Workers of America ("USWA"). Prior thereto, Mr.
Thompson was a Staff Representative, District 23, of the USWA.

<PAGE>

Timothy R. Duke has been Vice President, Treasurer and Chief Financial
Officer of the Company since March 1988 and was the Controller from June 1987
until March 1988. Mr. Duke was formerly the Manager - Operations Accounting at
Joy Manufacturing Company, and served in various other positions at Joy
Manufacturing Company from 1979 until he joined the Company. Mr. Duke is a
certified public accountant, a certified management accountant and has more than
20 years of experience in private industry. He received a bachelor of science
degree in business from Pennsylvania State University and a masters of business
administration from Duquesne University.

Larry E. Gue has been Vice President of Human Relations of SWVA, Inc.
since March 1988 and had been Manager of Personnel and Public Relations of SWVA
since its organization in 1982. Mr. Gue began working at the Company's mini-
mill in 1971 as part of the maintenance team. At that time, Mr. Gue was
actively involved in, and later became a leader of, the United Steel Workers of
America (Local 37), the union which represents the Company's work force.

T. Elton North has been President of Marshall since its organization
in April 1993. From June 1992 until April 1993, Mr. North was Division Manager
for the Memphis, Tennessee division of Marshall Steel Inc., a wholly-owned
subsidiary of Marshall Steel Ltd., a Canadian steel company. This division was
sold to the Company. Mr. North served as branch manager of Marshall Steel Ltd.,
from June 1991 to June 1992. Prior thereto, Mr. North served as marketing
manager of Marshall Steel Ltd. for approximately six years.

Meetings of the Board of Directors and Committees
- -------------------------------------------------

During the year ended December 31, 1994, the Board of Directors held
seven meetings. During that period no director attended fewer than 75% of the
aggregate of (i) the total number of meetings of the Board of Directors held
during the period for which he was a director and (ii) the total number of
meetings held by all Committees of the Board of Directors on which he served
during the period that he served on such Committees.

The Company's Board of Directors has a Compensation and Benefits
Committee (the "Compensation Committee") and an Audit Committee, both of which
are comprised of directors who are not officers or employees of the Company.
The Board of Directors does not have a standing nominating committee. The
Compensation and Benefits Committee reviews employee compensation and benefits,
and the Audit Committee reviews the scope of the independent audit, the
appropriateness of the accounting policies, the adequacy of internal controls,
the Company's year-end financial statements and such other matters relating to
the Company's financial affairs as its members deem appropriate. During 1994,
the Compensation Committee held eight meetings and the Audit Committee held one
meeting.

<PAGE>

Executive Compensation
- ----------------------

The following summary compensation table sets forth the compensation
earned for services rendered by the Company's Chief Executive Officer and each
of the Company's executive officers whose aggregate compensation exceeded
$100,000 during the years ended December 31, 1992, 1993 and 1994.
<TABLE><CAPTION>
Summary Compensation Table

All Other
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------- ---- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Robert L. Bunting, Jr., President, 1992 $225,000 $199,551 $12,686(2)
Chief Executive Officer and Director 1993 225,000 4,947 13,707(2)
1994 225,000 121,537(1) 9,957(2)

Timothy R. Duke, Vice President, 1992 $128,190 $ 68,807 $ 6,143(3)
Treasurer and Chief Financial Officer 1993 128,190 4,947 6,143(3)
1994 132,228 69,375(1) 6,143(3)

Larry E. Gue, Vice President of Human 1992 $120,000 $ 68,807 $ 6,403(4)
Relations 1993 120,000 4,947 6,403(4)
1994 120,000 67,126(1) 6,403(4)

T. Elton North, President 1992 $ n/a $ n/a $ n/a
Marshall Steel, Inc. 1993 54,808 12,600 3,247(5)
1994 75,000 47,099(1) 9,690(5)
</TABLE>

- -------------------------

(1) Does not include the following discretionary bonuses recognized in 1994
results of operations but paid in January 1995; $150,750 to Robert L.
Bunting, Jr.; $75,000 to Timothy R. Duke; $30,000 to Larry E. Gue; and
$42,000 to T. Elton North.

(2) Consists of $11,111, $11,250 and $7,500 contributions to a defined
contribution plan and $1,575, $2,457 and $2,457 of costs of group-term life
insurance coverage provided by the Company for 1992, 1993 and 1994
respectively.

(3) Consists of a $6,000 contribution to a defined contribution plan and $143
of costs of group-term life insurance coverage provided by the Company.

(4) Consists of a $6,000 contribution to a defined contribution plan and $403
of costs of group-term life insurance coverage provided by the Company.

(5) Consists of $2,188 and $3,750 contributions to a defined contribution
plan, $1,020 and $5,850 for personal use of a company vehicle, and $40 and
$90 of costs of group-term life insurance coverage provided by the Company
for 1993 and 1994, respectively.

The Company entered into a five-year employment agreement with Mr.
Bunting on January 1, 1992. Mr. Bunting's base salary is $225,000 per year,
subject to increase each year by the Board of Directors, which may also, in its
discretion, pay bonuses to Mr. Bunting and other employees. Mr. Bunting's
employment agreement contains a non-competition restriction for a period of one
year following termination of the agreement. The agreement provides that the
Company will purchase Mr. Bunting's and his family's shares of Common Stock of
the Company upon his death, but only out of the proceeds of a $7 million key man
life insurance policy covering Mr. Bunting which the Company has purchased

<PAGE>

and of which the Company is the beneficiary. The employment agreement also
provides that Mr. Bunting will participate in the Company's retirement plan.

Directors' Compensation
- -----------------------

The only directors who are compensated for services as a director are
Albert W. Eastburn, Daniel N. Pickens, and Paul E. Thompson, each of whom
receives an annual retainer in the amount of $6,000 plus $1,000 for each
committee on which he serves. In addition, each such director receives a fee of
$1,000 for each meeting of the Board of Directors, the Compensation Committee
and the Audit Committee that he attends. Under this arrangement, during 1994
Messrs. Eastburn, Pickens and Thompson received $21,500, $21,000 and $15,500
respectively.

Compensation Committee Report

Compensation Policies
- ---------------------

The Compensation Committee of the Board of Directors is comprised of
directors who are not officers or employees of the Company. The Compensation
Committee is responsible for reviewing and making recommendations to the Board
of Directors regarding the compensation and benefits of the Company's
management. The Committee's philosophy is that the Company's goals are more
likely to be achieved if management is encouraged to work together as a team and
if final compensation is tied to the Company's and the individual's performance
during the year, based on such Company factors as the change in operating income
from the prior years, the Company's achievement of budgeted earnings objectives,
and the Company's results of operations in light of economic conditions in the
industry and the general economy, and such personal factors as the individual's
supervision of or performance in his or her particular business unit, and his or
her supervision of significant corporate projects. In the past, this philosophy
has been implemented through the use of discretionary bonuses in which each
person included in the bonus award, including the Company's Chief Executive
Officer, received the same fixed percentage of salary as a bonus. Beginning
with 1995, incentive compensation will be awarded to management personnel to the
extent that the Company achieves certain corporate goals, and/or the particular
individual achieves certain personal goals.

Assuming that the stockholders approve the Management Option Plan,
stock option grants will be awarded on a discretionary, case by case basis,
after consideration of an individual's position, contribution to the Company,
length of service with the Company, number of options held, and other
compensation.

The Company has not yet formulated a policy with respect to qualifying
compensation paid to executive officers for deductibility under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the provision was enacted as
part of "OBRA '93" for compensation exceeding $1,000,000 in a taxable year paid
to an executive officer, effective January 1, 1994).

Fiscal 1994 Compensation
- ------------------------

In 1994, the base compensation of the Company's Chief Executive
Officer, Robert L. Bunting, Jr., was $225,000, as established pursuant to the
employment agreement between the Company and Mr. Bunting described above under
"Executive Compensation". With respect to 1994, discretionary bonuses were
awarded to management personnel, including the Company's Chief Executive
Officer, as described above under "Executive Compensation", based on the Company
having achieved a certain level of operating income. These discretionary

<PAGE>

bonuses, when added to base salaries, were determined by the Compensation
Committee to be in accord with the Company's philosophy described above.

Compensation Committee
----------------------

Albert W. Eastburn
Daniel N. Pickens
Paul E. Thompson

Performance Graph
- -----------------

Below is a graph comparing the cumulative total stockholder return on
the Company's Common Stock for the last five years with the cumulative total
return of companies included in the S&P 500 Stock Index and an index of peer
companies selected by the Company. The graph assumes (i) investment of $100 on
December 31, 1989 in the Company's Common Stock, the S&P 500 Index and common
stock of the peer group and (ii) the reinvestment of all dividends. The peer
group consists of Commercial Metals Co., Lukens, Inc., New Jersey Steel Corp.,
Nucor Corp. and Roanoke Electric Steel Corp.

1989 1990 1991 1992 1993 1994
- ------------------------------------------------------------------------
PEER GROUP 100 93.8 117.3 124.3 105.9 105.4
SWVA 100 84.0 72.0 264.0 408.0 352.0
S & P 100 96.7 126.1 135.7 149.4 151.3

PROPOSAL 2. APPROVAL OF STEEL OF WEST VIRGINIA, INC. 1995 EMPLOYEE STOCK
OPTION PLAN.

PROPOSAL 3. APPROVAL OF STEEL OF WEST VIRGINIA, INC. 1995 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN.

On March 16, 1995, the Board of Directors adopted, subject to
stockholder approval, the Management Option Plan and the Director Option Plan,
which provide that options to acquire shares of the Company's Common Stock
("Options") may be granted to officers, key employees and directors of the
Company or its designated subsidiaries. The Board of Directors believes that
Options provide performance incentives and assist the Company in attracting,
motivating and retaining employees and non-employee directors to the benefit of

<PAGE>

the Company and its stockholders, and recommends approval of the Management
Option Plan and the Director Option Plan by the stockholders. In the absence of
instructions to the contrary, the shares of Common Stock represented by a
proxy delivered to the Board of Directors will be voted FOR the approval of
the Management Option Plan and FOR the approval of the Director Option Plan.

Management Option Plan

Purposes of the Plan
- --------------------

The purposes of the Management Option Plan are to enable the Company
to attract, retain, and motivate certain key employees who are important to
the success and growth of the business of the Company and designated
subsidiaries and to create a long-term mutuality of interest between such
employees and the stockholders of the Company by granting Options.

Shares Subject to Options
- -------------------------

The Plan authorizes the issuance of up to 430,000 shares of Common
Stock upon the exercise of Incentive Stock Options ("ISOs") and Non-Qualified
Stock Options ("NQSOs") granted to officers and key employees of the Company.
Key employees are those active officers or other valuable employees of the
Company that are selected by the Compensation Committee to participate in the
Plan. In general, if Options are for any reason cancelled, or expire or
terminate unexercised, the shares covered by such Options will again be
available for the grant of Options. No Options may be granted after five years
from the Effective Date of the Management Option Plan.

Terms of Options
- ----------------

In the case of ISOs, the exercise price of an Option may not be less
than 100% of the Fair Market Value (as defined in the Management Option Plan)
of a share of Common Stock at the time of grant (or 110% of such Fair Market
Value if the grantee owns more than 10% of the shares of Common Stock
outstanding at the time of grant (a "Ten Percent Shareholder")). NQSOs
issued pursuant to the Management Option Plan will be exercisable at such
price as may be fixed by the Compensation Committee. Shares purchased
pursuant to the exercise of Options may be paid for at the time of exercise as
follows: (i) in cash or by check, bank draft or money order payable to the
order of the Company; (ii) if the Common Stock is traded on a national
securities exchange, through the delivery of instructions to a broker to
deliver the purchase price; or (iii) on other terms acceptable to the
Compensation Committee (which may include payment by the transfer of shares
owned by the participant for at least six months or the
surrender of Options).

Options granted under the Management Option Plan are subject to
restrictions on transfer and exercise. If the stockholders approve the
Management Option Plan, each Option granted thereunder will be exercisable on
and after the first anniversary of the date of grant. No Option granted under
the Management Option Plan may be exercised prior to that time, subject to
acceleration in the event of a Change of Control of the Company (as defined in
the Management Option Plan) and subject to the authority of the Compensation
Committee to permit earlier exercise in its sole discretion. Furthermore, no
Option may be exercisable after the expiration of ten years from the date of
its grant (or five years, in the case of ISOs granted to a Ten Percent
Shareholder). No Option may be transferred, assigned, pledged or hypothecated
in any way except by will or under applicable laws of descent and distribution.

Options that were exercisable upon a participant's termination of
employment other than for Cause (as defined in the Management Option Plan)
remain exercisable following such termination until expiration of the Option;
Options that were exercisable upon a participant's termination of employment for
Cause terminate immediately. Except as otherwise determined by the Compensation
Committee, Options that were not exercisable at the time of a participant's
termination of employment by the Company shall automatically be canceled upon
such

<PAGE>

termination. The Compensation Committee has the discretion under the Management
Option Plan to impose in a participant's Option Agreement such other conditions,
limitations and restrictions as it determines are appropriate in its sole
discretion, including any waivers of rights which a participant may have.

The Management Option Plan provides for the Committee to have the
right to make appropriate adjustments in the number and kind of securities
receivable upon the exercise of Options in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The Management Option Plan also gives the Compensation Committee
the option to terminate all outstanding Options effective upon the consummation
of a merger or consolidation in which the Company is not the surviving entity or
of any other transaction that results in the acquisition of substantially all of
the Company's outstanding Common Stock by a single person or entity or by a
group of persons and/or entities acting in concert, or upon the consummation of
the sale or transfer or all of the Company's assets (any such event an
"Acquisition Event"), subject to the right of participants to exercise all
outstanding Options prior to the effective date of the Acquisition Event.

Administration
- --------------

The Management Option Plan will be administered by the Compensation
Committee, which is comprised of non-employee directors who are not eligible to
receive options thereunder. The Compensation Committee may make such rules and
regulations and establish such processes for administration of the Management
Option Plan as it deems appropriate. The Management Option Plan provides that
it may be amended by the Compensation Committee at any time, and from time to
time, except that the rights of a participant with respect to Options granted
prior to such amendment may not be materially impaired without the consent of
such participant, and that no amendment may be made which materially increases
the aggregate number of shares of Common Stock that may be issued under the
Management Option Plan, decrease the minimum option price for any Option, or
extend the maximum option period under the Management Option Plan, without
stockholder approval.

Federal Income Tax Consequences
- -------------------------------

The rules concerning the Federal income tax consequences with respect
to the Options are quite technical. Moreover, the applicable statutory
provisions are subject to change, as are their interpretations and applications,
which may vary in individual circumstances. Therefore, the following discussion
of tax consequences is designed to provide a general understanding as of the
date hereof. In addition, the following discussion does not set forth any state
or local tax consequences that may be applicable.

Incentive Stock Options
- -----------------------

In general, a participant will not realize taxable income upon either
the grant or the exercise of an ISO and the Company will not realize an income
tax deduction at either such time. If the participant does not sell the Common
Stock received pursuant to the exercise of the ISO within either (i) two years
after the date of the grant of the ISO or (ii) one year after the date of
exercise, a subsequent sale of the Common Stock will result in long-term capital
gain or loss to the participant and will not result in a tax deduction to the
Company.

If the participant disposes of the Common Stock acquired upon exercise
of the ISO within either of the above mentioned time periods, the participant
will generally realize as ordinary income an amount equal to the lesser of (i)
the fair market value of the Common Stock on the date of exercise over the
Option exercise price, or (ii) the amount realized upon disposition over the
Option exercise price. In such event, the Company generally will be entitled to
an income tax deduction equal to the amount recognized by the participant as
ordinary income. Any gain in excess of such amount realized by the participant
as ordinary income would be taxed as short-term or long-term capital gain
(depending on the applicable holding period).

In addition, please note that: (i) officers and directors of the
Company subject to Section 16(b) of the Securities Exchange Act of 1934 may be
subject to special rules regarding the income tax consequences

<PAGE>

concerning their ISOs; (ii) any entitlement to a tax deduction on the part of
the Company is subject to the applicable federal tax rules (including, without
limitation, Internal Revenue Code Section 162(m) regarding the $1,000,000
limitation on deductible compensation); (iii) the exercise of an ISO may have
implications in the computation of alternative minimum taxable income; and (iv)
in the event that the exercisability of an Option is accelerated because of a
change in control, payments relating to the Option, either alone or together
with certain other payments, may constitute parachute payments under Internal
Revenue Code Section 280G, which excess amounts may be subject to excise taxes.

Nonqualified Stock Options
- --------------------------

A participant will realize no taxable income upon the grant of a NQSO
and the Company will not receive a deduction at the time of such grant unless
the Option has a readily ascertainable fair market value (as determined under
applicable tax law) at the time of grant. Upon exercise of a NQSO the
participant generally will realize ordinary income in an amount equal to the
excess of the fair market value of the Common Stock on the date of exercise over
the exercise price. Upon a subsequent sale of the Common Stock by the
participant, the participant will recognize short-term or long-term capital gain
or loss depending upon his or her holding period for the Common Stock. The
Company will generally be allowed a deduction equal to the amount recognized by
the participant as ordinary income.

In addition, please note that: (i) any officers and directors of the
Company subject to Section 16(b) of the Securities Exchange Act of 1934 may be
subject to special tax rules regarding the income tax consequences concerning
their NQSOs; (ii) any entitlement to a tax deduction on the part of the Company
is subject to the applicable tax rules (including, without limitation, Internal
Revenue Code Section 162(m) regarding the $1,000,000 limitation on deductible
compensation); (iii) the exercise of a NQSO has no effect on the compensation of
alternative minimum taxable income, and (iv) in the event that the
exercisability of an Option is accelerated because of a change in control,
payments relating to the Option, either alone or together with certain other
payments, may constitute parachute payments under Internal Revenue Code Section
280G, which excess amounts may be subject to excise taxes.

Director Option Plan

Purposes of the Plan
- --------------------

The purposes of the Director Option Plan are to enable the Company to
attract, retain, and motivate the non-employee directors of the Company and to
create a long-term mutuality of interest between such non-employee directors and
the stockholders of the Company by granting Options.

Shares Subject to Options
- -------------------------

The Plan authorizes the issuance of up to 70,000 shares of Common
Stock upon the exercise of NQSOs granted to non-employee directors of the
Company. A non-employee director is a director who is not an active employee of
the Company and/or a designated subsidiary, including any director who is an
officer of the Company but who is receiving no compensation as an employee from
the Company or any designated subsidiary. In general, if Options are for any
reason cancelled, or expire or terminate unexercised, the shares covered by such
Options will again be available for the grant of Options. No Options may be
granted after five years from the Effective Date of the Director Option Plan.

Grant and Terms of Options
- --------------------------

On the Effective Date of the Director Option Plan and on each
anniversary thereof commencing as of April 1, 1996, each non-employee director
of the Company will be granted options to purchase 2,000 shares

<PAGE>

of Common Stock. The exercise price for the Options will be one hundred percent
(100%) of the Fair Market Value (as defined in the Director Option Plan) of the
Common Stock at the time of the grant of the Options.

If the stockholders approve the Director Option Plan, each Option
granted thereunder will be exercisable on and after the first anniversary of the
date of grant. Shares purchased pursuant to the exercise of Options will be
paid for at the time of exercise as follows: (i) in cash; (ii) by delivery of
unencumbered shares of Common Stock held for at least six months; or (iii) a
combination of cash and unencumbered shares of Common Stock.

Options granted under the Director Option Plan are subject to
restrictions on transfer and exercise. No Option granted under the Director
Option Plan may be exercised prior to the time period for exercisability,
subject to acceleration in the event of a Change of Control of the Company (as
defined in the Director Option Plan). No Option may be transferred, assigned,
pledged or hypothecated in any way except by will or under applicable laws of
descent and distribution.

Options that were exercisable upon a participant's termination of
directorship for any reason other than for Cause (as defined in the Director
Option Plan) remain exercisable following such termination until expiration of
the Option; Options that were exercisable upon a participant's termination of
directorship for Cause terminate immediately. Options that were not exercisable
at the time of a participant's termination of directorship will automatically be
canceled upon such termination.

The Director Option Plan provides that appropriate adjustments will be
made in the number and kind of securities receivable upon the exercise of
Options in the event of a stock split, stock dividend, merger, consolidation or
reorganization. The Director Option Plan also provides that all outstanding
Options will terminate effective upon the consummation of a merger,
consolidation liquidation or dissolution in which the Company is not the
surviving entity, subject to the right of participants to exercise all
outstanding Options prior to the effective date of the merger, consolidation,
liquidation or dissolution.

Administration
- --------------

The Director Option Plan will be administered by the Compensation
Committee. The Compensation Committee may make such rules and regulations and
establish such processes for administration of the Director Option Plan as it
deems appropriate subject to the provisions of the Director Option Plan. The
Director Option Plan provides that it may be amended by the Compensation
Committee at any time, and from time to time, to effect (i) amendments necessary
or desirable in order that the Director Option Plan and the Options granted
thereunder conform to all applicable laws, and (ii) any other amendments deemed
appropriate, provided that no such amendment would cause the non-employee
directors to cease to be "disinterested directors" (as defined in Rule 16b-3)
with regard to the Director Option Plan or any other stock option or equity plan
of the Company. Notwithstanding the foregoing, no amendment may be made which
materially increases the aggregate number of shares of Common Stock that may be
issued under the Director Option Plan, decrease the minimum option price for any
Option, extend the maximum option period under the Director Option Plan, or
change the eligibility requirements for participation in the Director Option
Plan, without stockholder approval (unless such stockholder approval is no
longer required as a condition of compliance with the requirements of Rule 16b-
3). The Director Option Plan may be amended or terminated at any time by the
stockholders of the Company.

Federal Income Tax Consequences
- -------------------------------

<PAGE>

Nonqualified Stock Options
- --------------------------

In addition, please note that directors of the Company subject to
Section 16(b) of the Securities Exchange Act of 1934 may be subject to special
tax rules regarding the income tax consequences concerning their NQSOs.

NEW PLAN BENEFITS

As of April 1, 1995, Options to acquire 78,000 shares of Common Stock
authorized under the Option Plans have been granted, subject to stockholder
approval, as follows: Robert L. Bunting, Jr. has been granted ISOs for 8,000
shares; Timothy R. Duke has been granted ISOs for 6,000 shares; Larry Gue has
been granted ISOs for 3,000 shares; T. Elton North has been granted ISOs for
3,000 shares; all executive officers as a group have been granted ISOs for an
aggregate of 20,000 shares; all directors who are not executive officers of the
Company have been granted NQSOs for an aggregate of 8,000 shares (2,000 shares
each); and all other employees of the Company have been granted ISOs for an
aggregate of 50,000 shares. All of these Options will vest on April 1, 1996,
are for a term of ten years and have an exercise price of $11 5/8 per share.

On May 1, 1995, the closing sale price for the Common Stock on the
National Association of Securities Dealers National Market was $11 3/4.

PROPOSAL 4. AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
AUTHORIZE 4,000,000 ADDITIONAL SHARES OF COMMON STOCK AND TO
ELIMINATE ALL OF THE AUTHORIZED NON-VOTING SHARES OF COMMON STOCK

The Certificate of Incorporation of the Company currently authorizes
the issuance of up to 8,000,000 shares of Common Stock (6,953,360 shares of
which are currently outstanding), and 500,000 shares of non-voting common stock
(none of which are currently outstanding). The Board of Directors of the
Company is proposing to amend the Certificate of Incorporation of the Company,
to increase the number of authorized shares of Common Stock from 8,000,000 to
12,000,000 and to eliminate all of the authorized non-voting common stock. The
Board of Directors has adopted and recommends that the stockholders approve the
following resolution:

"RESOLVED, that ARTICLE FOURTH of the Certificate of Incorporation of
the Company is hereby amended in its entirety to read as follows:

(a) `FOURTH: The total number of shares of capital stock that
the Corporation shall have authority to issue is twelve million
(12,000,000) shares of Common Stock, par value $.01 per share.'"

In addition to the 6,953,360 shares of Common Stock outstanding, an
additional 500,000 shares are reserved for issuance in connection with Options
granted or available for grant under the Company's Option Plans (assuming the
stockholders approve the Option Plans.) The additional authorized shares that
would be

<PAGE>

available for issuance, if the proposed amendment to the Certificate of
Incorporation is approved, may be issued for any proper corporate purpose at any
time without further stockholder approval (subject, however, to applicable
statutes or the rules of the National Association of Securities Dealers National
Market which require stockholder approval for the issuance of shares in certain
circumstances). The Board of Directors believes it is desirable to give the
Company this flexibility in considering such matters as raising additional
capital, acquisitions, or other corporate purposes. The authorization of such
shares will enable the Company to act promptly and without additional expense if
appropriate circumstances arise which require the issuance of such shares. The
Company has no current agreements, commitments, plans or intentions to issue
any additional shares, other than in connection with the Option Plans. Holders
of Common Stock are not entitled to preemptive rights, and to the extent that
any additional shares of Common Stock or securities convertible into Common
Stock may be issued other than on a pro rata basis to current stockholders, the
current ownership portion of current stockholders may be diluted. Depending
upon the circumstances in which such additional shares of Common Stock are
issued, the overall effects of such issuance may be to render more difficult or
to discourage a merger, tender offer, proxy content, or the assumption of
control by a holder of a large block of Common Stock and the removal of
incumbent management. Management of the Company is not aware of any possible
takeover attempts at this time.

PROPOSAL 5. SELECTION OF INDEPENDENT ACCOUNTANTS

The Board of Directors recommends the ratification by the stockholders
of the reappointment by the Board of Directors of Ernst & Young LLP as the
Company's independent accountants for the fiscal year ending December 31, 1995.
In the absence of instructions to the contrary, the shares of Common Stock
represented by a proxy delivered to the Board of Directors will be voted FOR the
ratification of the reappointment of Ernst & Young LLP. A representative of
Ernst & Young LLP is expected to be present at the Annual Meeting and will be
available to respond to appropriate questions and make such statements as he or
she may desire.

STOCKHOLDER PROPOSALS

It is contemplated that the Company's 1996 Annual Meeting of
Stockholders will be held on or about May 15, 1996. Stockholders of the Company
who intend to submit proposals at the next Annual Meeting of Stockholders must
submit such proposals to the Company no later than January 22, 1996.
Stockholder proposals should be submitted to Steel of West Virginia, Inc., P.O.
Box 2547, Huntington, West Virginia 25726, Attention: Timothy R. Duke, Vice
President, Treasurer and Chief Financial Officer.

ANNUAL REPORT

The Company's Annual Report for the year ended December 31, 1994,
including financial statements, is being mailed together with this Proxy
Statement to the Company's stockholders of record at the close of business on
May 15, 1995. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON WHOSE
PROXY IS SOLICITED BY THIS PROXY STATEMENT A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994, FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. A WRITTEN REQUEST FOR A COPY OF SUCH ANNUAL REPORT ON FORM
10-K SHOULD BE DIRECTED TO STEEL OF WEST VIRGINIA, INC., P.O. BOX 2547,
HUNTINGTON, WEST VIRGINIA 25726, ATTENTION: TIMOTHY R. DUKE, VICE PRESIDENT,
TREASURER AND CHIEF FINANCIAL OFFICER.

<PAGE>

OTHER BUSINESS

The Board of Directors does not know of any other business to be
presented to the meeting and does not intend to bring any other matters before
the meeting. However, if any other matters properly come before the meeting or
any adjournments thereof, it is intended that the persons named in the
accompanying proxy will vote thereon according to their best judgment in the
interests of the Company.

By Order of the Board of Directors

Stephen A. Albert
Secretary
May 19, 1995

STOCKHOLDERS ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES. YOUR PROMPT RESPONSE WILL BE HELPFUL, AND YOUR COOPERATION
WILL BE APPRECIATED.

<PAGE>

STEEL OF WEST VIRGINIA, INC.
17th Street and 2nd Avenue
Huntington, West Virginia 25703

PROXY

Solicited by the Board of Directors
for the Annual Meeting of Stockholders on
June 29, 1995

The undersigned hereby appoints Robert L. Bunting, Jr. and Stephen A. Albert or
either of them, with full power of substitution, as proxies and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock of Steel of West Virginia, Inc. held of record by the undersigned
at the close of business on May 15, 1995 at the Annual Meeting of Stockholders
to be held on June 29, 1995 and any adjournments thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 and 5.

<TABLE><CAPTION>
The Board of Directors recommends a vote FOR each of the proposals below.

<S> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed (except / / WITHHOLD AUTHORITY to vote
as marked to the contrary below) for all nominees listed below

Robert L. Bunting, Jr., Albert W. Eastburn, Daniel N. Pickens, Paul E. Thompson, Stephen A. Albert

(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's
name in the list above.)

2. PROPOSAL TO APPROVE THE STEEL OF WEST VIRGINIA, INC. 1995 EMPLOYEE STOCK OPTION PLAN.

/ / FOR / / AGAINST / / ABSTAIN

3. PROPOSAL TO APPROVE THE STEEL OF WEST VIRGINIA, INC. 1995 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.

/ / FOR / / AGAINST / / ABSTAIN

4. PROPOSAL TO APPROVE THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO AUTHORIZE 4,000,000
ADDITIONAL SHARES OF COMMON STOCK AND TO ELIMINATE ALL OF THE AUTHORIZED NON-VOTING COMMON STOCK.

5. PROPOSAL TO RATIFY THE REAPPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS.

/ / FOR / / AGAINST / / ABSTAIN

6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.

</TABLE>

<PAGE>

PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY THE PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AN
AUTHORIZED PERSON.

PLEASE RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

_______________________________
Signature

_______________________________
Signature if held jointly

<PAGE>

Appendix to Preliminary
Proxy Statement for filing
purposes only

___________________________________________________________________________

STEEL OF WEST VIRGINIA, INC.

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

___________________________________________________________________________

April 1, 1995

<PAGE>

Table of Contents
-----------------

Page
----

I. Purposes of the Plan . . . . . . . . . . . . . . . . . . . . . . . 1

II. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

III. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2

IV. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A. Duties of the Committee . . . . . . . . . . . . . . . . . . . 3
B. Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 3
D. Meetings of the Committee . . . . . . . . . . . . . . . . . . 4
E. Determinations . . . . . . . . . . . . . . . . . . . . . . . 4
F. Disinterested Directors . . . . . . . . . . . . . . . . . . . 4

V. Shares; Adjustment Upon Certain Events . . . . . . . . . . . . . . 4
A. Shares to be Delivered; Fractional Shares . . . . . . . . . . 4
B. Number of Shares . . . . . . . . . . . . . . . . . . . . . . 4
C. Adjustments; Recapitalization, etc. . . . . . . . . . . . . . 4

VI. Awards and Terms of Options . . . . . . . . . . . . . . . . . . . 6
A. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Date of Grant . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Option Agreement . . . . . . . . . . . . . . . . . . . . . . 7
D. Option Terms . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Expiration. . . . . . . . . . . . . . . . . . . . . . . . . . 7
F. Acceleration of Exercisability . . . . . . . . . . . . . . . 7

VII. Effect of Termination of Directorship . . . . . . . . . . . . . . 8
A. Death, Disability or Otherwise Ceasing to be a Director . . . 8
C. Cancellation of Options . . . . . . . . . . . . . . . . . . . 9

VIII. Nontransferability of Options . . . . . . . . . . . . . . . . 9

IX. Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . 9

X. Termination, Amendment and Modification . . . . . . . . . . . . . 10

XI. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 11

<PAGE>

Page
----

XII. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Right to Terminate Directorship . . . . . . . . . . . . . . . 11
B. Trusts, etc. . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
D. Severability of Provisions . . . . . . . . . . . . . . . . . 12
E. Payment to Minors, Etc. . . . . . . . . . . . . . . . . . . . 12
F. Headings and Captions . . . . . . . . . . . . . . . . . . . . 12
G. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
H. Controlling Law . . . . . . . . . . . . . . . . . . . . . . . 12
I. Section 16(b) of the Act . . . . . . . . . . . . . . . . . . 12

XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses . . . . . . . . . . . . . . . . . . . 12
A. Stock Certificates . . . . . . . . . . . . . . . . . . . . . 12
B. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
C. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 13

XIV. Listing of Shares and Related Matters . . . . . . . . . . . . . . 13

XV. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 13

Form of Option Agreement . . . . . . . . . . . . . . . . . . . . Exhibit A

<PAGE>

Steel of West Virginia, Inc.

1995 Non-Employee Director Stock Option Plan

I. Purposes of the Plan
--------------------

The purposes of this 1995 Non-Employee Director Stock Option Plan
(the "Plan") are to enable Steel of West Virginia, Inc. (the "Company") to
attract, retain and motivate the directors who are important to the success
and growth of the business of the Company and to create a long-term
mutuality of interest between the directors and the stockholders of the
Company by granting the directors options to purchase Common Stock (as
defined herein).

II. Definitions
-----------

In addition to the terms defined elsewhere herein, for purposes
of this Plan, the following terms will have the following meanings when
used herein with initial capital letters:

A. "Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.

B. "Board" means the Board of Directors of the Company.

C. "Cause" means that a court of competent jurisdiction shall
have determined that the Participant shall have committed a breach of the
Participant's fiduciary duty to the Company or a Designated Subsidiary.

D. "Code" means the Internal Revenue Code of 1986, as amended
(or any successor statute).

E. "Committee" means the Board or a duly appointed committee of
the Board to which the Board has delegated its power and functions
hereunder.

F. "Common Stock" means the common stock of the Company, par
value $.01 per share, any Common Stock into which the Common Stock may be
converted and any Common Stock resulting from any reclassification of the
Common Stock.

G. "Company" means Steel of West Virginia, Inc., a Delaware
corporation.

<PAGE>

H. "Designated Subsidiary" means a corporation that is defined
as a subsidiary corporation in Section 424(f) of the Code. Any entity
shall be deemed a Designated Subsidiary only for such periods as the
required ownership relationship is maintained.

I. "Eligible Director" means a director of the Company who is
not an active employee of the Company or any Designated Subsidiary,
including any director who is an officer of the Company but who is
receiving no compensation as an employee from the Company or any Designated
Subsidiary.

K. "Option" means the right to purchase one Share at a
prescribed purchase price on the terms specified in the Plan.

L. "Participant" means an Eligible Director who is granted
Options under the Plan which Options have not expired.

M. "Person" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person as the context may require.

N. "Securities Act" means the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.

O. "Share" means a share of Common Stock.

P. "Termination of Directorship" with respect to an individual
means that individual is no longer acting as a director of the Company.

III. Effective Date
--------------

The Plan shall become effective as of April 1, 1995 (the
"Effective Date"), subject to its approval by the stockholders of the
Company in accordance with Rule 16b-3 under the Act within one year after
the Plan is adopted by the Board. Grants of Options under the Plan will be
made on or after the Effective Date of the Plan, provided that, if

<PAGE>

the Plan is not approved by the stockholders of the Company as provided in
the preceding sentence, all Options which have been granted pursuant to the
terms of the Plan shall be null and void. No Options may be exercised
prior to the approval of the Plan by the stockholders of the Company as
aforesaid.

IV. Administration
--------------

A. Duties of the Committee. The Plan shall be administered by
-----------------------
the Committee. The Committee shall have full authority to interpret the
Plan and to decide any questions and settle all controversies and disputes
that may arise in connection with the Plan; to establish, amend and rescind
rules for carrying out the Plan; to administer the Plan, subject to its
provisions; to prescribe the form or forms of instruments evidencing
Options and any other instruments required under the Plan and to change
such forms from time to time; and to make all other determinations and to
take all such steps in connection with the Plan and the Options as the
Committee, in its sole discretion, deems necessary or desirable. The
Committee shall not be bound to any standards of uniformity or similarity
of action, interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters coming
before it. Any determination, action or conclusion of the Committee shall
be final, conclusive and binding on all parties.

B. Advisors. The Committee may employ such legal counsel,
--------
consultants and agents as it may deem desirable for the administration of
the Plan, and may rely upon any advice or opinion received from any such
counsel or consultant and any computation received from any such consultant
or agent. Expenses incurred by the Committee in the engagement of such
counsel, consultant or agent shall be paid by the Company.

C. Indemnification. To the maximum extent permitted by
---------------
applicable law, no officer of the Company or member or former member of the
Committee or of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
To the maximum extent permitted by applicable law and the Certificate of
Incorporation or By-Laws of the Company and to the extent not covered by
insurance, each officer and member or former member of the Committee or of
the Board shall be indemnified and held harmless by the Company against any
cost or expense (including reasonable fees of counsel reasonably acceptable
to the Company) or liability (including any sum paid in settlement of a
claim with the approval of the Company), and advanced amounts necessary to
pay the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the Plan,
except to the extent arising out of such officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in addition
to any rights of indemnification the officers, members or former members
may have as directors or officers under applicable law or under the
Certificate of Incorporation or By-Laws of the Company. Notwithstanding
anything else herein, this indemnification will not apply to

<PAGE>

actions or determinations by an individual with regard to Options granted
to him or her under this Plan.

D. Meetings of the Committee. The Committee shall adopt such
-------------------------
rules and regulations as it shall deem appropriate concerning the holding
of its meetings and the transaction of its business. All determinations by
the Committee shall be made by the affirmative vote of a majority of its
members. Any such determination may be made at a meeting duly called and
held at which a majority of the members of the Committee are in attendance
in person or through telephonic communication. Any determination set forth
in writing and signed by all the members of the Committee shall be as fully
effective as if it had been made by a majority vote of the members at a
meeting duly called and held.

E. Determinations. Each determination, interpretation or other
--------------
action made or taken pursuant to the provisions of this Plan by the
Committee shall be final, conclusive and binding for all purposes and upon
all persons, including, without limitation, the Participants, the Company,
directors, officers and other employees of the Company, and the respective
heirs, executors, administrators, personal representatives and other
successors in interest of each of the foregoing.

F. Disinterested Directors. Notwithstanding the foregoing,
-----------------------
the Committee may not take any action which would cause any Eligible
Director to cease to be a "disinterested person" for purposes of Rule 16b-3
promulgated under the Act, as then in effect or any successor provisions
("Rule 16b-3"), with regard to any stock option or other equity plan of the
Company.

V. Shares; Adjustment Upon Certain Events
--------------------------------------

A. Shares to be Delivered; Fractional Shares. Shares to be
-----------------------------------------
issued under the Plan shall be made available, at the sole discretion of
the Board, either from authorized but unissued Shares or from issued Shares
reacquired by the Company and held in treasury. No fractional Shares will
be issued or transferred upon the exercise of any Option nor will any
compensation be paid with regard to fractional shares.

B. Number of Shares. Subject to adjustment as provided in this
----------------
Article V, the maximum aggregate number of Shares that may be issued under
the Plan shall be 70,000. Where Options are for any reason cancelled, or
expire or terminate unexercised, the Shares covered by such Options shall
again be available for the grant of Options, within the limits provided by
the preceding sentence.

C. Adjustments; Recapitalization, etc. The existence of this
-----------------------------------
Plan and the Options granted hereunder shall not affect in any way the
right or power of the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change
in the Company's capital structure or its

<PAGE>

business, any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or affecting Common
Stock, the dissolution or liquidation of the Company or any sale or transfer
of all or part of its assets or business, or any other corporate act or
proceeding, in which case the provisions of this Article V(C) shall govern
outstanding Options:

1. The Shares with respect to which Options may be granted are
Shares of Common Stock as presently constituted, but, if and whenever the
Company shall effect a subdivision, recapitalization or consolidation of
Shares or the payment of a stock dividend on Shares without receipt of
consideration, the aggregate number and kind of shares of capital stock
issuable under this Plan shall be proportionately adjusted, and each holder
of a then outstanding Option shall have the right to purchase under such
Option, in lieu of the number of Shares as to which the Option was then
exercisable but on the same terms and conditions of exercise set forth in
such Option, the number and kind of shares of capital stock which he or she
would have owned after such subdivision, recapitalization, consolidation or
dividend if immediately prior thereto he had been the holder of record of
the number of Shares as to which such Option was then exercisable.

2. If the Company merges or consolidates with one or more
corporations and the Company shall be the surviving corporation, thereafter
upon exercise of an Option theretofore granted, the Participant shall be
entitled to purchase under such Option in lieu of the number of Shares as
to which such Option shall then be exercisable, but on the same terms and
conditions of exercise set forth in such Option, the number and kind of
shares of capital stock or other property to which the Participant would
have been entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, the
Participant had been the holder of record of the number of Shares as to
which such Option was then exercisable.

3. If the Company shall not be the surviving corporation in any
merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options or
substitutes new Options which are determined by the Board in its sole
discretion to be substantially similar in nature and equivalent in terms
and value for Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised Options
shall expire without additional compensation to the holder thereof;
provided, that, the Committee shall deliver notice to each Participant at
least 20 days prior to the date of consummation of such merger,
consolidation, dissolution or liquidation which would result in the
expiration of the Options and during the period from the date on which such
notice of termination is delivered to the consummation of the merger,
consolidation, dissolution or liquidation, each Participant shall have the
right to exercise in full effective as of such consummation all the Options
that are then outstanding (without regard to limitations on exercise
otherwise contained in the Options other than the requirements of Article
III) but contingent on occurrence of the merger, consolidation, dissolution
or liquidation, and, provided that, if the contemplated transaction does
not take place within a 90-day period after giving such notice for any
reason whatsoever, the notice, accelerated

<PAGE>

vesting and exercise shall be null and void and if and when appropriate new
notice shall be given as aforesaid. Notwithstanding the foregoing, the
Options held by persons subject to Section 16(b) of the Act that would not
have vested under the Plan except pursuant to Article VI(F) prior to the
effective date of such merger, consolidation, liquidation or dissolution
shall not expire on such date but shall expire 30 days after they would
have otherwise vested under the Plan and shall after the effective date of
such merger, consolidation, liquidation or dissolution represent only the
right to receive the number and kind of shares of capital stock or other
property to which the Participant would have been entitled if immediately
prior to the effective date of such merger, consolidation, liquidation or
dissolution the Participant had been the holder of record of the number of
Shares as to which such Option was then exercisable.

4. If as a result of any adjustment made pursuant to the
preceding paragraphs of this Article V(C), any Participant shall become
entitled upon exercise of an Option to receive any shares of capital stock
other than Common Stock, then the number and kind of shares of capital
stock so receivable thereafter shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock set forth in this Article V(C).

5. Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon
direct sale, upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or other securities, and in any case whether
or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Shares subject to
Options theretofore granted or the purchase price per Share.

VI. Awards and Terms of Options
---------------------------

A. Grant. Without further action by the Board or the
-----
stockholders of the Company, each Eligible Director on each Annual Date of
Grant (as hereinafter defined) shall be automatically granted options to
purchase 2,000 shares, subject to the terms of the Plan, provided that no
such Option shall be granted if on the date of grant the Company has
liquidated, dissolved or merged or consolidated with another entity in such
a manner that it is not the surviving entity (unless the Plan has been
assumed by such surviving entity with regard to future grants).

B. Date of Grant. Annual Grants shall be made annually on the
-------------
Effective Date and each anniversary thereof (the "Annual Date of Grant")
commencing as of April 1, 1995, provided that if such date in any year is a
date on which the national securities exchange or automated quotation
system on which the Common Stock is traded is not open for trading, the
grant shall be made on the first day thereafter on which the relevant
exchange or quotation system is open for trading. Notwithstanding the

<PAGE>

foregoing, in the event no Fair Market Value can be determined pursuant to
the provisions hereof, no Annual Grant shall be made for such fiscal year.

C. Option Agreement. Options shall be evidenced by Option
----------------
agreements in substantially the form annexed hereto as Exhibit A as
modified from time to time.

D. Option Terms:
------------

1. Exercise Price. The purchase price per share ("Purchase
--------------
Price") deliverable upon the exercise of an Option shall be 100% of
the Fair Market Value of such Share at the time of the grant of the
Option, or the par value of the Share, whichever is the greater.

2. Period of Exercisability. Except as otherwise provided
------------------------
herein, each Option granted under this Plan shall be exercisable on
and after the first anniversary of the date on which such Option is
granted.

3. Procedure for Exercise. A Participant electing to exercise
----------------------
one or more Options shall give written notice to the Secretary of the
Company of such election and of the number of Options he or she has
elected to exercise. Shares purchased pursuant to the exercise of
Options shall be paid for at the time of exercise in cash or by
delivery of unencumbered Shares owned by the Participant for at least
six months (or such longer period as required by applicable accounting
standards to avoid a charge to earnings) or a combination thereof.

E. Expiration. Except as otherwise provided herein, if not
----------
previously exercised each Option shall expire upon the tenth anniversary of
the date of the grant thereof.

F. Acceleration of Exercisability.
------------------------------

All Options granted and not previously exercisable shall become
fully exercisable immediately upon the later of a Change of Control (as
defined herein). Article (V)(C) shall also apply to the extent, if any, it
is applicable. For this purpose, a "Change of Control" shall be deemed to
have occurred upon:

(a) an acquisition after the Effective Date by any
individual, entity or group (within the meaning of Section 13(d)(3) or
(14)(d)(1) of the Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Act) of more than 30% of the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors, including,
but not limited to, by merger, consolidation or similar corporate
transaction or by purchase; excluding, however, the following:
(x) any such acquisition by the Company or Designated Subsidiaries, or
(y) any such

<PAGE>

acquisition by an employee benefit plan (or related trust) sponsored
or maintained by the Company or Designated Subsidiaries; or

(b) the approval of the stockholders of the Company of
(i) a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of more than 30% of the assets of the
Company and Designated Subsidiaries on a consolidated basis
(determined under generally accepted accounting principles in
accordance with prior practice); excluding, however, such a sale or
other disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 70% of the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors
will be then beneficially owned, directly or indirectly, by the
individuals and entities who were the beneficial owners of the
outstanding Shares immediately prior to such sale or other
disposition, (y) no Person (other than the Company, Designated
Subsidiaries, and any employee benefit plan (or related trust) of the
Company or Designated Subsidiaries or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 70% or more of the outstanding
Shares) will beneficially own, directly or indirectly, 70% or more of
the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors and (z) individuals who were members of the board
immediately prior to the sale or other disposition will constitute at
least a majority of the members of the board of directors of such
corporation.

(c) within any 24 month period beginning on or after the
Effective Date, the persons who were directors of the Company
immediately before the beginning of such period ("Incumbent
Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of directors
of any successor to the Company, provided that, any director who was
not a director as of the date hereof shall be deemed to be an
Incumbent Director if such director was elected to the Board by, or on
the recommendation of or with approval of, at least two-thirds of the
directors who qualified as Incumbent Directors either actually or by
prior operation of this subsection, unless such election,
recommendation or approval was a result of an actual or threatened
election contest of the type contemplated by Regulation 14a-11
promulgated under the Exchange Act or any successor provision.

VII. Effect of Termination of Directorship
-------------------------------------

A. Death, Disability or Otherwise Ceasing to be a Director.
-------------------------------------------------------
Except as otherwise provided herein, upon Termination of Directorship,
other than for Cause, all outstanding Options then exercisable and not
exercised by the Participant prior to such Termination of Directorship
shall remain exercisable by the Participant or, in the case of death, by
the Participant's estate or by the person given authority to exercise such

<PAGE>

Options by his or her will or by operation of law, until the expiration of
the Option in accordance with the terms of the Plan and grant.

B. Cause. Upon Termination of Directorship for Cause, all
-----
outstanding Options of such Participant shall immediately terminate and
shall be null and void.

C. Cancellation of Options. No Options that were not
-----------------------
exercisable during the period such person serves as a director shall
thereafter become exercisable upon a Termination of Directorship for any
reason or no reason whatsoever, and such options shall terminate and become
null and void upon a Termination of Directorship.

VIII. Nontransferability of Options
-----------------------------

Except as provided in the following sentence, no Option shall be
transferable by the Participant otherwise than by will or under applicable
laws of descent and distribution and during the lifetime of the Participant
may be exercised only by the Participant or his or her guardian or legal
representative. An Option shall also be transferable under a domestic
relations order that is a "qualified domestic relations order", as defined
in section 414(p) of the Code, but may thereafter not be further
transferred except as provided in the prior sentence (with the alternate
payee under such order being substituted for "Participant"). In addition,
except as provided above, no Option shall be assigned, negotiated, pledged
or hypothecated in any way (whether by operation of law or otherwise), and
no Option shall be subject to execution, attachment or similar process.
Upon any attempt to transfer, assign, negotiate, pledge or hypothecate any
Option, or in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the provisions hereof,
such Option shall immediately terminate and become null and void.
Notwithstanding the "qualified domestic relations order" exception above,
an Option shall not be transferable unless (i) such transfer is not
considered a disposition within the meaning of Code Section 83 or (ii) such
Option is not immediately exercisable in full on the date of grant.

IX. Rights as a Stockholder
-----------------------

A Participant (or a permitted transferee of an Option) shall have
no rights as a stockholder with respect to any Shares covered by such
Participant's Option until such Participant (or permitted transferee) shall
have become the holder of record of such Shares, and no adjustments shall
be made for dividends in cash or other property or distributions or other
rights in respect to any such Shares, except as otherwise specifically
provided in this Plan.

<PAGE>

X. Termination, Amendment and Modification
---------------------------------------

The Plan shall terminate at the close of business on the fifth
anniversary of the Effective Date (the "Termination Date"), unless
terminated sooner as hereinafter provided, and no Option shall be granted
under the Plan on or after that date. The termination of the Plan shall
not terminate any outstanding Options that by their terms continue beyond
the Termination Date. The Committee at any time or from time to time may
amend this Plan to effect (i) amendments necessary or desirable in order
that this Plan and the Options shall conform to all applicable laws and
regulations, and (ii) any other amendments deemed appropriate, provided
that no such amendment may be made if either the authority to make such
amendment or the amendment would cause the Eligible Directors to cease to
be "disinterested persons" with regard to this Plan or any other stock
option or other equity plan of the Company for purposes of Rule 16b-3 under
the Act, and further provided that the provisions of the Plan relating to
the amount, price and timing of, and eligibility for, awards shall not be
amended more than once every six (6) months except to comport with changes
in the Code and the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder. Notwithstanding the foregoing, the
Committee may not effect any amendment that would require the approval of
the stockholders of the Company under Rule 16b-3 unless such approval is
obtained. In no event, unless no longer required as a condition of
compliance with the requirements of Rule 16b-3 under the Act, shall the
Committee without the approval of stockholders normally entitled to vote
for the election of directors of the Company:

1. increase the number of Shares available for grants under
this Plan;

2. reduce the minimum exercise price at which any Option may be
exercised;

3. change the requirements as to eligibility for participation
under this Plan;

4. change the number of Options to be granted or the date on
which such Options are to be granted; or

5. materially increase the benefits accruing to Participants
hereunder.

This Plan may be amended or terminated at any time by the
stockholders of the Company.

<PAGE>

without the consent of the Participant or the permitted transferee of his
or her Option, alter or impair the rights and obligations arising under any
then outstanding Option.

XI. Use of Proceeds
---------------

The proceeds of the sale of Shares subject to Options under the
Plan are to be added to the general funds of the Company and used for its
general corporate purposes as the Board shall determine.

XII. General Provisions
------------------

A. Right to Terminate Directorship. This Plan shall not impose
-------------------------------
any obligations on the Company to retain any Participant as a director nor
shall it impose any obligation on the part of any Participant to remain as
a director of the Company.

B. Trusts, etc. Nothing contained in the Plan and no action
------------
taken pursuant to the Plan (including, without limitation, the grant of any
Option thereunder) shall create or be construed to create a trust of any
kind, or a fiduciary relationship, between the Company and any Participant
or the executor, administrator or other personal representative or
designated beneficiary of such Participant, or any other persons. Any
reserves that may be established by the Company in connection with the Plan
shall continue to be part of the general funds of the Company, and no
individual or entity other than the Company shall have any interest in such
funds until paid to a Participant. If and to the extent that any
Participant or such Participant's executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment
from the Company pursuant to the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company.

C. Notices. Any notice to the Company required by or in
-------
respect of this Plan will be addressed to the Company at 17th Street and
2nd Avenue, Huntington, West Virginia 25703, Attention: Chief Financial
Officer, or such other place of business as shall become the Company's
principal executive offices from time to time. Each Participant shall be
responsible for furnishing the Committee with the current and proper
address for the mailing to such Participant of notices and the delivery to
such Participant of agreements, Shares and payments. Any such notice to
the Participant will, if the Company has received notice that the
Participant is then deceased, be given to the Participant's personal
representative if such representative has previously informed the Company
of his or her status and address (and has provided such reasonable
substantiating information as the Company may request) by written notice
under this Section. Any notice required by or in respect of this Plan will
be deemed to have been duly given when delivered in person or when
dispatched by telegram or one business day after having been dispatched by
a nationally recognized overnight courier service or three business days
after having been mailed by United States registered or certified mail,

<PAGE>

return receipt requested, postage prepaid. The Company assumes no
responsibility or obligation to deliver any item mailed to such address
that is returned as undeliverable to the addressee and any further mailings
will be suspended until the Participant furnishes the proper address.

D. Severability of Provisions. If any provisions of the Plan
--------------------------
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provisions had not been included.

E. Payment to Minors, Etc. Any benefit payable to or for the
-----------------------
benefit of a minor, an incompetent person or other person incapable of
receipt thereof shall be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge the Committee, the
Company and their employees, agents and representatives with respect
thereto.

F. Headings and Captions. The headings and captions herein are
---------------------
provided for reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of the Plan.

G. Costs. The Company shall bear all expenses included in
-----
administering this Plan, including expenses of issuing Common Stock
pursuant to any Options hereunder.

H. Controlling Law. The Plan shall be construed and enforced
---------------
according to the laws of the State of Delaware.

I. Section 16(b) of the Act. All elections and transactions
------------------------
under the Plan by persons subject to Section 16 of the Act involving shares
of Common Stock are intended to comply with all exemptive conditions under
Rule 16b-3 under the Act. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and
void. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the
Act, as it may deem necessary or proper for the administration and
operation of the Plan and the transaction of business thereunder.

XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses
----------------------------

A. Stock Certificates. Upon any exercise of an Option and
------------------
payment of the exercise price as provided in such Option, a certificate or
certificates for the Shares as to which such Option has been exercised
shall be issued by the Company in the name of the person or persons
exercising such Option and shall be delivered to or upon the

<PAGE>

order of such person or persons, subject, however, in the case of Options
exercised pursuant to Section V(C)3 hereof, to the merger, consolidation,
dissolution or liquidation triggering the rights under that Section.

B. Legends. Certificates for Shares issued upon exercise of an
-------
Option shall bear such legend or legends as the Committee, in its sole
discretion, determines to be necessary or appropriate to prevent a
violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or to implement the provisions of any
agreements between the Company and the Participant with respect to such
Shares.

C. Payment of Expenses. The Company shall pay all issue or
-------------------
transfer taxes with respect to the issuance or transfer of Shares, as well
as all fees and expenses necessarily incurred by the Company in connection
with such issuance or transfer and with the administration of the Plan.

XIV. Listing of Shares and Related Matters
-------------------------------------

If at any time the Board or the Committee shall determine in its
sole discretion that the listing, registration or qualification of the
Shares covered by the Plan upon any national securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the grant of Options or the award or sale of Shares under
the Plan, no Option grant shall be effective and no Shares will be
delivered, as the case may be, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Board.

XV. Withholding Taxes
-----------------

The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the
Participant of any Federal, state or local taxes required by law to be
withheld.

<PAGE>

Exhibit A
---------

STEEL OF WEST VIRGINIA, INC.
OPTION AGREEMENT
PURSUANT TO THE
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
--------------------------------------------------

[Eligible Director]

Dear ________:
Preliminary Statement
- ---------------------

As a director of Steel of West Virginia, Inc. (the "Company") on the Annual
Date of Grant and pursuant to the terms of the Steel of West Virginia, Inc.
1995 Non-Employee Director Stock Option Plan, annexed hereto as Exhibit 1
(the "Plan"), you, as an Eligible Director (as defined in the Plan), have
been automatically granted a nonqualified stock option (the "Option") to
purchase the number of shares of the Company's common stock, par value $.01
per share (the "Common Stock"), set forth below.

The terms of the grant are as follows:

1. Tax Matters. No part of the Option granted hereby is
-----------
intended to qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").

2. Grant of Option. Subject in all respects to the Plan and
---------------
the terms and conditions set forth herein and therein including, without
limitation, the provisions requiring shareholder approval, you are hereby
granted an Option to purchase from the Company up to 2,000 Shares (as
defined in the Plan), at a price per Share of $_________ (the "Option
Price").

3. Vesting. The Option may be exercised by you, in whole or in
-------
part, at any time or from time to time on and after the first anniversary
of the date of grant and prior to the expiration of the Option as provided
herein and in the Plan. Upon the occurrence of a Change of Control (as
defined in the Plan), the Option shall immediately become exercisable with
respect to all Shares subject thereto, regardless of whether the Option has
vested with respect to such Shares upon the later of such Change of Control
and approval of the Plan by the stockholders of the Company.

4. Termination. Unless terminated as provided in the Plan, the
-----------
Option shall expire on the tenth anniversary of this grant.

<PAGE>

5. Restriction on Transfer of Option. Except as provided in
---------------------------------
the Plan with regard to a "qualified domestic relations order", as defined
in Section 414(p) of the Internal Revenue Code, the Option granted hereby
is not transferable otherwise than by will or under the applicable laws of
descent and distribution and during your lifetime may be exercised only by
you or your guardian or legal representative. In addition, the Option
shall not be assigned, negotiated, pledged or hypothecated in any way
(whether by operation of law or otherwise), and the Option shall not be
subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate the Option, or in the
event of any levy upon the Option by reason of any execution, attachment or
similar process contrary to the provisions hereof, the Option shall
immediately become null and void.

6. Rights as a Shareholder. You shall have no rights as a
-----------------------
shareholder with respect to any Shares covered by the Option until you
shall have become the holder of record of the Shares, and no adjustments
shall be made for dividends in cash or other property, distributions or
other rights in respect of any such Shares, except as otherwise
specifically provided for in the Plan.

7. Provisions of Plan Control. This grant is subject to all
--------------------------
the terms, conditions and provisions of the Plan and to such rules,
regulations and interpretations relating to the Plan as may be adopted by
the Committee and as may be in effect from time to time. Any capitalized
term used but not defined herein shall have the meaning ascribed to such
term in the Plan. The annexed copy of the Plan is incorporated herein by
reference. If and to the extent that this grant conflicts or is
inconsistent with the terms, conditions and provisions of the Plan, the
Plan shall control, and this grant shall be deemed to be modified
accordingly.

8. Notices. Any notice or communication given hereunder shall
-------
be in writing and shall be deemed to have been duly given when delivered in
person when dispatched by Telegram or one business day after having been
dispatched by a nationally recognized courier service or three business
days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, to the appropriate party
at the address (or, in the case of notice to the Company, facsimile number)
set forth below (or such other address as the party shall from time to time
specify in accordance with Article XII(D) of the Plan.):

If to the Company, to:

Steel of West Virginia, Inc.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
Attention: Chief Financial Officer

<PAGE>

If to you, to:

the address indicated on the signature page at the end of
this grant.

Sincerely,

STEEL OF WEST VIRGINIA, INC.

By:__________________________
Authorized Officer

Accepted:

- -----------------------------
[PARTICIPANT]
Address:

<PAGE>

Appendix to Preliminary
Proxy Statement for filing
purposes only

___________________________________________________________________________

STEEL OF WEST VIRGINIA, INC.

1995 EMPLOYEE STOCK OPTION PLAN

___________________________________________________________________________

April 1, 1995

<PAGE>

Table of Contents
-----------------

Page

I. Purposes of the Plan . . . . . . . . . . . . . . . . . . . . . . . 1

II. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

III. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4

IV. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A. Duties of the Committee . . . . . . . . . . . . . . . . . . . 4
B. Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . 4
C. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 5
D. Meetings of the Committee . . . . . . . . . . . . . . . . . . 5
E. Determinations . . . . . . . . . . . . . . . . . . . . . . . 5

V. Shares; Adjustment Upon Certain Events . . . . . . . . . . . . . . 5
A. Shares to be Delivered; Fractional Shares . . . . . . . . . . 5
B. Number of Shares . . . . . . . . . . . . . . . . . . . . . . 6
C. Adjustments; Recapitalization, etc. . . . . . . . . . . . . . 6

VI. Awards and Terms of Options . . . . . . . . . . . . . . . . . . . 7
A. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Exercise Price . . . . . . . . . . . . . . . . . . . . . . . 7
C. Number of Shares . . . . . . . . . . . . . . . . . . . . . . 7
D. Exercisability . . . . . . . . . . . . . . . . . . . . . . . 7
E. Acceleration of Exercisability . . . . . . . . . . . . . . . 8
F. Exercise of Options. . . . . . . . . . . . . . . . . . . . . 9
G. Incentive Stock Option Limitations. . . . . . . . . . . . . . 10

VII. Effect of Termination of Employment . . . . . . . . . . . . . . . 10
A. Death, Disability, Retirement, etc. . . . . . . . . . . . . . 10
B. Cause . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
C. Cancellation of Options . . . . . . . . . . . . . . . . . . . 11

VIII. Nontransferability of Options . . . . . . . . . . . . . . . . 11

IX. Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . 11

X. Termination, Amendment and Modification . . . . . . . . . . . . . 12
General Amendments and Termination . . . . . . . . . . . . . . . . 12

XI. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 13

<PAGE>

Page
----

XII. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Right to Terminate Employment . . . . . . . . . . . . . . . . 13
B. Purchase for Investment . . . . . . . . . . . . . . . . . . . 13
C. Trusts, etc. . . . . . . . . . . . . . . . . . . . . . . . . 13
D. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
E. Severability of Provisions . . . . . . . . . . . . . . . . . 14
F. Payment to Minors, Etc. . . . . . . . . . . . . . . . . . . . 14
G. Headings and Captions . . . . . . . . . . . . . . . . . . . . 14
H. Controlling Law . . . . . . . . . . . . . . . . . . . . . . . 14
I. Other Benefits . . . . . . . . . . . . . . . . . . . . . . . 14
J. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
K. Section 162(m) Deduction Limitation . . . . . . . . . . . . . 15
L. Section 16(b) of the Act . . . . . . . . . . . . . . . . . . 15

XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses . . . . . . . . . . . . . . . . . . . 15
A. Stock Certificates . . . . . . . . . . . . . . . . . . . . . 15
B. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 15

XIV. Listing of Shares and Related Matters . . . . . . . . . . . . . . 15

XV. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 16

Form of Option Agreement . . . . . . . . . . . . . . . . . . . . Exhibit A

<PAGE>

Steel of West Virginia, Inc.

1995 Employee Stock Option Plan

I. Purposes of the Plan
--------------------

The purposes of this 1995 Employee Stock Option Plan (the "Plan")
are to enable Steel of West Virginia, Inc. (the "Company") and Designated
Subsidiaries (as defined herein) to attract, retain and motivate certain
employees who are important to the success and growth of the business of
the Company and Designated Subsidiaries and to create a long-term mutuality
of interest between such employees and the stockholders of the Company by
granting the options to purchase Common Stock (as defined herein).

II. Definitions
-----------

In addition to the terms defined elsewhere herein, for purposes
of this Plan, the following terms will have the following meanings when
used herein with initial capital letters:

A. "Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.

B. "Board" means the Board of Directors of the Company.

C. "Cause" means that the Committee shall have determined that
any of the following events has occurred: (1) an act of fraud,
embezzlement, misappropriation of business or theft committed by a
Participant in the course of his or her employment or any intentional or
grossly negligent misconduct of a Participant which injures the business or
reputation of the Company or Designated Subsidiaries; (2) intentional or
grossly negligent damage committed by a Participant to the property of the
Company or Designated Subsidiaries; (3) a Participant's willful failure or
refusal to perform the customary duties and responsibilities of his or her
position with the Company or Designated Subsidiaries; (4) a Participant's
material breach of any covenant, condition or obligation required to be
performed by him or her pursuant to this Plan, the Option Agreement or any
other agreement between him or her and the Company or Designated
Subsidiaries or a Participant's intentional or grossly negligent violation
of any material written policy of the Company or Designated Subsidiaries;
or (5) commission by a Participant of a felony or a crime or act involving
moral turpitude that brings the Company or Designated Subsidiaries into
public disrepute. Cause shall be deemed to exist as of the date any of the
above events occur even if the Committee's determination

<PAGE>

is later and whether or not such determination is made before or after
Termination of Employment.

D. "Code" means the Internal Revenue Code of 1986, as amended.

E. "Committee" means such committee, if any, appointed by the
Board to administer the Plan, consisting of two or more directors as may be
appointed from time to time by the Board each of whom, unless otherwise
determined by the Board, shall be disinterested persons as defined in Rule
16b-3 promulgated under Section 16(b) of the Act and outside directors as
defined in Section 162(m) of the Code. If the Board does not appoint a
committee for this purpose, "Committee" means the Board.

G. "Company" means Steel of West Virginia, Inc., a Delaware
corporation.

H. "Designated Subsidiary" means any corporation that is
defined as a subsidiary corporation in Section 424(f) of the Code. An
entity shall be deemed a Designated Subsidiary only for such periods as the
requisite ownership relationship is maintained.

I. "Disability" means a permanent and total disability,
rendering a Participant unable to perform the duties performed by the
Participant for the Company or Designated Subsidiaries by reason of
physical or mental disability for a period of four consecutive months, or
for a period of more than an aggregate of six months in any twelve month
period. A Disability shall only be deemed to occur at the time of the
determination by the Committee of the Disability.

J. "Fair Market Value" shall mean, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date, the last sales prices
reported for the Common Stock on the applicable date, (i) as reported by
the principal national securities exchange in the United States on which it
is then traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by the
National Association of Securities Dealers, or if the sale of the Common
Stock shall not have been reported or quoted on such date, on the first day
prior thereto on which the Common Stock was reported or quoted. If the
Common Stock is not readily tradeable on a national securities exchange or
any system sponsored by the National Association of Securities Dealers, its
Fair Market Value shall be set by the Committee based upon its assessment
of the cash price that would be paid between a fully informed buyer and
seller under no compulsion to buy or sell (without giving effect to any
discount for a minority interest or any restrictions on transferability or
any lack of liquidity of the stock).

<PAGE>

K. "Incentive Stock Option" shall mean any Option awarded under
this Plan intended to be and designated as an "Incentive Stock Option"
within the meaning of Section 422 of the Code.

L. "Key Employee" means any person who is an officer or other
valuable employee of the Company or a Designated Subsidiary, as determined
by the Committee in its sole discretion. A Key Employee may, but need not,
be an officer of the Company or a Designated Subsidiary.

M. "Non-Qualified Stock Option" shall mean any Option awarded
under this Plan that is not an Incentive Stock Option.

N. "Option" means the right to purchase one Share at a
prescribed purchase price on the terms specified in the Plan.

O. "Participant" means a Key Employee who is granted Options
under the Plan which Options have not expired.

P. "Person" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of
such Person as the context may require.

Q. "Retirement" means a Termination of Employment at or after
age 65 (or, with the consent of the Committee, any age between age 55 and
65).

R. "Securities Act" means the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.

S. "Share" means a share of Common Stock.

T. "Ten Percent Shareholder" shall mean a person owning Common
Stock of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company as defined in
Section 422 of the Code.

U. "Termination of Employment" with respect to an individual
means that individual is no longer actively employed by the Company or a
Designated Subsidiary on a full-time basis, irrespective of whether or not
such employee is receiving salary continuance pay, is continuing to
participate in other employee benefit programs or is otherwise receiving
severance type payments. In the event an entity shall cease to be a
Designated Subsidiary, there shall be deemed a Termination of Employment of
any individual who is not otherwise an employee of the Company or another
Designated Subsidiary at the time the entity ceases to be a Designated
Subsidiary. A Termination of Employment shall not include a leave of
absence approved for purposes of the Plan by the Committee.

<PAGE>

III. Effective Date
--------------

The Plan shall become effective on April 1, 1995 (the "Effective
Date"), subject to its approval by the stockholders of the Company in
accordance with Rule 16b-3 promulgated under the Act within one year after
the Plan is adopted by the Board of Directors of the Company. Grants of
Options by the Committee under the Plan may be made on or after the
Effective Date of the Plan, including retroactively, provided that, if the
Plan is not approved by the stockholders of the Company as provided in the
preceding sentence, all Options which have been granted by the Committee
shall be null and void. No Options may be exercised prior to the approval
of the Plan by the stockholders of the Company as aforesaid.

IV. Administration
--------------

A. Duties of the Committee. The Plan shall be administered and
-----------------------
interpreted by the Committee. The Committee shall have full authority to
interpret the Plan and to decide any questions and settle all controversies
and disputes that may arise in connection with the Plan; to establish,
amend and rescind rules for carrying out the Plan; to administer the Plan,
subject to its provisions; to select Participants in, and grant Options
under, the Plan; to determine the terms, exercise price and form of
exercise payment for each Option granted under the Plan; to determine the
consideration to be received by the Company in exchange for the grant of
the Options; to determine whether and to what extent Incentive Stock
Options and Non-Qualified Stock Options, or any combination thereof, are to
be granted hereunder to one or more Key Employees to prescribe the form or
forms of instruments evidencing Options and any other instruments required
under the Plan (which need not be uniform) and to change such forms from
time to time; and to make all other determinations and to take all such
steps in connection with the Plan and the Options as the Committee, in its
sole discretion, deems necessary or desirable. The Committee shall not be
bound to any standards of uniformity or similarity of action,
interpretation or conduct in the discharge of its duties hereunder,
regardless of the apparent similarity of the matters coming before it. Any
determination, action or conclusion of the Committee shall be final,
conclusive and binding on all parties. Anything in the Plan to the
contrary notwithstanding, no term of this Plan relating to Incentive Stock
Options shall be interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be so exercised, so as to disqualify
the Plan under Section 422 of the Code, or, without the consent of the
Participants affected, to disqualify any Incentive Stock Option under such
Section 422.

<PAGE>

C. Indemnification. To the maximum extent permitted by
---------------
applicable law, no officer of the Company or member or former member of the
Committee or of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
To the maximum extent permitted by applicable law or the Certificate of
Incorporation or By-Laws of the Company and to the extent not covered by
insurance, each officer and member or former member of the Committee or of
the Board shall be indemnified and held harmless by the Company against any
cost or expense (including reasonable fees of counsel reasonably acceptable
to the Company) or liability (including any sum paid in settlement of a
claim with the approval of the Company), and advanced amounts necessary to
pay the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the Plan,
except to the extent arising out of such officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in addition
to any rights of indemnification the officers, members or former members
may have as directors under applicable law or under the Certificate of
Incorporation or By-Laws of the Company or Designated Subsidiary.
Notwithstanding anything else herein, this indemnification will not apply
to the actions or determinations made by an individual with regard to
Options granted to him or her under this Plan.

D. Meetings of the Committee. The Committee shall adopt such
-------------------------
rules and regulations as it shall deem appropriate concerning the holding
of its meetings and the transaction of its business. Any member of the
Committee may be removed from the Committee at any time either with or
without cause by resolution adopted by the Board, and any vacancy on the
Committee may at any time be filled by resolution adopted by the Board.
All determinations by the Committee shall be made by the affirmative vote
of a majority of its members. Any such determination may be made at a
meeting duly called and held at which a majority of the members of the
Committee are in attendance in person or through telephonic communication.
Any determination set forth in writing and signed by all the members of the
Committee shall be as fully effective as if it had been made by a majority
vote of the members at a meeting duly called and held.

E. Determinations. Each determination, interpretation or other
--------------
action made or taken pursuant to the provisions of this Plan by the
Committee shall be final, conclusive and binding for all purposes and upon
all persons, including, without limitation, the Participants, the Company
and Designated Subsidiaries, directors, officers and other employees of the
Company and Designated Subsidiaries, and the respective heirs, executors,
administrators, personal representatives and other successors in interest
of each of the foregoing.

V. Shares; Adjustment Upon Certain Events
--------------------------------------

<PAGE>

held in treasury. No fractional Shares will be issued or transferred upon
the exercise of any Option. In lieu thereof, the Company shall pay a cash
adjustment equal to the same fraction of the Fair Market Value of one Share
on the date of exercise.

B. Number of Shares. Subject to adjustment as provided in this
----------------
Article V, the maximum aggregate number of Shares that may be issued under
the Plan shall be 430,000. If Options are for any reason canceled, or
expire or terminate unexercised, the Shares covered by such Options shall
again be available for the grant of Options, subject to the foregoing
limit.

C. Adjustments; Recapitalization, etc. The existence of the
-----------------------------------
Plan and the Options granted hereunder shall not affect in any way the
right or power of the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change
in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of bonds, debentures, preferred or
prior preference stocks ahead of or affecting Common Stock, the dissolution
or liquidation of the Company or Designated Subsidiaries, any sale or
transfer of all or part of its assets or business or any other corporate
act or proceeding. The Committee may make or provide for such adjustments
in the maximum number of Shares specified in Article V(B), in the number of
Shares covered by outstanding Options granted hereunder, and/or in the
Purchase Price (as hereinafter defined) applicable to such Options or such
other adjustments in the number and kind of securities received upon the
exercise of Options, as the Committee in its sole discretion may determine
is equitably required to prevent dilution or enlargement of the rights of
Participants or to otherwise recognize the effect that otherwise would
result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company,
merger, consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase securities or any
other corporate transaction or event having an effect similar to any of the
foregoing. In the event of a merger or consolidation in which the Company
is not the surviving entity or in the event of any transaction that results
in the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all of the
Company's assets (the foregoing being referred to as "Acquisition Events"),
then the Committee may in its sole discretion terminate all outstanding
Options effective as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20 days prior
to the date of consummation of the Acquisition Event; provided that, during
the period from the date on which such notice of termination is delivered
to the consummation of the Acquisition Event, each Participant shall have
the right to exercise in full all the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the
Options) but contingent on occurrence of the Acquisition Event, and,
provided that, if the Acquisition Event does not take place within a
specified period after giving such notice for any reason whatsoever, the
notice and exercise shall be null and void. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of

<PAGE>

any class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor or upon conversion
of shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number and class of shares and/or other securities or
property subject to Options theretofore granted or the Purchase Price (as
hereinafter defined).

VI. Awards and Terms of Options
---------------------------

A. Grant. The Committee may grant Non-Qualified Stock Options
-----
or Incentive Stock Options, or any combination thereof to Key Employees.
To the extent that the maximum number of authorized Shares with respect to
which Options may be granted are not granted in a particular calendar year
to a Participant (beginning with the year in which the Participant receives
his or her first grant of Options hereunder), such ungranted Options for
any year shall increase the maximum number of Shares with respect to which
Options may be granted to such Participant in subsequent calendar years
during the term of the Plan until used. To the extent that any Option does
not qualify as an Incentive Stock Option (whether because of its provisions
or the time or manner of its exercise or otherwise), such Option or the
portion thereof which does not qualify, shall constitute a separate Non-
Qualified Stock Option. Each Option shall be evidenced by an Option
agreement (the "Option Agreement") in such form as the Committee shall
approve from time to time.

B. Exercise Price. The purchase price per Share (the "Purchase
--------------
Price") deliverable upon the exercise of a Non-Qualified Stock Option shall
be determined by the Committee and set forth in a Participant's Option
Agreement, provided that the Purchase Price shall not be less than the par
value of a Share. The Purchase Price deliverable upon the exercise of an
Incentive Stock Option shall be determined by the Committee and set forth
in a Participant's Option Agreement but shall be not less than 100% of the
Fair Market Value of a Share at the time of grant; provided, however, if an
Incentive Stock Option is granted to a Ten Percent Shareholder, the
Purchase Price shall be no less than 110% of the Fair Market Value of a
Share.

C. Number of Shares. The Option Agreement shall specify the
----------------
number of Options granted to the Participant, as determined by the
Committee in its sole discretion.

D. Exercisability. Except as otherwise provided herein or in
--------------
the Option Agreement, each Option granted under this Plan shall be
exercisable on and after the first anniversary of the date as of which such
Option is granted, and at the time of grant the Committee shall specify on
what terms the Options granted shall be exercisable, provided that the
Committee may at any time accelerate the time at which all or any part of
the Options may be exercised and may waive any other conditions to
exercise. No Option shall be exercisable after the expiration of ten years
from the date of grant; provided,

<PAGE>

however, the term of an Incentive Stock Option granted to a Ten Percent
Shareholder may not exceed five years. Each Option shall be subject to
earlier termination as provided in Article VII below.

E. Acceleration of Exercisability.
------------------------------

All Options granted and not previously exercisable shall
become fully exercisable immediately upon the later of a Change of
Control (as defined herein). For this purpose, a "Change of Control"
shall be deemed to have occurred upon:

(a) an acquisition after the Effective Date by any
individual, entity or group (within the meaning of Section 13d-3
or 14d-1 of the Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act) of more than 30% of the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors, including, but not limited to, by merger,
consolidation or similar corporate transaction or by purchase;
excluding, however, the following: (x) any such acquisition by
the Company or Designated Subsidiaries or (y) any such
acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or Designated
Subsidiaries; or

(b) the approval of the stockholders of the Company of
(i) a complete liquidation or dissolution of the Company or (ii)
the sale or other disposition of more than 80% of the assets of
the Company and Designated Subsidiaries on a consolidated basis
(determined under generally accepted accounting principles as
determined in good faith by the Committee); excluding, however,
such a sale or other disposition to a corporation with respect to
which, following such sale or other disposition, (x) more than
70% of the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors will be then beneficially owned, directly
or indirectly, by the individuals and entities who were the
beneficial owners of the outstanding Shares immediately prior to
such sale or other disposition, (y) no Person (other than the
Company, Designated Subsidiaries, and any employee benefit plan
(or related trust) of the Company or Designated Subsidiaries or
such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly,
70% or more of the outstanding Shares) will beneficially own,
directly or indirectly, 70% or more of the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and (z)
individuals who were members of the board prior to such sale or
other disposition will constitute at least a majority of the
members of the board of directors of such corporation.

<PAGE>

(c) within any 24 month period beginning on or after
the Effective Date, the persons who were directors of the Company
immediately before the beginning of such period ("Incumbent
Directors") shall cease (for any reason other than death) to
constitute at least a majority of the Board or the board of
directors of any successor to the Company, provided that, any
director who was not a director as of the date hereof shall be
deemed to be an Incumbent Director if such director was elected
to the Board by, or on the recommendation of or with approval of,
at least two-thirds of the directors who qualified as Incumbent
Directors either actually or by prior operation of this
subsection, unless such election, recommendation or approval was
a result of an actual or threatened election contest of the type
contemplated by Regulation 14a-11 promulgated under the Exchange
Act or any successor provision.

F. Exercise of Options.
-------------------

1. A Participant may elect to exercise one or more Options
by giving written notice to the Committee of such election and of the
number of Options such Participant has elected to exercise,
accompanied by payment in full of the aggregate Purchase Price for the
number of Shares for which the Options are being exercised.

2. Shares purchased pursuant to the exercise of Options
shall be paid for at the time of exercise as follows:

(a) in cash or by check, bank draft or money order
payable to the order of Company;

(b) if the Shares are traded on a national securities
exchange, through the delivery of irrevocable instructions to a
broker to deliver promptly to the Company an amount equal to the
aggregate Purchase Price; or

(c) on such other terms and conditions as may be
acceptable to the Committee (which may include payment in full or
in part by the transfer of Shares which have been owned by the
Participant for at least six months or the surrender of Options
owned by the Participant) and in accordance with applicable law.

3. Upon receipt of payment, the Company shall deliver to
the Participant as soon as practicable a certificate or certificates
for the Shares then purchased.

<PAGE>

G. Incentive Stock Option Limitations. To the extent that the
----------------------------------
aggregate Fair Market Value (determined as of the time of grant) of the
Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Participant during any calendar year under the
Plan and/or any other stock option plan of the Company or any subsidiary or
parent corporation (within the meaning of Section 424 of the Code) exceeds
$100,000, such Options shall be treated as Options which are not Incentive
Stock Options.

To the extent permitted under Section 422 of the Code, or the
applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement, if (i) a Participant's employment with the Company
or Designated Subsidiary is terminated by reason of death, Disability,
Retirement or termination without Cause, and (ii) the portion of any
Incentive Stock Option that would be exercisable during the post-
termination period specified under Article VII but for the $100,000
limitation currently contained in Section 422(d) of the Code, is greater
than the portion of such Stock Option that is immediately exercisable as an
`incentive stock option' during such post-termination period under Section
422, such excess shall be treated as a Non-Qualified Stock Option. If the
exercise of an Incentive Stock Option is accelerated for any reason, any
portion of such Option that is not exercisable as an Incentive Stock Option
by reason of the $100,000 limitation contained in Section 422(d) of the
Code shall be treated as a Non-Qualified Stock Option.

Should any of the foregoing provisions not be necessary in order
for the Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of the
shareholders of the Company, except as otherwise required by law.

VII. Effect of Termination of Employment
-----------------------------------

A. Death, Disability, Retirement, etc. Except as otherwise
-----------------------------------
provided in the Participant's Option Agreement, upon Termination of
Employment other than for Cause, all outstanding Options then exercisable
and not exercised by the Participant prior to such Termination of
Employment (and any Options not previously exercisable but made exercisable
by the Committee at or after the Termination of Employment) shall remain
exercisable by the Participant (or in the case of death, by the
Participant's estate or by the person given authority to exercise such
Options by the Participant's will or by operation of law) until the
expiration of the Option in accordance with the terms of the Plan and
grant.

B. Cause. Upon the Termination of Employment of a Participant
-----
for Cause, or if the Company or a Designated Subsidiary obtains or
discovers information after Termination of Employment that such Participant
had engaged in conduct that would have justified a Termination of
Employment for Cause during employment, all

<PAGE>

outstanding Options of such Participant shall immediately terminate and
shall be null and void.

C. Cancellation of Options. Except as otherwise provided in
-----------------------
Article VI(E), no Options that were not exercisable during the period of
employment shall thereafter become exercisable upon a Termination of
Employment for any reason or no reason whatsoever, and such options shall
terminate and become null and void upon a Termination of Employment, unless
the Committee determines in its sole discretion that such Options shall be
exercisable.

VIII. Nontransferability of Options
-----------------------------

No Option shall be transferable by the Participant otherwise than
by will or under applicable laws of descent and distribution, and during
the lifetime of the Participant may be exercised only by the Participant or
his or her guardian or legal representative. An option shall also be
transferable under a domestic relations order that is a "qualified domestic
relations order", as defined in Section 414(p) of the Code, but may
thereafter not be further transferred except as provided in the prior
sentence (with the alternate payee under such order being substituted for
"Participant"). In addition, except as provided above, no Option shall be
assigned, negotiated, pledged or hypothecated in any way (whether by
operation of law or otherwise), and no Option shall be subject to
execution, attachment or similar process. Upon any attempt to transfer,
assign, negotiate, pledge or hypothecate any Option, or in the event of any
levy upon any Option by reason of any execution, attachment or similar
process contrary to the provisions hereof, such Option shall immediately
terminate and become null and void. Notwithstanding the "qualified
domestic relations order" exception above, an Incentive Stock Option shall
not be transferable except as permitted under Code Section 422(b)(5) and a
Nonqualified Stock Option shall not be transferable unless (i) such
transfer is not considered a disposition within the meaning of Code Section
83 or (ii) such Option is not immediately exercisable in full on the date
of grant.

IX. Rights as a Stockholder
-----------------------

<PAGE>

X. Termination, Amendment and Modification
---------------------------------------

General Amendments and Termination. The Plan shall terminate at
----------------------------------
the close of business on the fifth anniversary of the Effective Date (the
"Termination Date"), unless terminated sooner as hereinafter provided, and
no Option shall be granted under the Plan on or after that date. The
termination of the Plan shall not terminate any outstanding Options that by
their terms continue beyond the Termination Date. At any time prior to the
Termination Date, the Committee may amend or terminate the Plan or suspend
the Plan in whole or in part.

The Committee may at any time, and from time to time, amend, in
whole or in part, any or all of the provisions of the Plan (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirements referred to in Article XII), or suspend or
terminate it entirely, retroactively or otherwise; provided, however, that,
-------- -------
unless otherwise required by law or specifically provided herein, the
rights of a Participant with respect to Options granted prior to such
amendment, suspension or termination, may not, be materially impaired
without the consent of such Participant and, provided further, without the
approval of the stockholders of the Company entitled to vote, no amendment
may be made which would (i) materially increase the aggregate number of
shares of Common Stock that may be issued under this Plan (except by
operation of Article V); (ii) decrease the minimum Purchase Price of any
Option or (iii) extend the maximum option period.

The Committee may amend the terms of any Option granted,
prospectively or retroactively, but, subject to Article VI above or as
otherwise provided herein, no such amendment or other action by the
Committee shall materially impair the rights of any Participant without the
Participant's consent. No modification of an Option shall adversely affect
the status of an Incentive Stock Option as an incentive stock option under
Section 422 of the Code. Notwithstanding the foregoing, however, no such
amendment may, without the approval of the stockholders of the Company,
effect any change that would require stockholder approval under applicable
law.

This Plan and any Options granted hereunder shall terminate and
be void if this Plan does not receive the approval of the stockholders of
the Company that may be required under Rule 16b-3 promulgated under the Act
within one year after the Plan is adopted by the Board of Directors of the
Company. Except as otherwise required by law, or as provided in this Plan,
no termination, amendment or modification of this Plan may, without the
consent of the Participant or the permitted transferee of his or her
Option, alter or impair the rights and obligations arising under any then
outstanding Option.

<PAGE>

XI. Use of Proceeds
---------------

The proceeds of the sale of Shares subject to Options under the
Plan are to be added to the general funds of Company and used for its
general corporate purposes as the Board shall determine.

XII. General Provisions
------------------

A. Right to Terminate Employment. Neither the adoption of the
-----------------------------
Plan nor the grant of Options shall impose any obligation on the Company or
Designated Subsidiaries to continue the employment of any Participant, nor
shall it impose any obligation on the part of any Participant to remain in
the employ of the Company or Designated Subsidiaries.

B. Purchase for Investment. If the Board or the Committee
-----------------------
determines that the law so requires, the holder of an Option granted
hereunder shall, upon any exercise or conversion thereof, execute and
deliver to the Company a written statement, in form satisfactory to the
Company, representing and warranting that such Participant is purchasing or
accepting the Shares then acquired for such Participant's own account and
not with a view to the resale or distribution thereof, that any subsequent
offer for sale or sale of any such Shares shall be made either pursuant to
(i) a Registration Statement on an appropriate form under the Securities
Act, which Registration Statement shall have become effective and shall be
current with respect to the Shares being offered and sold, or (ii) a
specific exemption from the registration requirements of the Securities
Act, and that in claiming such exemption the holder will, prior to any
offer for sale or sale of such Shares, obtain a favorable written opinion,
satisfactory in form and substance to the Company, from counsel acceptable
to the Company as to the availability of such exception.

C. Trusts, etc. Nothing contained in the Plan and no action
------------
taken pursuant to the Plan (including, without limitation, the grant of any
Option thereunder) shall create or be construed to create a trust of any
kind, or a fiduciary relationship, between the Company and any Participant
or the executor, administrator or other personal representative or
designated beneficiary of such Participant, or any other persons. Any
reserves that may be established by the Company in connection with the Plan
shall continue to be part of the general funds of the Company, and no
individual or entity other than the Company shall have any interest in such
funds until paid to a Participant. If and to the extent that any
Participant or such Participant's executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment
from the Company pursuant to the Plan, such right shall be no greater than
the right of an unsecured general creditor of the Company.

<PAGE>

D. Notices Any notice to the Company required by or in respect
-------
of this Plan will be addressed to the Company at 17th Street and 2nd
Avenue, Huntington, West Virginia 25703, Attention: Chief Financial
Officer, or such other place of business as shall become the Company's
principal executive offices from time to time. Each Participant shall be
responsible for furnishing the Committee with the current and proper
address for the mailing to such Participant of notices and the delivery to
such Participant of agreements, Shares and payments. Any such notice to
the Participant will, if the Company has received notice that the
Participant is then deceased, be given to the Participant's personal
representative if such representative has previously informed the Company
of his status and address (and has provided such reasonable substantiating
information as the Company may request) by written notice under this
Section. Any notice required by or in respect of this Plan will be deemed
to have been duly given when delivered in person or when dispatched by
telegram or one business day after having been dispatched by a nationally
recognized overnight courier service or three business days after having
been mailed by United States registered or certified mail, return receipt
requested, postage prepaid. The Company assumes no responsibility or
obligation to deliver any item mailed to such address that is returned as
undeliverable to the addressee and any further mailings will be suspended
until the Participant furnishes the proper address.

E. Severability of Provisions. If any provisions of the Plan
--------------------------
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provisions had not been included.

F. Payment to Minors, Etc. Any benefit payable to or for the
-----------------------
benefit of a minor, an incompetent person or other person incapable of
receipt thereof shall be deemed paid when paid to such person's guardian or
to the party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge the Committee, the
Company and their employees, agents and representatives with respect
thereto.

G. Headings and Captions. The headings and captions herein are
---------------------
provided for reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of the Plan.

H. Controlling Law. The Plan shall be construed and enforced
---------------
according to the laws of the State of Delaware.

I. Other Benefits. No payment under this Plan shall be
--------------
considered compensation for purposes of computing benefits under any
retirement plan of the Company or a Designated Subsidiary nor affect any
benefits under any other benefit plan now or subsequently in effect under
which the availability of benefits is related to the level of compensation.

<PAGE>

J. Costs. The Company shall bear all expenses included in
-----
administering this Plan, including expenses of issuing Common Stock
pursuant to any Options hereunder.

K. Section 162(m) Deduction Limitation. The Committee at any
-----------------------------------
time may in its sole discretion limit the number of Options that can be
exercised in any taxable year of the Company, to the extent necessary to
prevent the application of Section 162(m) of the Code (or any similar or
successor provision), provided that the Committee may not postpone the
earliest date on which Options can be exercised beyond the last day of the
stated term of such Options.

L. Section 16(b) of the Act. All elections and transactions
------------------------
under the Plan by persons subject to Section 16 of the Exchange Act
involving shares of Common Stock are intended to comply with all exemptive
conditions under Rule 16b-3 promulgated under the Act. The Committee may
establish and adopt written administrative guidelines, designed to
facilitate compliance with Section 16(b) of the Act, as it may deem
necessary or proper for the administration and operation of the Plan and
the transaction of business thereunder.

XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses
----------------------------

B. Legends. Certificates for Shares issued upon exercise of an
-------
Option shall bear such legend or legends as the Committee, in its sole
discretion, determines to be necessary or appropriate to prevent a
violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or to implement the provisions of any
agreements between Company and the Participant with respect to such Shares.

XIV. Listing of Shares and Related Matters
-------------------------------------

If at any time the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the grant of Options or

<PAGE>

the award or sale of Shares under the Plan, no Option grant shall be
effective and no Shares will be delivered, as the case may be, unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.

XV. Withholding Taxes
-----------------

The Company shall have the right to require prior to the issuance
or delivery of any shares of Common Stock payment by the Participant of any
Federal, state or local taxes required by law to be withheld.

The Committee may permit any such withholding obligation to be
satisfied by reducing the number of shares of Common Stock otherwise
deliverable. A person required to file reports under Section 16(a) of the
Exchange Act with respect to securities of the Company may elect to have a
sufficient number of shares of Common Stock withheld to fulfill such tax
obligations (hereinafter a "Withholding Election") only if the election
complies with such conditions as are necessary to prevent the withholding
of such shares from being subject to Section 16(b) of the Exchange Act. To
the extent necessary under then current law, such conditions shall include
the following: (x) the Withholding Election shall be subject to the
approval of the Committee and (y) the Withholding Election is made (i)
during the period beginning on the third business day following the date of
release for publication of the quarterly or annual summary statements of
sales and earnings of the Company and ending on the twelfth business day
following such date or is made in advance but takes effect during such
period, (ii) six (6) months before the stock award becomes taxable, or
(iii) during any other period in which a Withholding Election may be made
under the provisions of Rule 16b-3 promulgated under the Act. Any fraction
of a share of Common Stock required to satisfy such tax obligations shall
be disregarded and the amount due shall be paid instead in cash by the
Participant.

<PAGE>

Exhibit A
---------

STEEL OF WEST VIRGINIA, INC.
OPTION AGREEMENT
PURSUANT TO THE
1995 EMPLOYEE STOCK OPTION PLAN
-------------------------------------

AGREEMENT, dated ____________, 1995 by and between Steel of West Virginia,
Inc. (the "Company") and ___________________ (the "Participant").

Preliminary Statement
- ---------------------

The Committee of the Board of Directors of the Company (the "Committee"),
pursuant to the Company's 1995 Employee Stock Option Plan, annexed hereto
as Exhibit A (the "Plan"), has authorized the granting to the Participant,
as a Key Employee (as defined in the Plan), of a [nonqualified stock
option] [incentive stock option] (the "Option") to purchase the number of
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"), set forth below. The parties hereto desire to enter into this
Agreement in order to set forth the terms of the Option.

Accordingly, the parties hereto agree as follows:

1. Tax Matters. [No part of the Option granted hereby is
-----------
intended to qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").] [The Option
granted hereby is intended to qualify as an "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").]

2. Grant of Option. Subject in all respects to the Plan and
---------------
the terms and conditions set forth herein and therein, the Participant is
hereby granted the Option to purchase from the Company up to _______ Shares
(as defined in the Plan), at a price per Share of $_________ (the "Option
Price").

3. Vesting. The Option may be exercised by the Participant, in
-------
whole or in part, at any time or from time to time on and after the first
anniversary of the date of grant and prior to the expiration of the Option
as provided herein and in the Plan.

Upon the occurrence of a Change of Control (as defined in the
Plan), the Option shall immediately become exercisable with respect to all
Shares subject thereto, regardless of whether the Option has vested with
respect to such Shares.

<PAGE>

4. Termination. Unless terminated as provided in the Plan, the
-----------
Option shall expire on the tenth anniversary of this grant.

5. Restriction on Transfer of Option. Except as provided in
---------------------------------
the Plan with regard to a "qualified domestic relations order" as defined
in Section 414(p) of the Internal Revenue Code, the Option granted hereby
is not transferable otherwise than by will or under the applicable laws of
descent and distribution and during the lifetime of the Participant may be
exercised only by the Participant or the Participant's guardian or legal
representative. In addition, the Option shall not be assigned, negotiated,
pledged or hypothecated in any way (whether by operation of law or
otherwise), and the Option shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate, pledge
or hypothecate the Option, or in the event of any levy upon the Option by
reason of any execution, attachment or similar process contrary to the
provisions hereof, the Option shall immediately become null and void.

6. Rights as a Stockholder. The Participant shall have no
-----------------------
rights as a stockholder with respect to any Shares covered by the Option
until the Participant shall have become the holder of record of the Shares,
and no adjustments shall be made for dividends in cash or other property,
distributions or other rights in respect of any such Shares, except as
otherwise specifically provided for in the Plan.

7. Provisions of Plan Control. This Agreement is subject to
--------------------------
all the terms, conditions and provisions of the Plan, including, without
limitation, the amendment provisions thereof, and to such rules,
regulations and interpretations relating to the Plan as may be adopted by
the Committee and as may be in effect from time to time. Any capitalized
term used but not defined herein shall have the meaning ascribed to such
term in the Plan. The annexed copy of the Plan is incorporated herein by
reference. If and to the extent that this Agreement conflicts or is
inconsistent with the terms, conditions and provisions of the Plan, the
Plan shall control, and this Agreement shall be deemed to be modified
accordingly.

8. Notices. Any notice or communication given hereunder shall
-------
be in writing and shall be deemed to have been duly given when delivered in
person, when dispatched by Telegram or one business day after having been
dispatched by a nationally recognized courier service or three business
days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, to the appropriate party
at the address set forth below (or such other address as the party shall
from time to time specify in accordance with Article XII(D) of the Plan.):

If to the Company, to:

Steel of West Virginia, Inc.
17th Street and 2nd Avenue
Huntington, West Virginia 25703
Attention: Chief Financial Officer

<PAGE>

If to the Participant, to:

the address indicated on the signature page at the end of
this Agreement.

9. No Obligation to Continue Employment. This Agreement does
------------------------------------
not guarantee that the Company or any Designated Subsidiary will employ the
Participant for any specific time period, nor does it modify in any respect
the Company's or any Designated Subsidiary's right to terminate or modify
the Participant's employment or compensation.

IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.

STEEL OF WEST VIRGINIA, INC.

By:
---------------------------------
Authorized Officer

------------------------------------
[PARTICIPANT]
Address: