SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..............to ...........
Commission file number 0-14061
STEEL TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0712014
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15415 Shelbyville Road, Louisville, KY 40245
(Address of principal executive offices)
Registrant's telephone number, including area code 502-245-2110
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [X]
Aggregate market value of the voting stock (which consists solely of shares of
Common Stock) held by non-affiliates of the registrant as of November 30,
1995, computed by reference to the closing price of the registrant's Common
Stock, as quoted in the NASDAQ National Market System on such date:
$73,135,274.
Number of shares of the registrant's Common Stock outstanding at November 30,
1995: 11,989,565.
Portions of the registrant's annual report to shareholders for the fiscal year
ended September 30, 1995 are incorporated by reference into Part II.
Portions of the definitive proxy statement furnished to shareholders of
the registrant in connection with the annual meeting of shareholders to be
held on January 25, 1996 are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
GENERAL
Steel Technologies Inc. ("the Company") was incorporated under the laws of
the state of Kentucky in 1971 as Southern Strip Steel, Inc. In June 1985, the
name of the corporation was changed to Steel Technologies Inc.
The Company is an intermediate steel processor engaged in the business of
processing flat rolled steel to specified close tolerances in response to
orders from industrial customers who require steel of precise thickness,
width, temper and finish for their manufacturing purposes. The business of
the Company consists of purchasing commercial tolerance steel in coils
up to 72 inches in width from major steel mills, processing it to the precise
thickness, width, temper and finish specified by its customers and
distributing the processed steel from its Kentucky, Indiana, Michigan,
Maryland and Mexico plants to locations in 30 states primarily in the East,
Midwest and South, as well as into Mexico and Canada. The Company's principal
processed products include cold-rolled strip and sheet, cold-rolled one-pass
strip, high carbon and alloy strip and sheet, hot-rolled strip and sheet,
high strength low alloy strip and sheet, hot rolled pickle and oil and
coated strip and sheet.
Intermediate steel processors occupy a niche between the primary steel
producers and industrial customers who need processed steel for their end-
product manufacturing purposes. The primary producers have historically
emphasized the sale of commercial tolerance steel to large volume purchasers
and have generally viewed the intermediate steel processor as an integral
part of this customer base. Furthermore, end-product manufacturers have
increasingly sought to purchase steel with closer tolerances, on shorter lead
times, and with more reliable and more frequent delivery than the primary
producers can efficiently provide. Additionally, most manufacturers are not
willing to commit to the investment in technology, equipment and inventory
required to further process the steel for use in their manufacturing
operations. These industry forces have created a market in which the
strength of the Company's business is based upon its capability to process
steel to more precise specifications and to service the steel purchasing and
delivery requirements of its customers more expeditiously than the primary
producers.
STEEL PROCESSING
The Company maintains a substantial inventory of coiled steel purchased from
the primary producers and mini-mills. This steel, purchased as a continuous
sheet, typically 36 to 72 inches wide, between .015 and .625 inches thick, and
rolled into a 10 to 25-ton coil--is known as "commercial tolerance" because its
ranges of thickness, width and temper are established by general industry
standards which may not be of sufficient quality for the manufacturing purposes
of the Company's customers. By purchasing various kinds of steel in large
quantities and at predetermined intervals, the Company attempts to purchase
its raw materials at the lowest competitive prices for the quality purchased.
Customer orders are entered in a computerized order entry system, and
appropriate inventory is then selected and scheduled for processing in
accordance with the customer's specified delivery date. The Company attempts
to maximize yield from its inventory by scheduling customer orders to use to
the fullest extent practicable the purchased widths of its coils. The first
processing function typically involves slitting coils into specified widths
subject to close tolerances. After slitting, the processed product is ready
for either delivery to the customer or additional processing.
Many of the Company's orders involve an additional process known as "cold
reduction." Cold reduction reduces the thickness of the steel to a customer's
specification by passing the steel through a set of rolls under pressure. This
process significantly increases the value added by the Company to the product.
During the rolling process the edges of the steel may also be conditioned into
square, full round or partially round shapes. After cold reduction, it is
sometimes necessary to subject the rolled steel to high temperatures for long
periods of time in order to "anneal" or soften the steel. This annealing
capability is accomplished in the Company's own furnaces and is particularly
suitable for high carbon and alloy strip orders. After annealing, orders are
then ready for additional slitting and cold reduction and subsequent shipment
to the customer.
The Company has achieved high quality and productivity levels through its
commitment to state-of-the-art equipment used to perform the slitting, cold
reduction and annealing processes. The Company's slitting lines are capable of
maintaining width tolerances of +/-.002 inches. The Company has computerized
all of its rolling equipment, which has improved its capability to deliver flat
rolled steel products processed to closer than standard tolerances. The
Company's computerized rolling mills are capable of maintaining thickness
tolerances of +/-.0003 inches. Computers monitor thickness during the cold
reduction process, rapidly adjusting roll position to maintain the proper
tolerance as the steel passes through the rolling mill. The computers also
provide both visual displays and documented records of the thickness
maintained throughout the entire coil. Annealing is accomplished in high
convection bell furnaces. These furnaces feature extraordinary thermal
consistency, rapid water cooling and advanced atmosphere controls for good
surface cleanliness of the rolled steel product.
In August 1995, the Company added a fourth process, pickling, to its capabili-
ties. Pickling is a cleaning process that improves the quality of hot rolled
steel by removing scale from its surface. The state-of-the-art plant for
pickling, leveling and slitting coils of flat-rolled steel, opened in Ghent,
Kentucky, adjacent to the Gallatin Steel mini-mill. The addition of this
facility and its capabilities will allow the Company to enter a sizable
new market on a direct sale and toll basis as well as reduce its raw
material costs as the Company pickles hot-rolled steel for its own needs.
QUALITY CONTROL
The ability to obtain high quality steel from its suppliers on a consistent
basis is critical to the Company's business. Historically, about 3% of the
Company's raw material has failed to conform to the requirements for which it
was purchased, and most of this nonconforming raw material is diverted to less
critical applications. The Company, through its technical services department,
has instituted strict quality control measures to assure that the quality of
purchased raw materials will allow the Company to meet the specifications of
its customers and to reduce the costs of production interruptions resulting
from poor quality steel. Physical, chemical, and metallographic analyses are
performed on selected raw materials to verify that their mechanical and
dimensional properties, cleanliness, surface characteristics, and chemical
content are acceptable. Similar analyses are conducted on processed steel on
a selected basis before delivery to the customer. The Company also uses
statistical process control techniques to monitor its slitting and cold
reduction processes so management can document to customers that required
tolerances have been continuously maintained throughout processing. This close
attention to product quality has enabled the Company to limit the amount of
customer returns and allowances on average over the last three years to
approximately 1.3% of its sales. The Company's technical services department
and its metallurgical laboratory are located in the research and
development engineering and technology center in Shelbyville, Kentucky.
MARKETING
The Company's marketing staff consists of salesmen located in Michigan,
Indiana, Kentucky, Tennessee, Illinois, Missouri, Ohio, Pennsylvania, Maryland,
Wisconsin and Mexico. In addition to cultivating additional business from
existing customers and developing new accounts, these salesmen are responsible
for identifying market trends in their assigned areas. The marketing staff is
supported by an Executive Vice President, three regional Vice Presidents-Sales,
and by the Company's technical services department which develops application
engineering ideas. The Company is frequently requested to recommend the type
of steel which can best serve a customer's specific needs.
CUSTOMERS AND DISTRIBUTION
The Company produces to customer order rather than for inventory. Although
some blanket orders are taken for periods of up to one year, such blanket
orders represent a projection of anticipated customer requirements and do not
become firm orders until the customer calls for delivery of specified
quantities of particular products at specified times. The Company is therefore
required to maintain a substantial inventory of raw materials to meet the short
lead times and just-in-time delivery requirements of many of its customers.
Customers typically place firm orders for delivery within two to three weeks.
The Company's backlog of firm orders at October 31, 1995 was $29,573,000,
approximately 2% higher than the $29,115,000 at October 31, 1994.
The Company processes steel for sale to a variety of industrial customers,
including those in the automotive, automotive supply, appliance, lawn and
garden, machinery and office equipment industries. In fiscal 1995, 1994 and
1993 sales to the automotive industry accounted for 16%, 16%, and 15%,
respectively, of the Company's sales; sales to the automotive supply
industry accounted for 58%, 59% and 60%, respectively. The Company believes
its long-term relationships with its major customers are a significant factor
in its business.
The Company's largest customer is General Motors Corporation. During the
last three fiscal years, aggregate purchases by this customer as a
percentage of the Company's sales have been approximately as follows: 7% in
1995, 8% in 1994, and 8% in 1993. The loss of this customer's business in the
aggregate would have a material adverse effect on the Company. Purchases by
General Motors Corporation were historically made through decentralized
divisions and subsidiaries, which the Company observed to be independent in
their purchasing practices. General Motors Corporation has centralized
their purchasing function, however the Company continues to sell to multiple
divisions in several geographic locations. The Company believes its
relationship with General Motors Corporation to be good and does not believe
that the loss of a material portion of the business of this customer is
likely. The Company supplies processed steel to approximately 600 active
accounts. These customers are generally located within 300 miles of one of the
Company's plants. The location of Company facilities near a great number of
customers permits the efficient distribution of the Company's products by
truck. Independent trucking companies afford a convenient and expeditious
means for shipping approximately two-thirds of the Company's products to its
customers. The Company also maintains a small number of heavy-duty trucks
to provide flexible delivery service to those customers who do not arrange for
their own shipping needs.
SUPPLIERS
The Company obtains steel for processing from a number of primary producers and
mini-mills including AK Steel Corporation, Rouge Steel Corporation, LTV Steel
Company, Nucor Steel Corporation, and National Steel Corporation. The Company
obtains its raw material requirements by ordering steel possessing specified
physical qualities and alloy content. By purchasing in large quantities at
predetermined intervals, the Company attempts to purchase its raw materials at
the lowest competitive prices for the quality purchased. The Company believes
that it is not dependent on any one of its suppliers for raw materials and that
its relationships with its suppliers are good.
JOINT VENTURES
In April 1987, the Company formed Mi-Tech Steel, Inc., a 50% owned corporate
joint venture with Mitsui Steel Development Co., Inc. Mi-Tech Steel, Inc. was
established to own and operate high-volume steel slitting facilities to serve
Japanese and domestic automotive and appliance parts manufacturers located in
the United States. The initial processing facility was opened in December
1987 in Murfreesboro, Tennessee. In January 1990, a second Mi-Tech Steel
processing facility opened in Greensburg, Indiana. Steel Technologies is
providing management services for the Mi-Tech Steel operations.
In October 1990, the Company established Processing Technology, Inc., a
corporate joint venture with LTV Steel Company and Mitsui Steel Development
Co.,Inc. Processing Technology operates facilities in Perrysburg, Ohio and
Burns Harbor, Indiana, which process flat rolled steel and provide steel
storage principally for LTV Steel Company. Both facilities began operations
in fiscal 1992.
COMPETITION
Steel processing is highly competitive. The Company primarily competes with a
small number of other intermediate steel processors who are capable of process-
ing steel to closer than standard tolerances, none of whom could be considered
dominant in the industry. The primary characteristics of competition
encountered by the Company are quality of product, reliability of delivery and
price.
ENVIRONMENTAL MATTERS
The Company's manufacturing facilities are subject to many existing and
proposed federal, state and foreign regulations designed to protect the
environment. Presently, the Company has no knowledge of any pending or
threatened litigation or administrative proceeding against the Company
involving environmental matters. Management believes the Company's manu-
facturing facilities are in compliance with applicable federal, state and
foreign environmental regulations, and is not presently aware of any fact or
circumstance which would require the expenditure of material amounts for
environmental compliance in the future.
EMPLOYEES
As of October 31, 1995, the Company employed 571 people, including 114 at its
Eminence plant, 121 at its Portage plant, 84 at its Canton plant, 29 at its
Elkton plant, 8 at its Peru plant, 46 at its Mexico plant, 53 at its Ghent
plant, 100 at its Louisville/Shelbyville locations and 16 salesmen located in
their respective market areas. None of the Company's employees at October
31, 1995 are currently covered by a collective bargaining agreement. In 1995
the Canton, Michigan and Portage, Indiana hourly employees voted to be
represented by the United Auto Workers and the United Steel Workers,
respectively. The Company is currently in the preliminary stages of
negotiating a collective bargaining agreement with each of these unions. The
Company has never experienced a significant work stoppage and considers its
employee relations to be good.
ITEM 2. PROPERTIES
The Company's principal processing plants are as follows:
<TABLE>
Production Plant Date Production
Plant Location Capacity Size Opened Capabilities
<S> <C> <C> <C> <C>
Eminence, Kentucky 150,000 tons 140,000 sq.ft. 1971 S,R,A
Portage, Indiana 210,000 tons 220,000 sq.ft. 1987 S,R,A
Elkton, Maryland 60,000 tons 60,000 sq.ft. 1989 S,R
Canton, Michigan 210,000 tons 190,000 sq.ft. 1991 S,R,A
Peru, Indiana 40,000 tons 40,000 sq.ft. 1992 S
Monterrey, Mexico 60,000 tons 26,000 sq.ft. 1994 S,R
Ghent, Kentucky 500,000 tons 205,000 sq.ft. 1995 S,P
</TABLE>
S=Slitting
R=Cold Reduction
A=Annealing
P=Pickling and Leveling
All of the processing plants are majority-owned by the Company. During 1995,
the Company shipped approximately 405,000 tons of processed steel from its
manufacturing plants.
The Company's engineering division, technical services and metallurgical lab
are located in Shelbyville, Kentucky in a 35,000 square foot building owned by
the Company.
The Company's executive offices are located in Louisville, Kentucky in a 30,000
square foot building owned by the Company.
Mi-Tech Steel operates two high volume steel slitting operations. The
Murfreesboro, Tennessee plant, was expanded to 230,000 square feet in 1993.
The Greensburg, Indiana plant currently consists of 160,000 square feet of
manufacturing and storage space.
All operating properties owned or leased by the Company are in good repair and
in suitable condition for the purposes for which they are used. The Company's
Elkton, Maryland processing plant and the executive office building are subject
to outstanding mortgages covering certain long-term financing arrangements.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, positions held and ages of all the
executive officers of the Company:
Name Age Title
Merwin J. Ray 66 Chairman of the Board and Chief
Executive Officer
Bradford T. Ray 37 President and Chief Operating Officer
Michael J. Carroll 38 Executive Vice President
Howard F. Bates, Jr. 49 Vice President-Technical Services
Kenneth R. Bates 36 Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
Officers are elected annually by and serve at the discretion of the Board of
Directors. Messrs. Merwin Ray, Bradford Ray, Howard Bates and Carroll are
members of the Company's Board of Directors.
Mr. Merwin J. Ray has served as Chairman of the Board of the Company since its
incorporation in 1971, and as Chief Executive Officer since May 1985. He
previously held the position of President of the Company from 1971 until May
1985. Mr. Merwin J. Ray is the father of Bradford T. Ray, President and Chief
Operating Officer of the Company and father-in-law of Michael J. Carroll,
Executive Vice President of the Company.
Mr. Bradford T. Ray has served as President and Chief Operating Officer since
November 1994. He previously held the positions of Executive Vice President
from April 1993 to November 1994 and Vice President-Manufacturing of the
Company from January 1987 to April 1993.
Mr. Michael J. Carroll has served as Executive Vice President since January
1995. He previously held the positions of Senior Vice President-Sales from
April 1993 to January 1995 and Vice President-Sales from July 1987 to
April 1993.
Mr. Howard F. Bates, Jr. has served as Vice President-Technical Services since
November 1981. From August 1977 to November 1981, he held the position of
Manager of Technical Services.
Mr. Kenneth R. Bates has served as Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer of the Company since March 1990. He
previously held the position of Corporate Controller from March 1986 to March
1990.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information required for Item 5 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Market Price and Dividend Information" on page 13 of the
Company's annual report to shareholders for the year ended September 30,1995.
ITEM 6. SELECTED FINANCIAL DATA
The information required for Item 6 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Selected Financial Data" on page 12 of the Company's annual
report to shareholders for the year ended September 30, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required for Item 7 is incorporated by reference herein,
pursuant to General Instruction G(2), from the information provided under the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" on pages 14 through 16 of the Company's annual
report to shareholders for the year ended September 30, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of Steel Technologies Inc. and
Subsidiaries and Report of Independent Accountants, included in the Company's
annual report to shareholders for the year ended September 30, 1995, on pages
17 through 24 and the section entitled "Selected Quarterly Financial Data" on
page 13 thereof are incorporated herein by reference.
Consolidated Balance Sheets-September 30, 1995 and 1994
Consolidated Statements of Income-Years ended September 30, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity-Years ended September 30,
1995, 1994 and 1993
Consolidated Statements of Cash Flows-Years ended September 30, 1995, 1994 and
1993
Notes to Consolidated Financial Statements
Report of Independent Accountants
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), the information required by Item 10 is
incorporated by reference herein from the material under the section entitled
"Election of Directors" contained on pages 3 through 7 in the Company's
definitive proxy statement filed with the Securities and Exchange Commission
related to the annual meeting of shareholders of Steel Technologies Inc. to be
held on January 25, 1996. The information regarding Executive Officers
required by Item 401 of Regulation S-K is included in Part I hereof under the
section entitled "Executive Officers of the Registrant". No disclosure is
required to be made under Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G(3), the information required by Item 11 is
incorporated by reference herein from the material under the sections entitled
"Election of Directors - Compensation of Directors" contained on page 7 and
"Executive Compensation" contained on pages 8 and 9 in the Company's
definitive proxy statement filed with the Securities and Exchange Commission
related to the Company's annual meeting of shareholders to be held on January
25, 1996.
Information appearing in the sections entitled "Compensation Committee Report
on Executive Compensation" and "Performance Graph" contained on pages 10
through 14 in the Company's definitive proxy statement filed with the
Securities and Exchange Commission related to the Company's annual meeting of
shareholders to be held on January 25, 1996 shall not be deemed to be incor-
porated by reference in this report, notwithstanding any general statement
contained herein incorporating portions of such proxy statement by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G(3), the information required by Item 12 is
incorporated by reference herein from the material under the sections entitled
"Voting Securities" contained on pages 2 and 3 and "Election of Directors"
contained on pages 3 through 7 in the Company's definitive proxy statement
filed with the Securities and Exchange Commission related to the Company's
annual meeting of shareholders to be held on January 25, 1996.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G(3), the information required by Item 13 is
incorporated by reference herein from the material under the sections entitled
"Certain Transactions" contained on pages 9 and 10 and "Election of Directors"
contained on pages 3 through 7 in the Company's definitive proxy statement
filed with the Securities and Exchange Commission related to the Company's
annual meeting of shareholders to be held on January 25, 1996.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The response to this portion of Item 14 is submitted as a
separate section of this report--See List of Financial
Statements under Item 8.
(a) (2) The following consolidated financial statement schedule of
Steel Technologies Inc. and Subsidiaries is included in a
separate section of this report, following the index to
exhibits on page E-1:
Valuation and Qualifying Accounts - Schedule II
Report of Independent Accountants
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are inapplicable,
and therefore have been omitted.
(3) Listing of Exhibits--See Index to Exhibits contained herein on
page E-1 of this report. The index to exhibits specifically
identifies each management contract or compensatory plan
required to be filed as an Exhibit to this Form 10-K.
(b) No report on Form 8-K was filed for the quarter ended September 30, 1995.
(c) Exhibits filed with this report are attached hereto.
<PAGE>
STEEL TECHNOLOGIES INC. AND SUBSIDIARIES Page E-1
INDEX TO EXHIBITS
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 1995
Ref. Exhibit
# # Description
- --- ------ ------------------------------------------------
(a) 3.1 Restated Articles of Incorporation
of the Registrant
(a) 3.2 First Articles of Amendment to Restated
Articles of Incorporation of the Registrant
(d) 3.3 Second Articles of Amendment to Restated
Articles of Incorporation of the Registrant
(e) 3.4 Third Articles of Amendment to Restated
Articles of Incorporation of the Registrant
(e) 3.5 Amended By-Laws of the Registrant
(f) 10.1 Loan Agreement dated October 15, 1994,
between the Registrant and PNC Bank, Kentucky,
Inc., National City Bank, Kentucky, NBD Bank,
N.A. and Third National Bank, Nashville, Tennessee
(g) 10.1(a) First Amendment dated January 17, 1995 between
the Registrant and PNC Bank, Kentucky, Inc.,
National City Bank, Kentucky, NBD Bank, N.A.
and Third National Bank, Nashville, Tennessee
(h) 10.1(b) Second Amendment dated April 6, 1995 between
the Registrant and PNC Bank, Kentucky, Inc.,
National City Bank, Kentucky, NBD Bank, N.A.
and Third National Bank, Nashville, Tennessee
10.1(c) Third Amendment dated October 14, 1995 between
the Registrant and PNC Bank, Kentucky, Inc.,
National City Bank, Kentucky, NBD Bank, N.A.
and Third National Bank, Nashville, Tennessee
(h) 10.2 Note Agreement dated as of March 1, 1995, between
the Registrant and Principal Mutual Life
Insurance Company, Lincoln National Investment
Management Company, Jefferson-Pilot Life
Insurance Company and Northern Life Insurance
Company
(c) 10.3 (a) Incentive Stock Option Plan of the Registrant *
(b) 10.3 (b) Amendment #1, dated April 7, 1987 to the Incentive
Stock Option Plan of the Registrant *
(h) 10.3 (c) Registrant's 1995 Stock Option Plan *
(d) 10.5 Revised Employee Bonus Plan of the Registrant *
(b) 10.6 (a) Joint Venture Agreement dated March 30, 1987
between Mitsui & Co., LTD., Mitsui & Co.
(U.S.A.), Inc., Mitsui Steel Development Co.,
Inc., and the Registrant
(d) 10.6 (b) Amendment #1, dated February 28, 1989 to the Joint
Venture Agreement dated March 30, 1987 between
Mitsui & Co., LTD., Mitsui & Co. (U.S.A.), Inc.,
Mitsui Steel Development Co., Inc., and the
Registrant
(d) 10.7 (a) Loan Agreement dated as of November 1, 1989 between
the County Commissioners of Cecil County, Maryland
and the Registrant relating to Economic Development
Revenue Bonds
(d) 10.7 (b) Reimbursement, Credit and Security Agreement dated
as of November 1, 1989 between Citizens Fidelity
Bank and Trust Company and the Registrant relating
to Economic Development Revenue Bonds
(e) 10.8 Joint Venture Agreement dated October 16, 1990 among
Mitsui Steel Development Co., Inc. and LTV Steel
Company, Inc. and the Registrant
(e) 10.9 Form of Indemnification Agreement Between the
Registrant and its Directors *
10.10 Steel Technologies Inc. Restated Retirement Savings Plan
11 Statement Re: Computation of Per Share Earnings
13 1995 Annual Report to Shareholders, filed herewith. The
annual report shall not be deemed to be filed with the
Commission except to the extent that information
is specifically incorporated by reference herein
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Accountants
27 Financial Data Schedule
Alphabetic filed exhibit reference:
(a) Incorporated herein by reference to exhibits filed with the Company's Form
S-2 Registration Statement under the Securities Act of 1933
(No. 33-24209), which became effective September 28, 1988.
(b) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1987.
(c) Incorporated herein by reference to exhibits filed with the Company's Form
S-1 Registration Statement under the Securities Act of 1933 (No. 2-98617),
which became effective August 27, 1985.
(d) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1989.
(e) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1990.
(f) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1994.
(g) Incorporated herein by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q (file # 0-14061) for the quarter ended
December 31, 1994.
(h) Incorporated herein by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q (file # 0-14061) for the quarter ended
March 31, 1995.
* Indicates management contract or compensatory plan and arrangement
<PAGE>
STEEL TECHNOLOGIES INC. SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
Column A Column B Column C Column E Column F
Additions
- ---------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to
Beginning Costs and Other Deductions- Balance at
Description of Period Expenses Accounts- Describe End of Period
Describe
<S> <C> <C> <C> <C> <C>
Year Ended September 30, 1995:
Allowance for doubtful accounts $910,000 $27,729 - $82,729(A) $855,000
===================================================================
Year Ended September 30, 1994:
Allowance for doubtful accounts $800,000 $133,099 - $23,099(A) $910,000
===================================================================
Year Ended September 30, 1993:
Allowance for doubtful accounts $600,000 $230,279 - $30,279(A) $800,000
===================================================================
(A) Uncollectible accounts charged off, less recoveries.
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Steel Technologies Inc.
Our report on the consolidated financial statements of Steel Technologies Inc.
and subsidiaries dated November 3, 1995 has been incorporated by reference in
this Form 10-K from page 24 of the 1995 Annual Report to Shareholders of Steel
Technologies Inc. and subsidiaries. In connection with our audits of such
financial statements, we have also audited the related financial statement
schedule listed in the index in Item 14 (a)(2) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ COOPERS & LYBRAND L.L.P.
------------------------
Coopers & Lybrand L.L.P.
Louisville, Kentucky
November 3, 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934 the registrant has duly caused this report to be signed on behalf
by the undersigned thereunto duly authorized.
STEEL TECHNOLOGIES INC.
Dated: By: /s/ KENNETH R. BATES
----------------
Kenneth R. Bates
Vice President - Finance,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Date Title
/s/ MERWIN J. RAY 12/20/95 Chairman of the Board of Directors
------------- Chief Executive Officer
Merwin J. Ray (Principal Executive Officer)
/s/ BRADFORD T. RAY 12/20/95
--------------- Director, President and Chief
Bradford T. Ray Operating Officer
/s/ HOWARD R. BATES, JR. 12/20/95
-------------------- Director and Vice President-Technical
Howard F. Bates, Jr. Services
/s/ MICHAEL J. CARROLL 12/20/95
------------------
Michael J. Carroll Director and Executive Vice President
/s/ RALPH W. MCINTYRE 12/20/95
-----------------
Ralph W. McIntyre Director
/s/ CHARLES A. MAYS 12/20/95
---------------
Charles A. Mays Director
/s/ WILLIAM E. HELLMANN 12/20/95
-------------------
William E. Hellmann Director
/s/ DALE L. ARMSTRONG 12/20/95
----------------- Director
Dale L. Armstrong
/s/ JIMMY DAN CONNER 12/20/95
---------------- Director
Jimmy Dan Conner
EXHIBIT 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Fiscal 1995 Compared to Fiscal 1994
For the fiscal year ended September 30, 1995, the Company posted sales of
$252,730,000 compared to 1994 sales of $241,160,000, an increase of 5%.
Results for 1995 reflect a slowing of economic activity in the second half of
the fiscal year causing tons shipped to only approximate the 1994 levels.
Average selling price increases of approximately 5% were realized during 1995.
The Company continues to focus significant resources on the automotive
industry and to generate a major portion of business from selling to industrial
customers manufacturing component parts for use in the automotive industry.
Demand in automotive and other steel consuming markets softened in the second
half of 1995. As demand softened, customers reduced their inventory levels in
anticipation of lower demand and lower steel prices. The outlook for increased
demand in 1996 should improve as these inventory adjustments are completed in
the near term. However, lower average selling prices are also expected for
fiscal 1996. The Company is well positioned to take advantage of any improve-
ments in demand as the recently completed capital investments have added new
capacity and increased the products and services offered by the Company.
Cost of goods sold increased as a percentage of sales to 87.9% in 1995 from
87.1% in 1994, decreasing the gross profit margin to 12.1% in 1995 compared to
12.9% in 1994. The gross profit margin decrease is a result of production cost
increases associated with new production capacity added in 1995 as well as
startup costs of the new pickling operation. Additionally, the lower unit
sales volume, especially in the second half of 1995, resulted in higher
production costs as a percentage of sales. These production cost increases
offset the benefits of lower raw material costs associated with steel purchased
in the latter part of 1995. The Company expects margins to be positively
impacted in 1996 by lower raw material costs and production cost economies of
scale resulting from better utilization of both the newly expanded and existing
production capacity.
Selling, general and administrative expenses increased to 6.4% of sales in 1995
from 6.0% in 1994. The Company continues to actively manage the level at
which selling, general and administrative expenses are added to the cost
structure. As a result selling, general and administrative costs in recent
years have increased at a rate comparable to the growth in sales. The
increase in the current year is directly related to lower unit sales volume
associated with a slowing in overall economic activity in the second half of
1995.
The Company's equity in net income of its unconsolidated corporate joint
venture in 1995 was comparable to the record level achieved by Mi-Tech Steel,
Inc. a year ago. Operating profits in 1995 were at record levels as a result
of significantly higher sales achieved by the 50% owned corporate joint
venture. However, the joint venture incurred higher interest costs in 1995
as debt levels were increased to finance an expansion of the Greensburg
facility.
The Company recorded a charge of $601,000 in fiscal 1995 for the impact of the
Mexican peso devaluation on dollar denominated borrowings by the Company's 80%
owned steel processing company located in Monterrey, Mexico. Beginning in
1996 these borrowings are considered a part of the Company's long-term
investment in the Mexican subsidiary and any future currency fluctuations will
be reflected as a component of stockholder's equity.
Interest expense increased to $3,939,000 for 1995 from $1,316,000 in 1994.
This increase is the result of significantly higher average borrowings used to
finance the capital addition and working capital needs of the Company in 1995.
Higher interest rates have also contributed to the increase in interest
expense.
The Company's effective income tax rate was 34.3% in 1995 compared to 36.7% in
1994. In 1995 the Company's lower earnings were not subject to the maximum
federal corporate income tax rate. In addition a higher percentage of the
Company's overall earnings were generated by the Mi-Tech Steel joint venture
which are not fully taxable to the Company.
Results of Operations
Fiscal 1994 Compared to Fiscal 1993
For the fiscal year ended September 30, 1994, the Company posted sales of
$241,160,000 compared to prior year sales of $198,157,000, an increase of 22%.
The Company benefited from an improving economy and increased automotive
production schedules in 1994. The Company continued to focus significant
resources on the automotive industry and to generate a major portion of
business from selling to industrial customers manufacturing component parts for
use in the automotive industry. The Company continued to increase market
share and demand for flat rolled steel products remained strong throughout the
fiscal year. These factors allowed the Company to establish a new tonnage
record in 1994 with a 14% increase in the number of tons shipped from the
prior year. Additionally, sales benefited from increased selling prices of
approximately 6% as the Company was able to pass through a portion of the
higher raw material costs to its customers.
Cost of goods sold increased as a percentage of sales to 87.1% in 1994 from
84.9% in 1993. The strong demand in automotive and other steel consuming
markets created continued upward pressure on the prices for steel from the
primary mills. Although a lag existed between the time the price increases
impacted the Company and when they were ultimately passed on, the Company was
successful in passing through a majority of these raw material increases.
However, these raw material cost increases offset the benefits of the produc-
tion costs economies of scale attributable to the increased sales volume. As a
result, the gross profit margin decreased to 12.9% in 1994 from 15.1% in 1993.
The Company actively managed the level at which selling, general and adminis-
trative costs were added to its cost structure. This cost control resulted in
selling, general and administrative costs increasing only 3.6% during 1994, a
much slower rate than the growth in sales. As a result, selling, general and
administrative expenses decreased to 6.0% of sales for 1994 from 7.1% in 1993.
The Company's equity in unconsolidated corporate joint venture increased
significantly in 1994 as a result of the significant sales and operating profit
increases at Mi-Tech Steel, Inc. The 50% owned corporate joint venture
benefited from plant operating efficiencies and production cost economies of
scale attributable to the increased sales volumes.
Interest expense increased to $1,316,000 for 1994 from $904,000 in 1993. These
increases are principally the result of higher average outstanding borrowings
during the 1994 fiscal year.
Although the tax act of 1993 has increased the maximum corporate tax rate, the
Company's effective income tax rate remained approximately 37% in 1994 and
1993. The impact of the higher statutory rate was offset somewhat by increased
earnings of the Mi-Tech Steel joint venture, which are not fully taxable to the
Company.
Liquidity and Capital Resources
Over the last several years the Company has managed the levels of accounts
receivable, inventories and other working capital items in relation to the
trends in sales and the overall market. Early in the fiscal year higher inven-
tory levels were maintained in anticipation of tightening supply and rising raw
material prices. As the availability of raw material has improved in recent
months and the purchasing cost of raw materials has declined, the Company was
able to generate cash of $36,652,000 during 1995 from maintaining lower
inventory levels.
The Company has continued to invest in new equipment and facilities in 1995.
Capital expenditures for 1995 totaled $37,914,000. Cash generated from the
inventory reductions along with additional proceeds from long-term debt have
funded a significant portion of the 1995 capital additions. The Company has
invested over $23,000,000 in the new steel processing facility in Gallatin
County, Kentucky. This new facility, located adjacent to the new Gallatin
Steel mini-mill, has the capability to pickle, level and slit flat rolled
steel. Construction on the facility began in October 1994 with operations
starting in August 1995.
The Company also completed an expansion of the Portage, Indiana, facility in
1995. This $8,000,000 expansion significantly increases the production capacity
of the facility which enables the Company to extend its coverage in the Chicago
and Midwest markets. The expansion includes the installation of new slitting
lines and an additional 75,000 square feet of production and storage space.
While the effect of the Mexican peso devaluation had an impact on the short
term operating performance of the 80% owned subsidiary, the Company believes
the Mexican market offers excellent long term growth opportunities. The
Monterrey facility is nearing the completion of an expansion which includes the
installation of a new slitting line and rolling mill. The expansion increases
the products and services offered to the Mexican marketplace.
In April 1995, the Company completed the refinancing of $40 million of its bank
line of credit through a private placement of debt. The new ten-year note
agreement is unsecured, bears a fixed rate of interest and does not require any
principal payments for four years. This refinancing reduced the maximum
available borrowing under the unsecured bank line of credit from $80 million
to $40 million.
The Company believes that it currently has sufficient liquidity and available
capital resources to meet its existing needs. The capital expenditure plans
for 1996 are anticipated to be significantly reduced from the levels of the
past two years. The Company expects funds generated from operations and the
availability of $17.5 million under its unsecured bank line of credit to be
sufficient to finance the modest capital addition plans for 1996. The working
capital needs associated with the anticipated sales growth in 1996 will be
funded with cash flows generated from operations and available borrowing
capabilities. An ample supply of raw material is expected to be available in
the marketplace allowing the Company to operate with lower days sales in
inventory than in previous years. Additionally, the Board of Directors has
authorized the Company to repurchase up to 400,000 shares of its common stock
from time to time in the open market. The Company has repurchased additional
shares subsequent to the year-end bringing the total shares repurchased to over
150,000 shares. These additional shares have also been funded with a combina-
tion of cash flows generated from operations and available borrowing
capabilities.
At this time the Company has no known commitments or demands which must be met
beyond the next twelve months other than the ten year notes and the line of
credit. The ten year notes do not require any principal payments until fiscal
1999 and the line of credit is expected to be renewed at the end of the
term. However, the Company may seek, from time to time, additional funds to
finance the opening of new plants, significant improvements in its
production and processing equipment and purchases of equipment to expand its
production and processing capabilities. The form of such financing may vary
depending upon the prevailing market and related conditions, and may include
short or long-term borrowings or the issuance of debt or equity securities.
At September 30, 1995, the Company had $68,645,000 in long-term debt
outstanding. Under its various debt agreements, the Company has agreed to
maintain specified levels of working capital and net worth, maintain certain
ratios and limit the addition of substantial debt. The Company is in
compliance with all of its loan covenants, and none of these covenants would
restrict the Company from completing currently planned capital expenditures.
Pursuant to a joint venture agreement, Steel Technologies has guaranteed
$6,250,000 of the the bank financing required for the working capital purposes
of Mi-Tech Steel, Inc.
The Company maintains an investment, principally in preferred stock of
Processing Technology, Inc., a corporate joint venture. The Company continues
to periodically evaluate the possible conversion of its preferred stock
investment into common stock of Processing Technology, Inc. The Company's
decision to convert its investment to common stock will be based upon the
joint venture attaining certain financial criteria established by Steel
Technologies. Upon conversion, the Company would be obligated to guarantee
a proportionate share, currently approximating $9,900,000, of the joint
venture's loan and lease commitments. Currently, the Company is a guarantor
on a $2,000,000 Processing Technology, Inc. bank line of credit. This
guarantee will expire December 31, 1995.
The Company believes its manufacturing facilities are in compliance with
applicable federal and state environmental regulations. The Company is not
presently aware of any fact or circumstance which would require the expenditure
of material amounts for environmental compliance in the future.
[CAPTION]
STEEL TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
September 30 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,698 $ 1,008
Trade accounts receivable, less allowance for
doubtful accounts; 1995, $855; 1994, $910 31,460 34,496
Inventories 43,705 80,357
Deferred income taxes 1,005 1,450
Prepaid expenses and other assets 1,414 536
---------- ----------
Total current assets 80,282 117,847
---------- ----------
Property, plant and equipment, at cost:
Land and improvements 4,679 3,947
Buildings and improvements 40,899 25,703
Machinery and equipment 83,872 55,640
Construction in progress 3,761 11,276
---------- ----------
133,211 96,566
Less accumulated depreciation and
amortization 29,365 23,237
---------- ----------
103,846 73,329
---------- ----------
Investments in corporate joint ventures 9,344 7,930
---------- ----------
Other assets 1,258 1,307
---------- ----------
$ 194,730 $ 200,413
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,596 $ 43,432
Accrued liabilities 2,916 3,094
Long-term debt due within one year 385 810
---------- ----------
Total current liabilities 26,897 47,336
---------- ----------
Long-term debt 68,645 60,805
---------- ----------
Deferred income taxes 6,191 4,634
---------- ----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; authorized - -
shares: 500,000; none outstanding
Common stock, no par value; authorized shares:
20,000,000; issued and outstanding shares:
12,117,365 in 1995 and 12,157,365 in 1994 18,214 18,625
Additional paid-in capital 4,909 4,909
Retained earnings 70,554 64,104
Foreign currency translation adjustment (680) -
---------- ----------
92,997 87,638
---------- ----------
$ 194,730 $ 200,413
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[CAPTION]
STEEL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share)
<TABLE>
For the Years Ended September 30 1995 1994 1993
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 252,730 $ 241,160 $ 198,157
Cost of goods sold 222,121 210,131 168,295
---------- ---------- --------
Gross profit 30,609 31,029 29,862
Selling, general and administrative
expenses 16,185 14,544 14,044
Equity in net income of unconsolidated
corporate joint venture 1,414 1,437 934
---------- ---------- --------
Operating income 15,838 17,922 16,752
Foreign currency exchange loss 601 - -
Interest expense 3,939 1,316 903
---------- ---------- --------
Income before income taxes 11,298 16,606 15,849
Provision for income taxes 3,875 6,094 5,903
---------- ---------- --------
Net income $ 7,423 $ 10,512 $ 9,946
========== ========== ========
Weighted average number of common
shares outstanding 12,147 12,150 12,055
========== ========== ========
Earnings per common share $ 0.61 $ 0.87 $ 0.83
========== ========== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[CAPTION]
STEEL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except per share)
For the Years Ended September 30, 1995, 1994 and 1993
<TABLE>
Foreign
Additional Currency
Common Stock Paid-In Retained Translation
Shares Amount Capital Earnings Adjustment Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1992 12,046 $ 17,745 $ 4,909 $ 45,139 $ 67,793
Net income 9,946 9,946
Net issuance of common stock under incentive
stock option plan 91 868 868
Cash dividends on common stock ($.053 per share) (643) (643)
---------- ---------- -------- ------- ------- ------
Balances, September 30, 1993 12,137 18,613 4,909 54,442 77,964
Net income 10,512 10,512
Net issuance of common stock under incentive
stock option plan 20 12 12
Cash dividends on common stock ($.070 per share) (850) (850)
---------- ---------- -------- ------- ------- ------
Balances, September 30, 1994 12,157 18,625 4,909 64,104 87,638
Net income 7,423 7,423
Net issuance of common stock under incentive
stock option plan 1 7 7
Cash dividends on common stock ($.080 per share) (973) (973)
Purchase and retirement of common stock (41) (418) (418)
Foreign currency translation adjustment $ (680) (680)
---------- ---------- -------- ------- ------- --------
Balances, September 30, 1995 12,117 $ 18,214 $ 4,909 $ 70,554 $ (680) $92,997
========== ========== ======== ======= ====== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
[CAPTION]
STEEL TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
For the Years Ended September 30 1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,423 $ 10,512 $ 9,946
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,108 4,994 4,397
Provision for losses on trade accounts receivable 20 133 230
Deferred income taxes 2,002 788 98
Equity in net income of unconsolidated corporate
joint venture (1,414) (1,437) (934)
Gain on sale of assets (293) (415) (337)
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable 3,016 (6,790) (6,302)
Inventories 36,652 (27,846) (22,993)
Prepaid expenses and other assets (1,284) 86 (513)
Accounts payable (19,836) 16,245 10,252
Accrued liabilities (178) (1,276) 1,163
---------- ------- -------
Net cash provided by (used in) operating activities 33,216 (5,006) (4,993)
---------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (37,914) (24,480) (11,469)
Other assets - (817) -
Proceeds from sale of property, plant and equipment 582 790 1,556
---------- ------- -------
Net cash used in investing activities (37,332) (24,507) (9,913)
---------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 71,005 32,204 16,767
Principal payments on long-term debt (63,590) (985) (2,546)
Cash dividends on common stock (973) (850) (643)
Repurchase of common stock (418) - -
Net issuance of common stock under incentive
stock option plan 7 12 871
---------- ------- --------
Net cash provided by financing activities 6,031 30,381 14,449
---------- ------- -------
Effect of exchange rate changes on cash (225) - -
---------- ------- -------
Net increase (decrease) in cash and cash equivalents 1,690 868 (457)
Cash and cash equivalents, beginning of year 1,008 140 597
---------- ------- -------
Cash and cash equivalents, end of year $ 2,698 $ 1,008 $ 140
========== ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash payments for interest $ 5,038 $ 1,891 $ 1,005
========== ======= =======
Cash payments for income taxes $ 2,471 $ 5,895 $ 5,790
========== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Description of the Business: The Company is an intermediate steel processor
engaged in the business of processing flat rolled steel to specified thickness,
width, temper and finish requirements for customers' manufacturing processes.
A majority of the Company's sales are to industrial customers manufacturing
component parts for use in the automotive industry.
Principles of Consolidation: The consolidated financial statements include the
accounts of Steel Technologies Inc. and its majority-owned subsidiaries (the
Company). The Company's investments in corporate joint ventures are
accounted for by the cost or equity method based on the percentage of common
ownership and control. All significant intercompany transactions have been
eliminated.
Cash and Cash Equivalents: Cash and cash equivalents includes highly liquid
investments with an original maturity of three months or less.
Inventories: Inventories are valued at the lower of cost or market. Cost is
determined using the specific identification method for all inventories.
Depreciation and Amortization: Depreciation is computed by the straight-line
method with the following estimated useful lives:
Buildings and improvements 20-45 years
Machinery and equipment 3-12 years
When properties are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts with any resulting gain
or loss reflected in income. Maintenance and repairs are expensed in the year
incurred. The Company capitalizes interest costs as part of the cost of
constructing major facilities. Interest costs of $1,293,000, $746,000 and
$73,000 were capitalized in 1995, 1994 and 1993, respectively.
Earnings Per Common Share: Earnings per common share are based on the weighted
average number of common shares outstanding during each period. Common stock
options are not included in earnings per share computations since their effect
is not significant.
Foreign Currency Translation: The assets and liabilities of the Mexican
subsidiary are translated into U.S. dollars at the year-end rate of exchange
and revenues and expenses are translated at average rates of exchange in
effect during the period. Resulting translation adjustments are accumulated in
a separate component of shareholders' equity. Foreign currency transaction
gains and losses are included in net income when incurred.
2. Inventories:
Inventories at September 30 consist of 1995 1994
(in thousands):
------------------------------
Raw materials $ 34,703 $ 71,630
Finished goods and work in process 9,002 8,727
---------- ----------
$ 43,705 $ 80,357
========== ==========
3. Investments in Unconsolidated Corporate Joint Ventures:
Mi-Tech Steel, Inc. owns and operates high-volume steel slitting facilities to
serve Japanese and domestic automotive and appliance parts manufacturers in the
United States. Summarized condensed financial information of Mi-Tech Steel,
Inc., a fifty percent owned corporate joint venture accounted for by the equity
method follows (in thousands):
<TABLE>
Balance Sheet: September 30 1995 1994
Assets: ----------------------------------------------------
<S> <C> <C>
Current assets $ 28,803 $ 33,193
Other assets 19,868 20,164
Liabilities:
Current liabilities $ 10,071 $ 18,866
Non current liabilities 22,019 20,738
</TABLE>
<TABLE>
Income Statement: Fiscal Years Ended September 30 1995 1994 1993
-------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 88,204 $ 68,319 $ 56,253
Net income $ 2,828 $ 2,874 $ 1,868
</TABLE>
The Company has various transactions with Mi-Tech Steel, Inc. Included in
operating income of the Company are management and other fees, interest earned
on advances and equity from the joint venture earnings totaling $2,273,000,
$2,118,000 and $1,554,000 in 1995, 1994 and 1993, respectively. The Company is
a guarantor on $6,250,000 of Mi-Tech bank borrowings. The Company's equity in
undistributed net income of Mi-Tech Steel, Inc. was $4,291,000 at September 30,
1995.
The Company maintains an investment of approximately $1,000,000, principally in
preferred stock, of Processing Technology, Inc., a corporate joint venture
accounted for by the cost method. The Company continues to periodically
evaluate the possible conversion of its preferred stock investment into common
stock of Processing Technology, Inc. The Company's decision to convert its
investment to common stock will be based upon the joint venture attaining
certain financial criteria established by Steel Technologies. Upon conversion,
the Company would be obligated to guarantee a proportionate share, currently
approximating $9,900,000, of the joint venture's loan and lease commitments.
Currently, the Company is a guarantor on a $2,000,000 Processing Technology,
Inc. bank line of credit. This guarantee will expire December 31, 1995.
4. Long-Term Debt:
Long-term debt at September 30 consists of the
following (in thousands): 1995 1994
- ------------------------------------------------------------------------------
Notes payable, unsecured, interest due
semiannually at 8.52% $ 40,000
Notes payable to bank, unsecured under current
line of credit; interest rate at September
30, 1995 was 6.95% 22,500 $ 53,995
Variable rate industrial revenue development
bonds payable in annual installments through
November 1, 2014; interest rate at September
30, 1995, was 4.65% 4,600 4,700
Mortgage notes payable in installments through
2003; interest rates averaging 8.15% 1,900 2,169
All other debt 30 751
---------- ----------
69,030 61,615
Less amounts due within one year 385 810
---------- ----------
$ 68,645 $ 60,805
========== ==========
In April 1995, the Company entered into a $40,000,000 private note placement.
Proceeds from the notes were applied to the bank line of credit reducing the
maximum availability under the line of credit to $40,000,000. Annual principal
payments of $5,720,000 begin March 1, 1999 and continue through March 1, 2005.
In October 1995, the Company renewed its $40,000,000 unsecured bank line of
credit and extended the term through October 14, 1996. Various options are
available on the interest rate, none of which are greater than the bank's
prime rate.
The aggregate amounts of all long-term debt to be repaid for the five years
following September 30, 1995, are: 1996, $385,000; 1997, $22,885,000;
1998, $370,000; 1999, $6,091,000; and 2000, $6,091,000. Provisions
contained in the Company's various debt agreements require the Company to
maintain specified levels of net worth, maintain certain financial ratios
and limit the addition of substantial debt.
5. Retirement Plan:
The Company maintains a 401(k) defined contribution pension plan. Annual
expense provisions are based upon the level of employee participation as the
plan requires the Company to match a certain portion of the employees'
contribution. Total retirement plan expense was $482,000 in 1995, $516,000 in
1994 and $353,000 in 1993. The Company follows the policy of funding
retirement plan contributions as accrued.
6. Income Taxes:
<TABLE>
Provision for income taxes consists of the following (in thousands):
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
Current:
Federal $ 1,586 $ 4,361 $ 4,699
State and local 287 945 1,106
---------- ---------- --------
1,873 5,306 5,805
---------- ---------- --------
Deferred:
Federal 1,688 707 97
State and local 314 81 1
---------- ---------- --------
2,002 788 98
---------- ---------- --------
$ 3,875 $ 6,094 $ 5,903
========== ========== ========
</TABLE>
Deferred income taxes are recorded at currently enacted rates and result from
temporary differences in the recognition of revenues and expenses for tax and
financial statement purposes. The primary temporary differences giving rise to
the Company's deferred tax assets and liabilities are as follows (in thousands):
<TABLE>
1995 1994
Assets Liabilities Assets Liabilities
--------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Income tax effects at September 30:
Accelerated depreciation $ $ 5,861 $ 4,178
Inventory capitalization 676 $ 827
Provision for doubtful accounts 328 351
Non deductible liabilities 1 272
Other, net 330 456
--------- --------- -------- -------
$ 1,005 $ 6,191 $ 1,450 $ 4,634
========= ========= ======== =======
</TABLE>
A reconciliation of the provision for income taxes with amounts computed by
applying the federal statutory income tax rate before income taxes follows:
<TABLE>
1995 1994 1993
---------- ---------- -------
<S> <C> <C> <C>
Provision at federal statutory rate 34.0 % 35.0 % 34.8 %
Increases (decreases) resulting from:
State and local income taxes, net
of federal income tax benefit 3.5 4.1 4.6
Equity in net income of unconsolidated
corporate joint venture (3.4) (2.4) (1.6)
Other 0.2 - (0.5)
---------- --------- --------
34.3 % 36.7 % 37.3 %
========== ========= ========
</TABLE>
7. Stock Option Plans:
Under its employee stock option plans, the Company may grant employees
incentive stock options to purchase shares at not less than 100% of market
value at date of grant or non-qualified stock options at a price determined by
the Compensation Committee. Generally, options are exerciseable at the rate of
20% a year beginning one year from date of grant and expire ten years from the
date of grant.
The following table summarizes the option plans:
<TABLE>
Price Range Number of Options
Per Share 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Exercised $ 6.67-$11.09 1,000 20,610 91,450
Granted $ 11.00-$11.73 61,500 - 234,750
At September 30,
Outstanding $ 6.67-$11.73 535,325 498,825 550,625
Exerciseable $ 6.67-$11.73 324,050 255,188 206,075
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Steel Technologies Inc.
We have audited the accompanying consolidated balance sheets of Steel
Technologies Inc. and subsidiaries as of September 30, 1995 and 1994 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Steel
Technologies Inc. and subsidiaries as of September 30, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1995 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
------------------------
Coopers & Lybrand L.L.P.
Louisville, Kentucky
November 3, 1995
[CAPTION]
SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
<TABLE>
Years Ended September 30 1995 1994 1993 1992 1991
Income Statement Data ---------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 252,730 $ 241,160 $ 198,157 $ 154,417 $ 129,674
Cost of goods sold 222,121 210,131 168,295 131,711 111,304
Gross profit 30,609 31,029 29,862 22,706 18,370
Selling, general and administrative expenses 16,185 14,544 14,044 12,630 11,539
Equity in net income (loss) of unconsolidated
corporate joint venture 1,414 1,437 934 306 (81)
Operating income 15,838 17,922 16,752 10,382 6,750
Income before income taxes 11,298 16,606 15,849 9,512 5,666
Net income 7,423 10,512 9,946 6,012 3,501
Earnings per common share $ 0.61 $ 0.87 $ 0.83 $ 0.50 $ 0.29
Cash dividends per common share $ 0.080 $ 0.070 $ 0.053 $ 0.040 $ 0.027
Weighted average number of common
shares outstanding 12,147 12,150 12,055 12,045 12,049
September 30 1995 1994 1993 1992 1991
Balance Sheet Data ---------- ---------- -------- ------- -------
Working capital $ 53,385 $ 70,511 $ 50,134 $ 32,275 $ 22,512
Total assets 194,730 200,413 143,821 107,418 95,123
Long-term debt 68,645 60,805 30,006 15,626 8,686
Shareholders' equity 92,997 87,638 77,964 67,793 62,263
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
Fiscal Year 1995 First Second Third Fourth
<S> <C> <C> <C> <C>
Sales 64,245 $ 71,496 $ 60,153 $ 56,836
Gross profit 7,822 9,686 7,464 5,637
Net income 2,024 2,663 2,062 674
Earnings per common share 0.17 $ 0.22 $ 0.17 $ 0.06
Fiscal Year 1994 First Second Third Fourth
Sales 54,072 $ 62,740 $ 63,673 $ 60,675
Gross profit 7,113 8,384 8,622 6,910
Net income 2,376 2,915 3,169 2,052
Earnings per common share 0.20 $ 0.24 $ 0.26 $ 0.17
</TABLE>
MARKET PRICE AND DIVIDEND INFORMATION
The Company's common stock trades on The Nasdaq Stock Market under the
symbol STTX. At October 31, 1995, there were 682 shareholders of record. The
Company's current dividend policy provides for semiannual payments of cash
dividends. The following table shows cash dividends and high and low prices
for the common stock for each quarter of fiscal 1995 and 1994. Nasdaq
National Market System quotations are based on actual transactions.
<TABLE>
Stock Price
Fiscal Year 1995 High Low Dividends
<S> <C> <C> <C>
First Quarter $ 18.250 $ 10.188 $ 0.04
Second Quarter $ 13.750 $ 10.500
Third Quarter $ 13.250 $ 9.500 $ 0.04
Fourth Quarter $ 12.250 $ 9.500
Stock Price
Fiscal Year 1994 High Low Dividends
First Quarter $ 21.250 $ 15.750 $ 0.03
Second Quarter $ 21.750 $ 18.750
Third Quarter $ 19.750 $ 15.500 $ 0.04
Fourth Quarter $ 20.000 $ 16.250
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet at September 30, 1995 and condensed
consolidated statement of income for the fiscal year ended September 30,
1995 and related footnotes and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000771790
<NAME> STEEL TECHNOLOGIES INC.
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 2,698
<SECURITIES> 0
<RECEIVABLES> 32,315
<ALLOWANCES> (855)
<INVENTORY> 43,705
<CURRENT-ASSETS> 80,282
<PP&E> 133,211
<DEPRECIATION> (29,365)
<TOTAL-ASSETS> 194,730
<CURRENT-LIABILITIES> 26,897
<BONDS> 68,645
<COMMON> 18,214
0
0
<OTHER-SE> 74,783
<TOTAL-LIABILITY-AND-EQUITY> 194,730
<SALES> 252,730
<TOTAL-REVENUES> 252,730
<CGS> 222,121
<TOTAL-COSTS> 222,121
<OTHER-EXPENSES> 601
<LOSS-PROVISION> 20
<INTEREST-EXPENSE> 3,939
<INCOME-PRETAX> 11,298
<INCOME-TAX> 3,875
<INCOME-CONTINUING> 7,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,423
<EPS-PRIMARY> $.61
<EPS-DILUTED> $.61
</TABLE>
[CAPTION]
EXHIBIT 11
STEEL TECHNOLOGIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
In thousands, except per share data
Fiscal Years Ended September 30 1995 1994 1993
- -------------------------------------------------------------------------------
ACTUAL
<S> <C> <C> <C>
Weighted average shares
outstanding 12,147 12,150 12,055
==============================
Net income $7,423 $10,512 $9,946
==============================
Earnings per share $ 0.61 $ 0.87 $ 0.83
==============================
PRIMARY
Weighted average shares
outstanding 12,147 12,150 12,055
Dilutive effect of stock options 81 236 151
------------------------------
12,228 12,386 12,206
==============================
Net income $7,423 $10,512 $9,946
==============================
Earnings per share $ 0.61 $ 0.85 $ 0.81
==============================
FULLY DILUTED
Weighted average shares
outstanding 12,147 12,150 12,055
Dilutive effect of stock options 81 236 297
------------------------------
12,228 12,386 12,352
==============================
Net income $7,423 $10,512 $9,946
==============================
Earnings per share $ 0.61 $ 0.85 $ 0.81
==============================
</TABLE>
EXHIBIT 23.1
STEEL TECHNOLOGIES INC.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Steel Technologies Inc. and subsidiaries on Form S-8 (File No. 33-66318) of our
reports dated November 3, 1995, on our audits of the consolidated financial
statements and financial statement schedule of Steel Technologies Inc. and
subsidiaries as of September 30, 1995 and 1994 and for the years ended
September 30, 1995, 1994 and 1993, which reports are incorporated by reference
and included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND
-----------------
Coopers & Lybrand
Louisville, Kentucky
December 20, 1995
EXHIBIT 21.1
STEEL TECHNOLOGIES INC.
SUBSIDIARIES
<TABLE>
Percentage of
Names Under Voting Secur-
Jurisdiction of Which Business ities Owned by
Name Incorporation Transacted Registrant
<S> <C> <C> <C>
Wabash Steel Indiana Wabash Steel Corporation 100%
Corporation (Formerly
Southern Strip Steel-
Peru, Inc.)
Southern Strip Steel- Ohio (Inactive Corporation) 100%
Columbus, Inc.
Steel Technologies de Mexico Mexico Steel Technologies de Mexico 80%
(formerly Transformadora y
Commercializadora de
Metales, S.A. de C.V.)
Mi-Tech Steel, Inc. Delaware Mi-Tech Steel, Inc. 50%
Processing Technology, Inc. * Delaware Processing Technology, Inc. 5%
</TABLE>
* Steel Technologies Inc. also owns shares of Processing Technology, Inc.,
non-voting preferred stock. The Company continues to evaluate the possible
conversion of its preferred shares into common shares of Processing Technology,
Inc. If converted, Steel Technologies Inc., including the 5% interest
currently held, would own 33% of the outstanding common shares of Processing
Technology, Inc.
THIRD AMENDMENT TO LOAN AGREEMENT
---------------------------------
THIS THIRD AMENDMENT TO LOAN AGREEMENT (the "Third
Amendment"), is made and entered into as of the 14th day of
October, 1995, by and among (i) STEEL TECHNOLOGIES INC., a
Kentucky corporation with principal office and place of business
in Louisville, Kentucky (the "Borrower"), (ii)(a) PNC BANK,
KENTUCKY, INC., a Kentucky banking corporation with principal
office and place of business in Louisville, Kentucky ("PNC"), (b)
NATIONAL CITY BANK, KENTUCKY, a national banking association with
principal office and place of business in Louisville, Kentucky
("National City"), (c) NBD BANK, a Michigan banking corporation
with principal office and place of business in Detroit, Michigan
("NBD"), and (d) THIRD NATIONAL BANK IN NASHVILLE, a national
banking association with principal office and place of business
in Nashville, Tennessee ("Third National") (PNC, National City,
NBD and Third National is each hereinafter individually referred
to as a "Bank," and all of the same are hereinafter collectively
referred to as the "Banks"), and (iii) PNC BANK, KENTUCKY, INC.,
in its capacity as agent for the Banks (in such capacity, the
"Agent").
P R E L I M I N A R Y S T A T E M E N T S:
- - - - - - - - - - - - - - - - - - - - -
A. Pursuant to that certain Loan Agreement dated as of
October 15, 1994, among the Borrower, the Banks and the Agent, as
amended pursuant to (i) that certain First Amendment to Loan
Agreement dated as of January 17, 1995, among the Borrower, the
Banks and the Agent, and (ii) that certain Second Amendment to
Loan Agreement dated as of April 6, 1995, among the Borrower, the
Banks and the Agent (collectively, the "Loan Agreement"), the
Banks have established a revolving credit facility in the current
principal amount of Forty Million Dollars ($40,000,000.00) in
favor of the Borrower (the "Revolver") for the purposes set forth
in Section 2.5 of the Loan Agreement.
B. The current stated maturity date of the Revolver is
October 14, 1995.
- 1 -
C. The Borrower has requested that the Banks extend the
stated maturity date of the Revolver from October 14, 1995 to
October 14, 1996.
D. The Banks are willing to and desire to extend the
stated maturity date of the Revolver from October 14, 1995 to
October 14, 1996 upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth in the Loan Agreement
and herein, and for other good and valuable consideration, the
mutuality, receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Each capitalized term used herein, unless otherwise
expressly defined herein, shall have the meaning set forth in the
Loan Agreement.
2. The Banks hereby extend the stated maturity date of the
Revolver from October 14, 1995 to October 14, 1996. In
furtherance thereof, the term "Revolving Loan Commitment
Termination Date", as defined in Section 1.80 of the Loan
Agreement, is hereby redefined to mean the Revolving Loan
Commitment Termination Date then in effect, which is currently
October 14, 1996, subject to extension thereof pursuant to
Section 2.1B of the Loan Agreement, or, if sooner, (i) the date
as of which the Obligations shall have become immediately due and
payable pursuant to Section 7 of the Loan Agreement, or (ii) the
date on which all of the Obligations are paid in full (including,
without limitation, the repayment, expiration, termination or
cash collateralization of Letters of Credit pursuant to the Loan
Agreement) and all Revolving Loan Commitments are reduced to
zero.
3. Section 6.5(iv) of the Loan Agreement is hereby amended
and restated as follows:
"(iv) So long as no Event of Default
or Potential Event of Default has occurred
and is continuing or would result therefrom,
the Borrower (A) may contribute capital
and/or make loans to its Mexican Subsidiary
in an amount not to exceed Ten Million
Dollars ($10,000,000.00) during the term of
the Loan Agreement, and (B) may increase its
- 2 -<PAGE>
existing investment in and/or make loans to
its other Consolidated Subsidiaries."
4. The Banks hereby release the Mexican Subsidiary
Guaranty Agreement and hereby direct and authorize the Agent on
behalf of the Banks to mark the Mexican Subsidiary Guaranty
Agreement "Cancelled" and to deliver the same to the Borrower on
behalf of the Mexican Subsidiary.
5. Except to the extent expressly amended or modified
hereby, the Borrower hereby ratifies and reaffirms each of its
covenants, agreements, obligations, representations and
warranties set forth in the Loan Agreement.
6. This Third Amendment may be executed in one or more
counterparts, each of which shall constitute an original and all
of the same shall constitute one and the same instrument.
7. This Third Amendment shall be effective as of the later
of (a) October 14, 1995, or (b) the date of delivery of the
following documents to the Banks and/or the Agent:
(i) This Third Amendment, duly executed by the
Borrower; and
(ii) The Ratification and Reaffirmation Agreement, duly
executed by Wabash Steel Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to Loan Agreement to be duly executed as of the
day and year first above written.
STEEL TECHNOLOGIES INC.
By:
--------------------------------
Its:
-------------------------------
(the "Borrower")
- 3 -
PNC BANK, KENTUCKY, INC.
By:
--------------------------------
Title:
-----------------------------
Address: PNC Bank, Kentucky, Inc.
Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: H. Joseph Brenner
Vice President
Telephone: (502) 581-3991
Telecopy: (502) 581-3355
("PNC")
NATIONAL CITY BANK, KENTUCKY
By:
--------------------------------
Title:
-----------------------------
Address: 101 South Fifth Street
Louisville, KY 40202
Attn: Deroy Scott
Vice President
Telephone: (502) 581-7821
Telecopy: (502) 581-4424
("National City")
- 4 -
NBD BANK
By:
--------------------------------
Title:
-----------------------------
Address: One Indiana Square
Indianapolis, IN 46266
Attn: Randall K. Stephens,
Third Floor
Telephone: (317) 266-6704
Telecopy: (317) 266-6042
("NBD")
THIRD NATIONAL BANK IN NASHVILLE
By:
--------------------------------
Title:
-----------------------------
Address: 201 Fourth Avenue North
Nashville, TN 37219
Attn: Allen K. Oakley
Telephone: (615) 748-5934
Telecopy: (615) 259-4119
("Third National")
(collectively, the "Banks")
- 5 -
PNC BANK, KENTUCKY, INC., in its
capacity as Agent
By:
--------------------------------
Title:
-----------------------------
(the "Agent")
- 6 -
ADOPTION AGREEMENT #005
NONSTANDARDIZED CODE 401(k) PROFIT SHARING PLAN
The undersigned, Steel Technologies Inc.
("Employer"), by executing this Adoption
Agreement, elects to become a participating Employer in
the Benefit Actuaries, Inc. Defined
Contribution Prototype Plan (basic plan document # 01 ) by
adopting the accompanying Plan and Trust in full as if the
Employer were a signatory to that Agreement. The Employer
makes the following elections granted under the provisions of
the Prototype Plan.
ARTICLE I
DEFINITIONS
1.02 TRUSTEE. The Trustee executing this Adoption
Agreement is: (Choose (a) or (b))
[ ] (a) A discretionary Trustee. See Section 10.03[A] of
the Plan.
[X ] (b) A nondiscretionary Trustee. See Section 10.03[B]
of the Plan. [Note: The Employer may not elect Option
(b) if a Custodian executes the Adoption Agreement.]
1.03 PLAN. The name of the Plan as adopted by the
Employer is Steel Technologies Inc. Retirement Savings Plan
.
1.07 EMPLOYEE. The following Employees are not eligible
to participate in the Plan: (Choose (a) or at least one of (b)
through (g))
[ ] (a) No exclusions.
[X ] (b) Collective bargaining employees (as defined in
Section 1.07 of the Plan). [Note: If the Employer
excludes union employees from the Plan, the Employer
must be able to provide evidence that retirement
benefits were the subject of good faith bargaining.]
[ ] (c) Nonresident aliens who do not receive any earned
income (as defined in Code 911(d)(2)) from the Employer
which constitutes United States source income (as
defined in Code 861(a)(3)).
[ ] (d) Commission Salesmen.
[ ] (e) Any Employee compensated on a salaried basis.
[ ] (f) Any Employee compensated on an hourly basis.
[ ] (g) (Specify)
.
Leased Employees. Any Leased Employee treated as an Employee
under Section 1.31 of the Plan, is: (Choose (h) or (i))
[X ] (h) Not eligible to participate in the Plan.
[ ] (i) Eligible to participate in the Plan, unless
excluded by reason of an exclusion classification
elected under this Adoption Agreement Section 1.07.
Related Employers. If any member of the Employer's related
group (as defined in Section 1.30 of the Plan) executes a
Participation Agreement to this Adoption Agreement, such
member's Employees are eligible to participate in this Plan,
unless excluded by reason of an exclusion classification
elected under this Adoption Agreement Section 1.07. In
addition: (Choose (j) or (k))
[ ] (j) No other related group member's Employees are
eligible to participate in the Plan.
[ ] (k) The following nonparticipating related group
member's Employees are eligible to participate in the
Plan unless excluded by reason of an exclusion
classification elected under this Adoption Agreement
Section 1.07:
.
1.12 COMPENSATION.
Treatment of elective contributions. (Choose (a) or (b))
[X ] (a) "Compensation" includes elective contributions
made by the Employer on the Employee's behalf.
[ ] (b) "Compensation" does not include elective
contributions.
Modifications to Compensation definition. (Choose (c) or at
least one of (d) through (j))
[X ] (c) No modifications other than as elected under
Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $
.
[ ] (e) In lieu of the definition in Section 1.12 of the
Plan, Compensation means any earnings reportable as W-2
wages for Federal income tax withholding purposes,
subject to any other election under this Adoption
Agreement Section 1.12.
[ ] (f) The Plan excludes bonuses.
[ ] (g) The Plan excludes overtime.
[ ] (h) The Plan excludes Commissions.
[ ] (i) Compensation will not include Compensation from a
related employer (as defined in Section 1.30 of the
Plan) that has not executed a Participation Agreement in
this Plan unless, pursuant to Adoption Agreement Section
1.07, the Employees of that related employer are
eligible to participate in this Plan.
[ ] (j) (Specify)
.
If, for any Plan Year, the Plan uses permitted disparity in
the contribution or allocation formula elected under Article
III, any election of Options (f), (g), (h) or (j) is
ineffective for such Plan Year with respect to any Nonhighly
Compensated Employee.
Special definition for matching contributions. "Compensation"
for purposes of any matching contribution formula under
Article III means: (Choose (k) or (l) only if applicable)
[X ] (k) Compensation as defined in this Adoption Agreement
Section 1.12.
[ ] (l) (Specify)
.
Special definition for salary reduction contributions. An
Employee's salary reduction agreement applies to his
Compensation determined prior to the reduction authorized by
that salary reduction agreement, with the following
exceptions: (Choose (m) or at least one of (n) or (o), if
applicable)
[X ] (m) No exceptions.
[ ] (n) If the Employee makes elective contributions to
another plan maintained by the Employer, the Advisory
Committee will determine the amount of the Employee's
salary reduction contribution for the withholding
period: (Choose (1) or (2))
[ ] (1) After the reduction for such period
of elective contributions to the other
plan(s).
[ ] (2) Prior to the reduction for such
period of elective contributions to the
other plan(s).
[ ] (o) (Specify)
.
1.17 PLAN YEAR/LIMITATION YEAR.
Plan Year. Plan Year means: (Choose (a) or (b))
[X ] (a) The 12 consecutive month period ending every
September 30 .
[ ] (b) (Specify)
.
Limitation Year. The Limitation Year is: (Choose (c) or (d))
[X ] (c) The Plan Year.
[ ] (d) The 12 consecutive month period ending every
.
1.18 EFFECTIVE DATE.
New Plan. The "Effective Date" of the Plan is
.
Restated Plan. The restated Effective Date is August 1, 1993
.
This Plan is a substitution and amendment of an
existing retirement plan(s) originally established
August 1, 1993
. [Note:
See the Effective Date Addendum.]
1.27 HOUR OF SERVICE. The crediting method for Hours of
Service is: (Choose (a) or (b))
[X ] (a) The actual method.
[ ] (b) The ___________________________________________
equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes
of: (Choose at least one)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under
Section 3.06.
[Note: On the blank line, insert "daily," "weekly," "semi-
monthly payroll periods" or "monthly."]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to
the predecessor service the Plan must credit by reason of
Section 1.29 of the Plan, the Plan credits Service with the
following predecessor employer(s): MiTech Steel Inc.
. Service with the designated predecessor employer(s)
applies: (Choose at least one of (a) or (b); (c) is available
only in addition to (a) or (b))
[X ] (a) For purposes of participation under Article II.
[X ] (b) For purposes of vesting under Article V.
[ ] (c) Except the following Service:
.
[Note: If the Plan does not credit any predecessor service
under this provision, insert "N/A" in the first blank line.
The Employer may attach a schedule to this Adoption Agreement,
in the same format as this Section 1.29, designating
additional predecessor employers and the applicable service
crediting elections.]
N/A 1.31 LEASED EMPLOYEES. If a Leased Employee is a
Participant in the Plan and also participates in a plan
maintained by the leasing organization: (Choose (a) or (b))
[ ] (a) The Advisory Committee will determine the Leased
Employee's allocation of Employer contributions under
Article III without taking into account the Leased
Employee's allocation, if any, under the leasing
organization's plan.
[ ] (b) The Advisory Committee will reduce a Leased
Employee's allocation of Employer nonelective
contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased
Employee's allocation under the leasing organization's
plan, but only to the extent that allocation is
attributable to the Leased Employee's service provided
to the Employer. The leasing organization's plan:
[ ] (1) Must be a money purchase plan which
would satisfy the definition under Section
1.31 of a safe harbor plan, irrespective of
whether the safe harbor exception applies.
[ ] (2) Must satisfy the features and, if a
defined benefit plan, the method of
reduction described in an addendum to this
Adoption Agreement, numbered 1.31.
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
Eligibility conditions. To become a Participant in the Plan,
an Employee must satisfy the following eligibility conditions:
(Choose (a) or (b) or both; (c) is optional as an additional
election)
[ ] (a) Attainment of age (specify
age, not exceeding 21).
[X ] (b) Service requirement. (Choose one of (1) through
(3))
[X ] (1) One Year of Service.
[ ] (2) months (not
exceeding 12) following the Employee's
Employment Commencement Date.
[ ] (3) One Hour of Service.
[ ] (c) Special requirements for non-401(k) portion of
plan. (Make elections under (1) and under (2))
(1) The requirements of this Option (c)
apply to participation in: (Choose at least
one of (i) through (iii))
[ ] (i) The allocation of Employer
nonelective contributions and
Participant forfeitures.
[ ] (ii) The allocation of Employer
matching contributions (including
forfeitures allocated as matching
contributions).
[ ] (iii) The allocation of Employer
qualified nonelective contributions.
(2) For participation in the allocations
described in (1), the eligibility
conditions are: (Choose at least one of (i)
through (iv))
[ ] (i) (one or two)
Year(s) of Service, without an
intervening Break in Service (as
described in Section 2.03(A) of the
Plan) if the requirement is two Years
of Service.
[ ] (ii) months (not
exceeding 24) following the
Employee's Employment Commencement
Date.
[ ] (iii) One Hour of Service.
[ ] (iv) Attainment of age
(Specify age, not exceeding
21).
Plan Entry Date. "Plan Entry Date" means the Effective Date
and: (Choose (d), (e) or (f))
[ ] (d) Semi-annual Entry Dates. The first day of the Plan
Year and the first day of the seventh month of the Plan
Year.
[ ] (e) The first day of the Plan Year.
[X ] (f) (Specify entry dates) August 1, 1993 and each
January 1, April 1, July 1 and October 1 thereafter
.
Time of Participation. An Employee will become a Participant
(and, if applicable, will participate in the allocations
described in Option (c)(1)), unless excluded under Adoption
Agreement Section 1.07, on the Plan Entry Date (if employed on
that date): (Choose (g), (h) or (i))
[X ] (g) immediately following
[ ] (h) immediately preceding
[ ] (i) nearest
the date the Employee completes the eligibility conditions
described in Options (a) and (b) (or in Option (c)(2) if
applicable) of this Adoption Agreement Section 2.01. [Note:
The Employer must coordinate the selection of (g), (h) or (i)
with the "Plan Entry Date" selection in (d), (e) or (f).
Unless otherwise excluded under Section 1.07, the Employee
must become a Participant by the earlier of: (1) the first day
of the Plan Year beginning after the date the Employee
completes the age and service requirements of Code 410(a); or
(2) 6 months after the date the Employee completes those
requirements.]
N/A Dual eligibility. The eligibility conditions of this
Section 2.01 apply to: (Choose (j) or (k))
[ ] (j) All Employees of the Employer, except: (Choose (1)
or (2))
[ ] (1) No exceptions.
[ ] (2) Employees who are Participants in the
Plan as of the Effective Date.
[ ] (k) Solely to an Employee employed by the Employer
after . If the Employee was
employed by the Employer on or before the specified
date, the Employee will become a Participant: (Choose
(1), (2) or (3))
[ ] (1) On the latest of the Effective Date,
his Employment Commencement Date or the
date he attains age
(not to exceed 21).
[ ] (2) Under the eligibility conditions in
effect under the Plan prior to the restated
Effective Date. If the restated Plan
required more than one Year of Service to
participate, the eligibility condition
under this Option (2) for participation in
the Code 401(k) arrangement under this
Plan is one Year of Service for Plan Years
beginning after December 31, 1988. [For
restated plans only]
[ ] (3) (Specify)
.
2.02 YEAR OF SERVICE - PARTICIPATION.
Hours of Service. An Employee must complete: (Choose (a) or
(b))
[X ] (a) 1,000 Hours of Service
[ ] (b) Hours of Service
during an eligibility computation period to receive credit for
a Year of Service. [Note: The Hours of Service requirement may
not exceed 1,000.]
Eligibility computation period. After the initial eligibility
computation period described in Section 2.02 of the Plan, the
Plan measures the eligibility computation period as: (Choose
(c) or (d))
[ ] (c) The 12 consecutive month period beginning with
each anniversary of an Employee's Employment
Commencement Date.
[X ] (d) The Plan Year, beginning with the Plan Year which
includes the first anniversary of the Employee's
Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in
Service rule described in Section 2.03(B) of the Plan: (Choose
(a) or (b))
[X ] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
2.06 ELECTION NOT TO PARTICIPATE. The Plan: (Choose (a)
or (b))
[X ] (a) Does not permit an eligible Employee or a
Participant to elect not to participate.
[ ] (b) Does permit an eligible Employee or a Participant
to elect not to participate in accordance with Section
2.06 and with the following rules: (Complete (1), (2),
(3) and (4))
(1) An election is effective for a Plan Year if
filed no later than
.
(2) An election not to participate must be
effective for at least Plan
Year(s).
(3) Following a re-election to participate, the
Employee or Participant:
[ ] (i) May not again elect not to
participate for any subsequent Plan Year.
[ ] (ii) May again elect not to participate,
but not earlier than the
Plan Year following the
Plan Year in which the re-election first
was effective.
(4) (Specify)
[Insert "N/A" if no
other rules apply].
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
Part I. [Options (a) through (g)] Amount of Employer's
contribution. The Employer's annual contribution to the Trust
will equal the total amount of deferral contributions,
matching contributions, qualified nonelective contributions
and nonelective contributions, as determined under this
Section 3.01. (Choose any combination of (a), (b), (c) and
(d), or choose (e))
[X ] (a) Deferral contributions (Code 401(k) arrangement).
(Choose (1) or (2) or both)
[X ] (1) Salary reduction arrangement. The
Employer must contribute the amount by
which the Participants have reduced their
Compensation for the Plan Year, pursuant to
their salary reduction agreements on file
with the Advisory Committee. A reference in
the Plan to salary reduction contributions
is a reference to these amounts.
[ ] (2) Cash or deferred arrangement. The
Employer will contribute on behalf of each
Participant the portion of the
Participant's proportionate share of the
cash or deferred contribution which he has
not elected to receive in cash. See Section
14.02 of the Plan. The Employer's cash or
deferred contribution is the amount the
Employer may from time to time deem
advisable which the Employer designates as
a cash or deferred contribution prior to
making that contribution to the Trust.
[X ] (b) Matching contributions. The Employer will make
matching contributions in accordance with the formula(s)
elected in Part II of this Adoption Agreement Section
3.01.
[X ] (c) Designated qualified nonelective contributions.
The Employer, in its sole discretion, may contribute an
amount which it designates as a qualified nonelective
contribution.
[X ] (d) Nonelective contributions. (Choose any combination
of (1) through (4))
[X ] (1) Discretionary contribution. The
amount (or additional amount) the Employer
may from time to time deem advisable.
[ ] (2) The amount (or additional amount) the
Employer may from time to time deem
advisable, separately determined for each
of the following classifications of
Participants: (Choose (i) or (ii))
[ ] (i) Nonhighly Compensated Employees
and Highly Compensated Employees.
[ ] (ii) (Specify classifications)
.
Under this Option (2), the Advisory
Committee will allocate the amount
contributed for each Participant
classification in accordance with Part II
of Adoption Agreement Section 3.04, as if
the Participants in that classification
were the only Participants in the Plan.
[ ] (3) % of the
Compensation of all Participants under the
Plan, determined for the Employer's taxable
year for which it makes the contribution.
[Note: The percentage selected may not
exceed 15%.]
[ ] (4) % of Net
Profits but not more than $
.
[ ] (e) Frozen Plan. This Plan is a frozen Plan effective
.
The Employer will not contribute to the Plan with
respect to any period following the stated date.
Net Profits. The Employer: (Choose (f) or (g))
[X ] (f) Need not have Net Profits to make its annual
contribution under this Plan.
[ ] (g) Must have current or accumulated Net Profits
exceeding $ to make the following
contributions: (Choose at least one)
[ ] (1) Cash or deferred contributions
described in Option (a)(2).
[ ] (2) Matching contributions described in
Option (b), except:
.
[ ] (3) Qualified nonelective contributions
described in Option (c).
[ ] (4) Nonelective contributions described
in Option (d).
The term "Net Profits" means the Employer's net income or
profits for any taxable year determined by the Employer upon
the basis of its books of account in accordance with generally
accepted accounting practices consistently applied without any
deductions for Federal and state taxes upon income or for
contributions made by the Employer under this Plan or under
any other employee benefit plan the Employer maintains. The
term "Net Profits" specifically excludes
. [Note: Enter "N/A" if no
exclusions apply.]
If the Employer requires Net Profits for matching
contributions and the Employer does not have sufficient Net
Profits under Option (g), it will reduce the matching
contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced
contribution will bear the same ratio as the matching
contribution the Participant would have received if Net
Profits were sufficient bears to the total matching
contribution all Participants would have received if Net
Profits were sufficient. If more than one member of a related
group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net
Profits separately but will not apply this reduction unless,
after combining the separately determined Net Profits, the
aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current
and accumulated Net Profits.
Part II. [Options (h) through (j)] Matching contribution
formula. [Note: If the Employer elected Option (b), complete
Options (h), (i) and (j).]
[X ] (h) Amount of matching contributions. For each Plan
Year, the Employer's matching contribution is: (Choose
any combination of (1), (2), (3), (4) and (5))
[ ] (1) An amount equal to % of
each Participant's eligible contributions for the
Plan Year.
[ ] (2) An amount equal to % of
each Participant's first tier of eligible
contributions for the Plan Year, plus the
following matching percentage(s) for the
following subsequent tiers of eligible
contributions for the Plan Year:
.
[X ] (3) Discretionary formula.
[ ] (i) An amount (or additional amount)
equal to a matching percentage the Employer
from time to time may deem advisable of the
Participant's eligible contributions for
the Plan Year.
[X ] (ii) An amount (or additional amount)
equal to a matching percentage the Employer
from time to time may deem advisable of
each tier of the Participant's eligible
contributions for the Plan Year.
[ ] (4) An amount equal to the following percentage
of each Participant's eligible contributions for
the Plan Year, based on the Participant's Years
of Service:
Number of Years of Service
Matching Percentage
The Advisory Committee will apply this formula by
determining Years of Service as follows:
.
[ ] (5) A Participant's matching contributions may
not: (Choose (i) or (ii))
[ ] (i) Exceed
.
[ ] (ii) Be less than
.
Related Employers. If two or more related employers (as
defined in Section 1.30) contribute to this Plan, the related
employers may elect different matching contribution formulas
by attaching to the Adoption Agreement a separately completed
copy of this Part II. Note: Separate matching contribution
formulas create separate current benefit structures that must
satisfy the minimum participation test of Code 401(a)(26).]
[X ] (i) Definition of eligible contributions. Subject to
the requirements of Option (j), the term "eligible
contributions" means: (Choose any combination of (1)
through (3))
[X ] (1) Salary reduction contributions.
[ ] (2) Cash or deferred contributions (including
any part of the Participant's proportionate share
of the cash or deferred contribution which the
Employer defers without the Participant's
election).
[ ] (3) Participant mandatory contributions, as
designated in Adoption Agreement Section 4.01.
See Section 14.04 of the Plan.
[X ] (j) Amount of eligible contributions taken into
account. When determining a Participant's eligible
contributions taken into account under the matching
contributions formula(s), the following rules apply:
(Choose any combination of (1) through (4))
[ ] (1) The Advisory Committee will take into
account all eligible contributions credited for
the Plan Year.
[ ] (2) The Advisory Committee will disregard
eligible contributions exceeding
.
[X ] (3) The Advisory Committee will treat as the
first tier of eligible contributions, an amount
not exceeding: 3% of compensation paid during
the applicable Allocation Period
.
The subsequent tiers of eligible contributions
are: the next 3% of compensation paid during the
applicable Allocation Period
.
[ ] (4) (Specify)
.
Part III. [Options (k) and (l)]. Special rules for Code
401(k) Arrangement. (Choose (k) or (l), or both, as
applicable)
[X ] (k) Salary Reduction Agreements. The following rules
and restrictions apply to an Employee's salary reduction
agreement: (Make a selection under (1), (2), (3) and
(4))
(1) Limitation on amount. The Employee's salary
reduction contributions: (Choose (i) or at least
one of (ii) or (iii))
[ ] (i) No maximum limitation other
than as provided in the Plan.
[X ] (ii) May not exceed 15 % of
Compensation for the Plan Year,
subject to the annual additions
limitation described in Part 2 of
Article III and the 402(g) limitation
described in Section 14.07 of the
Plan.
[ ] (iii) Based on percentages of
Compensation must equal at least
.
(2) An Employee may revoke, on a prospective
basis, a salary reduction agreement: (Choose (i),
(ii), (iii) or (iv))
[ ] (i) Once during any Plan Year but
not later than
of the Plan Year.
[X ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any
month.
[ ] (iv) (Specify, but must be at least
once per Plan Year)
.
(3) An Employee who revokes his salary
reduction agreement may file a new salary
reduction agreement with an effective date:
(Choose (i), (ii), (iii) or (iv))
[ ] (i) No earlier than the first day
of the next Plan Year.
[X ] (ii) As of any subsequent Plan Entry
Date.
[ ] (iii) As of the first day of any
month subsequent to the month in
which he revoked an Agreement.
[ ] (iv) (Specify, but must be at least
once per Plan Year following the Plan
Year of revocation)
.
(4) A Participant may increase or may decrease,
on a prospective basis, his salary reduction
percentage or dollar amount: (Choose (i), (ii),
(iii) or (iv))
[ ] (i) As of the beginning of each
payroll period.
[ ] (ii) As of the first day of each
month.
[X ] (iii) As of any Plan Entry Date.
[ ] (iv) (Specify, but must permit an
increase or a decrease at least once
per Plan Year)
.
N/A [ ] (l) Cash or deferred contributions. For each
Plan Year for which the Employer makes a
designated cash or deferred contribution, a
Participant may elect to receive directly in cash
not more than the following portion (or, if less,
the 402(g) limitation described in Section 14.07
of the Plan) of his proportionate share of that
cash or deferred contribution: (Choose (1) or
(2))
[ ] (1) All or any portion.
[ ] (2)
%.
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee
will allocate deferral contributions, matching contributions,
qualified nonelective contributions and nonelective
contributions in accordance with Section 14.06 and the
elections under this Adoption Agreement Section 3.04.
Part I. [Options (a) through (d)]. Special Accounting
Elections. (Choose whichever elections are applicable to the
Employer's Plan)
[X ] (a) Matching Contributions Account. The Advisory
Committee will allocate matching contributions to a
Participant's: (Choose (1) or (2); (3) is available only
in addition to (1))
[X ] (1) Regular Matching Contributions
Account.
[ ] (2) Qualified Matching Contributions
Account.
[ ] (3) Except, matching contributions under
Option(s) ___________________ of Adoption
Agreement Section 3.01 are allocable to the
Qualified Matching Contributions Account.
[X ] (b) Special Allocation Dates for Salary Reduction
Contributions. The Advisory Committee will allocate
salary reduction contributions as of the Accounting Date
and as of the following additional allocation dates:
after the end of each pay period
.
[X ] (c) Special Allocation Dates for Matching
Contributions. The Advisory Committee will allocate
matching contributions as of the Accounting Date and as
of the following additional allocation dates: the last
day of each month
.
[X ] (d) Designated Qualified Nonelective Contributions -
Definition of Participant. For purposes of allocating
the designated qualified nonelective contribution,
"Participant" means: (Choose (1), (2) or (3))
[ ] (1) All Participants.
[X ] (2) Participants who are Nonhighly
Compensated Employees for the Plan Year.
[ ] (3) (Specify)
.
Part II. Method of Allocation - Nonelective Contribution.
Subject to any restoration allocation required under Section
5.04, the Advisory Committee will allocate and credit each
annual nonelective contribution (and Participant forfeitures
treated as nonelective contributions) to the Employer
Contributions Account of each Participant who satisfies the
conditions of Section 3.06, in accordance with the allocation
method selected under this Section 3.04. If the Employer
elects Option (e)(2), Option (g)(2) or Option (h), for the
first 3% of Compensation allocated to all Participants,
"Compensation" does not include any exclusions elected under
Adoption Agreement Section 1.12 (other than the exclusion of
elective contributions), and the Advisory Committee must take
into account the Participant's Compensation for the entire
Plan Year. (Choose an allocation method under (e), (f), (g) or
(h); (i) is mandatory if the Employer elects (f), (g) or (h);
(j) is optional in addition to any other election.)
[X ] (e) Nonintegrated Allocation Formula. (Choose (1) or
(2))
[X ] (1) The Advisory Committee will allocate
the annual nonelective contributions in the
same ratio that each Participant's
Compensation for the Plan Year bears to the
total Compensation of all Participants for
the Plan Year.
[ ] (2) The Advisory Committee will allocate
the annual nonelective contributions in the
same ratio that each Participant's
Compensation for the Plan Year bears to the
total Compensation of all Participants for
the Plan Year. For purposes of this Option
(2), "Participant" means, in addition to a
Participant who satisfies the requirements
of Section 3.06 for the Plan Year, any
other Participant entitled to a top heavy
minimum allocation under Section 3.04(B),
but such Participant's allocation will not
exceed 3% of his Compensation for the Plan
Year.
[ ] (f) Two-Tiered Integrated Allocation Formula - Maximum
Disparity. First, the Advisory Committee will allocate
the annual Employer nonelective contributions in the
same ratio that each Participant's Compensation plus
Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all
Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed
the applicable percentage (5.7%, 5.4% or 4.3%) listed
under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year.
[ ] (g) Three-Tiered Integrated Allocation Formula. First,
the Advisory Committee will allocate the annual Employer
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a
percentage of each Participant's Compensation may not
exceed the applicable percentage (5.7%, 5.4% or 4.3%)
listed under the Maximum Disparity Table following
Option (i). Solely for purposes of the allocation in
this first paragraph, "Participant" means, in addition
to a Participant who satisfies the requirements of
Section 3.06 for the Plan Year: (Choose (1) or (2))
[ ] (1) No other Participant.
[ ] (2) Any other Participant entitled to a
top heavy minimum allocation under Section
3.04(B), but such Participant's allocation
under this Option (g) will not exceed 3% of
his Compensation for the Plan Year.
As a second tier allocation, the Advisory Committee will
allocate the nonelective contributions in the same ratio
that each Participant's Excess Compensation for the Plan
Year bears to the total Excess Compensation of all
Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's
Excess Compensation, may not exceed the allocation
percentage in the first paragraph.
Finally, the Advisory Committee will allocate any
remaining nonelective contributions in the same ratio
that each Participant's Compensation for the Plan Year
bears to the total Compensation of all Participants for
the Plan Year.
[ ] (h) Four-Tiered Integrated Allocation Formula. First,
the Advisory Committee will allocate the annual Employer
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year, but not exceeding 3% of each Participant's
Compensation. Solely for purposes of this first tier
allocation, a "Participant" means, in addition to any
Participant who satisfies the requirements of Section
3.06 for the Plan Year, any other Participant entitled
to a top heavy minimum allocation under Section 3.04(B)
of the Plan.
As a second tier allocation, the Advisory Committee will
allocate the nonelective contributions in the same ratio
that each Participant's Excess Compensation for the Plan
Year bears to the total Excess Compensation of all
Participants for the Plan Year, but not exceeding 3% of
each Participant's Excess Compensation.
As a third tier allocation, the Advisory Committee will
allocate the annual Employer contributions in the same
ratio that each Participant's Compensation plus Excess
Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all
Participants for the Plan Year. The allocation under
this paragraph, as a percentage of each Participant's
Compensation plus Excess Compensation, must not exceed
the applicable percentage (2.7%, 2.4% or 1.3%) listed
under the Maximum Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining
nonelective contributions in the same ratio that each
Participant's Compensation for the Plan Year bears to
the total Compensation of all Participants for the Plan
Year.
[ ] (i) Excess Compensation. For purposes of Option (f),
(g) or (h), "Excess Compensation" means Compensation in
excess of the following Integration Level: (Choose (1)
or (2))
[ ] (1) % (not exceeding 100%)
of the taxable wage base, as determined
under Section 230 of the Social Security
Act, in effect on the first day of the Plan
Year: (Choose any combination of (i) and
(ii) or choose (iii))
[ ] (i) Rounded to
(but not exceeding the
taxable wage base).
[ ] (ii) But not greater than $
.
[ ] (iii) Without any further adjustment
or limitation.
[ ] (2) $
[Note: Not exceeding the taxable
wage base for the Plan Year in which this
Adoption Agreement first is effective.]
Maximum Disparity Table. For purposes of Options (f), (g) and
(h), the applicable percentage is:
Integration Level (as Applicable Percentages
for Applicable Percentages
percentage of taxable wage base) Option (f) or Option
(g) for Option (h)
100% 5.7%
2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than $10,001)
and not more than 80% 4.3%
1.3%
20% (or $10,000, if greater) or less 5.7%
2.7%
[ ] (j) Allocation offset. The Advisory Committee will
reduce a Participant's allocation otherwise made under
Part II of this Section 3.04 by the Participant's
allocation under the following qualified plan(s)
maintained by the Employer:
.
The Advisory Committee will determine this allocation
reduction: (Choose (1) or (2))
[ ] (1) By treating the term "nonelective
contribution" as including all amounts paid or
accrued by the Employer during the Plan Year to
the qualified plan(s) referenced under this
Option (j). If a Participant under this Plan
also participates in that other plan, the
Advisory Committee will treat the amount the
Employer contributes for or during a Plan Year
on behalf of a particular Participant under
such other plan as an amount allocated under
this Plan to that Participant's Account for
that Plan Year. The Advisory Committee will
make the computation of allocation required
under the immediately preceding sentence before
making any allocation of nonelective
contributions under this Section 3.04.
[ ] (2) In accordance with the formula provided
in an addendum to this Adoption Agreement,
numbered 3.04(j).
Top Heavy Minimum Allocation - Method of Compliance. If a
Participant's allocation under this Section 3.04 is less than
the top heavy minimum allocation to which he is entitled under
Section 3.04(B): (Choose (k) or (l))
[X ] (k) The Employer will make any necessary additional
contribution to the Participant's Account, as
described in Section 3.04(B)(7)(a) of the Plan.
[ ] (l) The Employer will satisfy the top heavy minimum
allocation under the following plan(s) it maintains:
. However, the
Employer will make any necessary additional
contribution to satisfy the top heavy minimum
allocation for an Employee covered only under this
Plan and not under the other plan(s) designated in
this Option (l). See Section 3.04(B)(7)(b) of the
Plan.
If the Employer maintains another plan, the Employer may
provide in an addendum to this Adoption Agreement, numbered
Section 3.04, any modifications to the Plan necessary to
satisfy the top heavy requirements under Code 416.
Related employers. If two or more related employers (as
defined in Section 1.30) contribute to this Plan, the Advisory
Committee must allocate all Employer nonelective contributions
(and forfeitures treated as nonelective contributions) to each
Participant in the Plan, in accordance with the elections in
this Adoption Agreement Section 3.04: (Choose (m) or (n))
[X ] (m) Without regard to which contributing related
group member employs the Participant.
[ ] (n) Only to the Participants directly employed by
the contributing Employer. If a Participant receives
Compensation from more than one contributing Employer,
the Advisory Committee will determine the allocations
under this Adoption Agreement Section 3.04 by
prorating among the participating Employers the
Participant's Compensation and, if applicable, the
Participant's Integration Level under Option (i).
3.05 FORFEITURE ALLOCATION. Subject to any restoration
allocation required under Sections 5.04 or 9.14, the Advisory
Committee will allocate a Participant forfeiture in accordance
with Section 3.04: (Choose (a) or (b); (c) and (d) are
optional in addition to (a) or (b))
[ ] (a) As an Employer nonelective contribution for the
Plan Year in which the forfeiture occurs, as if the
Participant forfeiture were an additional nonelective
contribution for that Plan Year.
[X ] (b) To reduce the Employer matching contributions
and nonelective contributions for the Plan Year:
(Choose (1) or (2))
[X ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in
which the forfeiture occurs.
[ ] (c) To the extent attributable to matching
contributions: (Choose (1), (2) or (3))
[ ] (1) In the manner elected under Options (a)
or (b).
[ ] (2) First to reduce Employer matching
contributions for the Plan Year: (Choose (i) or
(ii))
[ ] (i) in which the forfeiture occurs,
[ ] (ii) immediately following the Plan Year
in which the forfeiture occurs,
then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution
for the Plan Year in which the forfeiture
occurs, in lieu of the manner elected under
Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and
necessary administrative expenses for the Plan Year
and then will allocate any remaining forfeitures in
the manner described in Options (a), (b) or (c),
whichever applies. If the Employer elects Option (c),
the forfeitures used to reduce Plan expenses: (Choose
(1) or (2))
[ ] (1) relate proportionately to forfeitures
described in Option (c) and to forfeitures
described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in
Option _________.
Allocation of forfeited excess aggregate contributions. The
Advisory Committee will allocate any forfeited excess
aggregate contributions (as described in Section 14.09):
(Choose (e), (f) or (g))
[X ] (e) To reduce Employer matching contributions for
the Plan Year: (Choose (1) or (2))
[X ] (1) in which the forfeiture occurs.
[ ] (2) immediately following the Plan Year in
which the forfeiture occurs.
[ ] (f) As Employer discretionary matching
contributions for the Plan Year in which forfeited,
except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who
incurred the forfeitures.
[ ] (g) In accordance with Options (a) through (d),
whichever applies, except the Advisory Committee will
not allocate these forfeitures under Option (a) or
under Option (c)(3) to the Highly Compensated
Employees who incurred the forfeitures.
3.06 ACCRUAL OF BENEFIT.
Compensation taken into account. For the Plan Year in which
the Employee first becomes a Participant, the Advisory
Committee will determine the allocation of any cash or
deferred contribution, designated qualified nonelective
contribution or nonelective contribution by taking into
account: (Choose (a) or (b))
[ ] (a) The Employee's Compensation for the entire Plan
Year.
[X ] (b) The Employee's Compensation for the portion of
the Plan Year in which the Employee actually is a
Participant in the Plan.
Accrual Requirements. Subject to the suspension of accrual
requirements of Section 3.06(E) of the Plan, to receive an
allocation of cash or deferred contributions, matching
contributions, designated qualified nonelective contributions,
nonelective contributions and Participant forfeitures, if any,
for the Plan Year, a Participant must satisfy the conditions
described in the following elections: (Choose (c) or at least
one of (d) through (f))
[ ] (c) Safe harbor rule. If the Participant is
employed by the Employer on the last day of the Plan
Year, the Participant must complete at least one Hour
of Service for that Plan Year. If the Participant is
not employed by the Employer on the last day of the
Plan Year, the Participant must complete at least 501
Hours of Service during the Plan Year.
[X ] (d) Hours of Service condition. The Participant
must complete the following minimum number of Hours of
Service during the Plan Year: (Choose at least one of
(1) through (5))
Applies to [X ] (1) 1,000 Hours of Service.
nonelective [ ] (2) (Specify, but the number
of Hours of Service may not exceed
1,000)
contributions and
.
QNECs only
[ ] (3) No Hour of Service requirement if the
Participant terminates employment during the
Plan Year on account of: (Choose (i), (ii) or
(iii))
[ ] (i) Death.
[ ] (ii) Disability.
[ ] (iii) Attainment of Normal Retirement
Age in the current Plan Year or in a
prior Plan Year.
[ ] (4) Hours of Service (not
exceeding 1,000) if the Participant terminates
employment with the Employer during the Plan
Year, subject to any election in Option (3).
[ ] (5) No Hour of Service requirement for an
allocation of the following contributions:
.
[X ] (e) Employment condition. The Participant must be
employed by the Employer on the last day of the Plan
Year, irrespective of whether he satisfies any Hours
of Service condition under Option (d), with the
following exceptions: (Choose (1) or at least one of
(2) through (5))
[X ] (1) No exceptions.
[ ] (2) Termination of employment because of
death.
[ ] (3) Termination of employment because of
disability.
[ ] (4) Termination of employment following
attainment of Normal Retirement Age.
[ ] (5) No employment condition for the
following contributions:
.
[ ] (f) (Specify other conditions, if applicable):
.
Suspension of Accrual Requirements. The suspension of accrual
requirements of Section 3.06(E) of the Plan: (Choose (g), (h)
or (i))
[X ] (g) Applies to the Employer's Plan.
[ ] (h) Does not apply to the Employer's Plan.
[ ] (i) Applies in modified form to the Employer's
Plan, as described in an addendum to this Adoption
Agreement, numbered Section 3.06(E).
Special accrual requirements for matching contributions. If
the Plan allocates matching contributions on two or more
allocation dates for a Plan Year, the Advisory Committee,
unless otherwise specified in Option (l), will apply any Hours
of Service condition by dividing the required Hours of Service
on a prorata basis to the allocation periods included in that
Plan Year. Furthermore, a Participant who satisfies the
conditions described in this Adoption Agreement Section 3.06
will receive an allocation of matching contributions (and
forfeitures treated as matching contributions) only if the
Participant satisfies the following additional condition(s):
(Choose (j) or at least one of (k) or (l))
[X ] (j) No additional conditions.
[ ] (k) The Participant is not a Highly Compensated
Employee for the Plan Year. This Option (k) applies
to: (Choose (1) or (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in
Option(s) __________ of Adoption Agreement
Section 3.01.
[ ] (l) (Specify)
.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of
Section 3.15 apply, the Excess Amount attributed to this Plan
equals: (Choose (a), (b) or (c))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such
date (including any amount which the Advisory
Committee would have allocated but for the limitations
of Code 415), times
(ii) the ratio of (1) the amount allocated to the
Participant as of such date under this Plan divided by
(2) the total amount allocated as of such date under
all qualified defined contribution plans (determined
without regard to the limitations of Code 415).
[X ] (b) The total Excess Amount.
[ ] (c) None of the Excess Amount.
3.18 DEFINED BENEFIT PLAN LIMITATION.
Application of limitation. The limitation under Section 3.18
of the Plan: (Choose (a) or (b))
[ ] (a) Does not apply to the Employer's Plan because
the Employer does not maintain and never has
maintained a defined benefit plan covering any
Participant in this Plan.
[X ] (b) Applies to the Employer's Plan. To the extent
necessary to satisfy the limitation under Section
3.18, the Employer will reduce: (Choose (1) or (2))
[ ] (1) The Participant's projected annual
benefit under the defined benefit plan under
which the Participant participates.
[X ] (2) Its contribution or allocation on behalf
of the Participant to the defined contribution
plan under which the Participant participates
and then, if necessary, the Participant's
projected annual benefit under the defined
benefit plan under which the Participant
participates.
[Note: If the Employer selects (a), the remaining options in
this Section 3.18 do not apply to the Employer's Plan.]
Coordination with top heavy minimum allocation. The Advisory
Committee will apply the top heavy minimum allocation
provisions of Section 3.04(B) of the Plan with the following
modifications: (Choose (c) or at least one of (d) or (e))
[X ] (c) No modifications.
[ ] (d) For Non-Key Employees participating only in
this Plan, the top heavy minimum allocation is the
minimum allocation described in Section 3.04(B)
determined by substituting _________% (not less than
4%) for "3%," except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Plan Years in which the top heavy ratio
exceeds 90%.
[ ] (e) For Non-Key Employees also participating in the
defined benefit plan, the top heavy minimum is:
(Choose (1) or (2))
[ ] (1) 5% of Compensation (as determined under
Section 3.04(B) or the Plan) irrespective of
the contribution rate of any Key Employee,
except: (Choose (i) or (ii))
[ ] (i) No exceptions.
[ ] (ii) Substituting "7 1/2%" for "5%" if the
top heavy ratio does not exceed 90%.
[ ] (2) 0%. [Note: The Employer may not select
this Option (2) unless the defined benefit plan
satisfies the top heavy minimum benefit
requirements of Code 416 for these Non-Key
Employees.]
Actuarial Assumptions for Top Heavy Calculation. To determine
the top heavy ratio, the Advisory Committee will use the
following interest rate and mortality assumptions to value
accrued benefits under a defined benefit plan:
.
If the elections under this Section 3.18 are not appropriate
to satisfy the limitations of Section 3.18, or the top heavy
requirements under Code 416, the Employer must provide the
appropriate provisions in an addendum to this Adoption
Agreement.
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDEDUCTIBLE CONTRIBUTIONS. The Plan:
(Choose (a) or (b); (c) is available only with (b))
[X ] (a) Does not permit Participant nondeductible
contributions.
[ ] (b) Permits Participant nondeductible
contributions, pursuant to Section 14.04 of the Plan.
[ ] (c) The following portion of the Participant's
nondeductible contributions for the Plan Year are
mandatory contributions under Option (i)(3) of
Adoption Agreement Section 3.01: (Choose (1) or (2))
[ ] (1) The amount which is not less than:
.
[ ] (2) The amount which is not greater than:
.
N/A Allocation dates. The Advisory Committee will allocate
nondeductible contributions for each Plan Year as of the
Accounting Date and the following additional allocation dates:
(Choose (d) or (e))
[ ] (d) No other allocation dates.
[ ] (e) (Specify)
.
As of an allocation date, the Advisory Committee will credit
all nondeductible contributions made for the relevant
allocation period. Unless otherwise specified in (e), a
nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after
that allocation period ends.
4.05 PARTICIPANT CONTRIBUTION - WITHDRAWAL/DISTRIBUTION.
Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Mandatory
Contributions Account, if any, prior to his Separation from
Service: (Choose (a) or at least one of (b) through (d))
[X ] (a) No distribution options prior to Separation
from Service.
[ ] (b) The same distribution options applicable to the
Deferral Contributions Account prior to the
Participant's Separation from Service, as elected in
Adoption Agreement Section 6.03.
[ ] (c) Until he retires, the Participant has a
continuing election to receive all or any portion of
his Mandatory Contributions Account if: (Choose (1) or
at least one of (2) through (4))
[ ] (1) No conditions.
[ ] (2) The mandatory contributions have
accumulated for at least Plan
Years since the Plan Year for which
contributed.
[ ] (3) The Participant suspends making
nondeductible contributions for a period of
months.
[ ] (4) (Specify)
.
[ ] (d) (Specify)
.
ARTICLE V
TERMINATION OF SERVICE - PARTICIPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the
Plan is: (Choose (a) or (b))
[X ] (a) 65 [State age, but
may not exceed age 65].
[ ] (b) The later of the date the Participant attains
(_____) years of age or
the (_____)
anniversary of the first day of the Plan Year in which
the Participant commenced participation in the Plan.
[The age selected may not exceed age 65 and the
anniversary selected may not exceed the 5th.]
5.02 PARTICIPANT DEATH OR DISABILITY. The 100% vesting
rule under Section 5.02 of the Plan: (Choose (a) or choose one
or both of (b) and (c))
[ ] (a) Does not apply.
[X ] (b) Applies to death.
[X ] (c) Applies to disability.
5.03 VESTING SCHEDULE.
Deferral Contributions Account/Qualified Matching
Contributions Account/Qualified Nonelective Contributions
Account/Mandatory Contributions Account. A Participant has a
100% Nonforfeitable interest at all times in his Deferral
Contributions Account, his Qualified Matching Contributions
Account, his Qualified Nonelective Contributions Account and
in his Mandatory Contributions Account.
Regular Matching Contributions Account/Employer Contributions
Account. With respect to a Participant's Regular Matching
Contributions Account and Employer Contributions Account, the
Employer elects the following vesting schedule: (Choose (a) or
(b); (c) and (d) are available only as additional options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all
times. [Note: The Employer must elect Option (a) if
the eligibility conditions under Adoption Agreement
Section 2.01(c) require 2 years of service or more
than 12 months of employment.]
[X ] (b) Graduated Vesting Schedules.
Top Heavy Schedule
(Mandatory)
Years of Nonforfeitable
Service Percentage
Less than 1
0%
1
0%
2
0%
3
100%
4
100%
5
100%
6 or more
100% Non Top Heavy Schedule
(Optional)
Years of Nonforfeitable
Service Percentage
Less than 1 0%
1 0%
2 0%
3 0%
4 0%
5 100%
6 100%
7 or more 100%
[ ] (c) Special vesting election for Regular Matching
Contributions Account. In lieu of the election under
Options (a) or (b), the Employer elects the following
vesting schedule for a Participant's Regular Matching
Contributions Account: (Choose (1) or (2))
[ ] (1) 100% Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule
described in the addendum to this Adoption
Agreement, numbered 5.03(c). [Note: If the
Employer elects this Option (c)(2), the
addendum must designate the applicable vesting
schedule(s) using the same format as used in
Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must
complete a Top Heavy Schedule which satisfies Code 416. The
Employer, at its option, may complete a Non Top Heavy
Schedule. The Non Top Heavy Schedule must satisfy Code
411(a)(2). Also see Section 7.05 of the Plan.]
[X ] (d) The Top Heavy Schedule under Option (b) (and,
if applicable, under Option (c)(2)) applies: (Choose
(1) or (2))
[X ] (1) Only in a Plan Year for which the Plan is top
heavy.
[ ] (2) In the Plan Year for which the Plan
first is top heavy and then in all subsequent
Plan Years. [Note: The Employer may not elect
Option (d) unless it has completed a Non Top
Heavy Schedule.]
Minimum vesting. (Choose (e) or (f))
[X ] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued
Benefit will never be less than the lesser of $
or his entire Accrued Benefit,
even if the application of a graduated vesting
schedule under Options (b) or (c) would result in a
smaller Nonforfeitable Accrued Benefit.
N/A Life Insurance Investments. The Participant's Accrued
Benefit attributable to insurance contracts purchased on his
behalf under Article XI is: (Choose (g) or (h))
[ ] (g) Subject to the vesting election under Options
(a), (b) or (c).
[ ] (h) 100% Nonforfeitable at all times, irrespective
of the vesting election under Options (b) or (c)(2).
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED
PARTICIPANTS/ RESTORATION OF FORFEITED ACCRUED BENEFIT. The
deemed cash-out rule described in Section 5.04(C) of the Plan:
(Choose (a) or (b))
[ ] (a) Does not apply.
[X ] (b) Will apply to determine the timing of
forfeitures for 0% vested Participants. A Participant
is not a 0% vested Participant if he has a Deferral
Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of
Service on the basis of the following 12 consecutive month
periods: (Choose (a) or (b))
[X ] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12
consecutive month period measured from the Employee's
Employment Commencement Date and each successive 12
consecutive month period measured from each
anniversary of that Employment Commencement Date.
Hours of Service. The minimum number of Hours of Service an
Employee must complete during a vesting computation period to
receive credit for a Year of Service is: (Choose (c) or (d))
[X ] (c) 1,000 Hours of Service.
[ ] (d) Hours of Service. [Note: The
Hours of Service requirement may not exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer
specifically excludes the following Years of Service: (Choose
(a) or at least one of (b) through (e))
[ ] (a) None other than as specified in Section 5.08(a)
of the Plan.
[ ] (b) Any Year of Service before the Participant
attained the age of (_____).
[Note: The age selected may not exceed age 18.]
[ ] (c) Any Year of Service during the period the
Employer did not maintain this Plan or a predecessor
plan.
[X ] (d) Any Year of Service before a Break in Service
if the number of consecutive Breaks in Service equals
or exceeds the greater of 5 or the aggregate number of
the Years of Service prior to the Break. This
exception applies only if the Participant is 0% vested
in his Accrued Benefit derived from Employer
contributions at the time he has a Break in Service.
Furthermore, the aggregate number of Years of Service
before a Break in Service do not include any Years of
Service not required to be taken into account under
this exception by reason of any prior Break in
Service.
[ ] (e) Any Year of Service earned prior to the
effective date of ERISA if the Plan would have
disregarded that Year of Service on account of an
Employee's Separation from Service under a Plan
provision in effect and adopted before January 1,
1974.
ARTICLE VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
Code 411(d)(6) Protected Benefits. The elections under this
Article VI may not eliminate Code 411(d)(6) protected
benefits. To the extent the elections would eliminate a Code
411(d)(6) protected benefit, see Section 13.02 of the Plan.
Furthermore, if the elections liberalize the optional forms of
benefit under the Plan, the more liberal options apply on the
later of the adoption date or the Effective Date of this
Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means
as soon as practical after the 90th day following the
participant's termination of employment unless the participant
has reached his Normal Retirement Age or age 55 with 10 years
of service in which case the distribution date shall be as
soon as practical following Separation from Service.
. [Note: The Employer must
specify the appropriate date(s). The specified distribution
dates primarily establish annuity starting dates and the
notice and consent periods prescribed by the Plan. The Plan
allows the Trustee an administratively practicable period of
time to make the actual distribution relating to a particular
distribution date.]
Nonforfeitable Accrued Benefit Not Exceeding $3,500. Subject
to the limitations of Section 6.01(A)(1), the distribution
date for distribution of a Nonforfeitable Accrued Benefit not
exceeding $3,500 is: (Choose (a), (b), (c), (d) or (e))
[ ] (a)
of the
Plan Year beginning after the Participant's
Separation from Service.
[X ] (b) As soon as practical after the 90th day
following the
Participant's Separation from Service.
[ ] (c)
of the Plan Year after the
Participant incurs Break(s) in
Service (as defined in Article V).
[ ] (d)
following the
Participant's attainment of Normal Retirement Age, but
not earlier than
days following his
Separation from Service.
[X ] (e) (Specify) If the participant has reached Normal
Retirement Age, or has reached age 55 with 10 years of
service, his distribution date shall be as soon as
practical after Separation from Service.
Nonforfeitable Accrued Benefit Exceeds $3,500. See the
elections under Section 6.03.
Disability. The distribution date, subject to Section
6.01(A)(3), is: (Choose (f), (g) or (h))
[X ] (f) As soon as practical
after the Participant
terminates employment because of disability.
[ ] (g) The same as if the Participant had terminated
employment without disability.
[ ] (h) (Specify)
.
Hardship. (Choose (i) or (j))
[X ] (i) The Plan does not permit a hardship
distribution to a Participant who has separated from
Service.
[ ] (j) The Plan permits a hardship distribution to a
Participant who has separated from Service in
accordance with the hardship distribution policy
stated in: (Choose (1), (2) or (3))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
[ ] (3) The addendum to this Adoption Agreement,
numbered Section 6.01.
N/A Default on a Loan. If a Participant or Beneficiary
defaults on a loan made pursuant to a loan policy adopted by
the Advisory Committee pursuant to Section 9.04, the Plan:
(Choose (k), (l) or (m))
[ ] (k) Treats the default as a distributable event.
The Trustee, at the time of the default, will reduce
the Participant's Nonforfeitable Accrued Benefit by
the lesser of the amount in default (plus accrued
interest) or the Plan's security interest in that
Nonforfeitable Accrued Benefit. To the extent the loan
is attributable to the Participant's Deferral
Contributions Account, Qualified Matching
Contributions Account or Qualified Nonelective
Contributions Account, the Trustee will not reduce the
Participant's Nonforfeitable Accrued Benefit unless
the Participant has separated from Service or unless
the Participant has attained age 59 1/2.
[ ] (l) Does not treat the default as a distributable
event. When an otherwise distributable event first
occurs pursuant to Section 6.01 or Section 6.03 of the
Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the
amount in default (plus accrued interest) or the
Plan's security interest in that Nonforfeitable
Accrued Benefit.
[ ] (m) (Specify)
.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory
Committee will apply Section 6.02 of the Plan with the
following modifications: (Choose (a) or at least one of (b),
(c), (d) and (e))
[X ] (a) No modifications.
[ ] (b) Except as required under Section 6.01 of the
Plan, a lump sum distribution is not available:
.
[X ] (c) An installment distribution: (Choose (1) or at
least one of (2) or (3))
[X ] (1) Is not available under the Plan.
[ ] (2) May not exceed the lesser of
years or the maximum
period permitted under Section 6.02.
[ ] (3) (Specify)
.
[X ] (d) The Plan permits the following annuity options:
none
.
Any Participant who elects a life annuity option is
subject to the requirements of Sections 6.04(A), (B),
(C) and (D) of the Plan. See Section 6.04(E). [Note:
The Employer may specify additional annuity options in
an addendum to this Adoption Agreement, numbered
6.02(d).]
[ ] (e) If the Plan invests in qualifying Employer
securities, as described in Section 10.03(F), a
Participant eligible to elect distribution under
Section 6.03 may elect to receive that distribution in
Employer securities only in accordance with the
provisions of the addendum to this Adoption Agreement,
numbered 6.02(e).
6.03 BENEFIT PAYMENT ELECTIONS.
Participant Elections After Separation from Service. A
Participant who is eligible to make distribution elections
under Section 6.03 of the Plan may elect to commence
distribution of his Nonforfeitable Accrued Benefit: (Choose at
least one of (a) through (c))
[ ] (a) As of any distribution date, but not earlier
than
of the
Plan
Year beginning after the Participant's Separation from
Service.
[X ] (b) As of the following date(s): (Choose at least
one of Options (1) through (6))
[ ] (1) Any distribution date after the close of
the Plan Year in which the Participant attains
Normal Retirement Age.
[X ] (2) Any distribution date following his
Separation from Service with the Employer.
[ ] (3) Any distribution date in the
Plan
Year(s) beginning after his Separation from
Service.
[ ] (4) Any distribution date in the Plan
Year after the Participant incurs
____________________ Break(s) in Service (as
defined in Article V).
[ ] (5) Any distribution date following
attainment of age and completion
of at least Years
of Service (as defined in Article V).
[ ] (6) (Specify)
.
[ ] (c) (Specify)
.
The distribution events described in the election(s) made
under Options (a), (b) or (c) apply equally to all Accounts
maintained for the Participant unless otherwise specified in
Option (c).
Participant Elections Prior to Separation from Service -
Regular Matching Contributions Account and Employer
Contributions Account. Subject to the restrictions of Article
VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and
Employer Contributions Account prior to his Separation from
Service: (Choose (d) or at least one of (e) through (h))
[X ] (d) No distribution options prior to Separation
from Service.
[ ] (e) Attainment of Specified Age. Until he retires,
the Participant has a continuing election to receive
all or any portion of his Nonforfeitable interest in
these Accounts after he attains: (Choose (1) or (2))
[ ] (1) Normal Retirement Age.
[ ] (2)
years of age and is at least __________% vested
in these Accounts. [Note: If the percentage is
less than 100%, see the special vesting formula
in Section 5.03.]
[ ] (f) After a Participant has participated in the
Plan for a period of not less than ______ years and he
is 100% vested in these Accounts, until he retires,
the Participant has a continuing election to receive
all or any portion of the Accounts. [Note: The number
in the blank space may not be less than 5.]
[ ] (g) Hardship. A Participant may elect a hardship
distribution prior to his Separation from Service in
accordance with the hardship distribution policy:
(Choose (1), (2) or (3); (4) is available only as an
additional option)
[ ] (1) Under Section 6.01(A)(4) of the Plan.
[ ] (2) Under Section 14.11 of the Plan.
[ ] (3) Provided in the addendum to this
Adoption Agreement, numbered Section 6.03.
[ ] (4) In no event may a Participant receive a
hardship distribution before he is at least
_________% vested in these Accounts. [Note: If
the percentage in the blank is less than 100%,
see the special vesting formula in Section
5.03.]
[ ] (h) (Specify)
.
[Note: The Employer may use an addendum, numbered 6.03, to
provide additional language authorized by Options (b)(6), (c),
(g)(3) or (h) of this Adoption Agreement Section 6.03.]
Participant Elections Prior to Separation from Service -
Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions
Account. Subject to the restrictions of Article VI, the
following distribution options apply to a Participant's
Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (Choose (i) or
at least one of (j) through (l))
[ ] (i) No distribution options prior to Separation
from Service.
[ ] (j) Until he retires, the Participant has a
continuing election to receive all or any portion of
these Accounts after he attains: (Choose (1) or (2))
[ ] (1) The later of Normal Retirement Age or
age 59 1/2.
[ ] (2) Age (at
least 59 1/2).
[X ] (k) Hardship. A Participant, prior to this
Separation from Service, may elect a hardship
distribution from his Deferral Contributions Account
in accordance with the hardship distribution policy
under Section 14.11 of the Plan.
[ ] (l) (Specify)
. [Note: Option (l) may not permit in
service distributions prior to age 59 1/2 (other than
hardship) and may not modify the hardship policy
described in Section 14.11.]
Sale of trade or business/subsidiary. If the Employer sells
substantially all of the assets (within the meaning of Code
409(d)(2)) used in a trade or business or sells a subsidiary
(within the meaning of Code 409(d)(3)), a Participant who
continues employment with the acquiring corporation is
eligible for distribution from his Deferral Contributions
Account, Qualified Matching Contributions Account and
Qualified Nonelective Contributions Account: (Choose (m) or
(n))
[X ] (m) Only as described in this Adoption Agreement
Section 6.03 for distributions prior to Separation
from Service.
[ ] (n) As if he has a Separation from Service. After
March 31, 1988, a distribution authorized solely by
reason of this Option (n) must constitute a lump sum
distribution, determined in a manner consistent with
Code 401(k)(10) and the applicable Treasury
regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING
SPOUSES. The annuity distribution requirements of
Section 6.04: (Choose (a) or (b))
[X ] (a) Apply only to a Participant described in
Section 6.04(E) of the Plan (relating to the profit
sharing exception to the joint and survivor
requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICIPANTS'
ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFIT. If a
distribution (other than a distribution from a segregated
Account and other than a corrective distribution described in
Sections 14.07, 14.08, 14.09 or 14.10 of the Plan) occurs more
than 90 days after the most recent valuation date, the
distribution will include interest at: (Choose (a), (b) or
(c))
[X ] (a) 0 % per annum. [Note: The percentage may
equal 0%.]
[ ] (b) The 90 day Treasury bill rate in effect at the
beginning of the current valuation period.
[ ] (c) (Specify)
.
9.11 ALLOCATION AND DISTRIBUTION OF NET INCOME GAIN OR
LOSS. Pursuant to Section 14.12, to determine the allocation
of net income, gain or loss: (Complete only those items, if
any, which are applicable to the Employer's Plan)
[X ] (a) For salary reduction contributions, the
Advisory Committee will: (Choose (1), (2), (3), (4) or
(5))
[X ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach
described in Section 14.12.
[ ] (3) Use the weighted average method
described in Section 14.12, based on a
weighting
period.
[ ] (4) Treat as part of the relevant Account at
the beginning of the valuation period
__________% of the salary reduction
contributions: (Choose (i) or (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified
time:
.
[ ] (5) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(a).
[X ] (b) For matching contributions, the Advisory
Committee will: (Choose (1), (2), (3) or (4))
[X ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the weighted average method
described in Section 14.12, based on a
weighting
period.
[ ] (3) Treat as part of the relevant Account at
the beginning of the valuation period
__________% of the matching contributions
allocated during the valuation period.
[ ] (4) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(b).
N/A [ ] (c) For Participant nondeductible
contributions, the Advisory Committee will:
(Choose (1), (2), (3), (4) or (5))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach
described in Section 14.12.
[ ] (3) Use the weighted average method
described in Section 14.12, based on a
weighting
period.
[ ] (4) Treat as part of the relevant Account at
the beginning of the valuation period
__________% of the Participant nondeductible
contributions: (Choose (i) or (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified
time:
.
[ ] (5) Apply the allocation method described in
the addendum to this Adoption Agreement
numbered 9.11(c).
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.03 INVESTMENT POWERS. Pursuant to Section 10.03[F] of
the Plan, the aggregate investments in qualifying Employer
securities and in qualifying Employer real property: (Choose
(a) or (b))
[X ] (a) May not exceed 10% of Plan assets.
[ ] (b) May not exceed _______% of Plan assets. [Note:
The percentage may not exceed 100%.]
10.14 VALUATION OF TRUST. In addition to each
Accounting Date, the Trustee must value the Trust Fund on the
following valuation date(s): (Choose (a) or (b))
[X ] (a) No other mandatory valuation dates.
[ ] (b) (Specify)
.
EFFECTIVE DATE ADDENDUM
(Restated Plans Only)
The Employer must complete this addendum only if the
restated Effective Date specified in Adoption Agreement
Section 1.18 is different than the restated effective date for
at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement
Section 1.18, the following special effective dates apply:
(Choose whichever elections apply)
[ ] (a) Compensation definition. The Compensation
definition of Section 1.12 (other than the $200,000
limitation) is effective for Plan Years beginning
after . [Note: May not be
effective later than the first day of the first Plan
Year beginning after the Employer executes this
Adoption Agreement to restate the Plan for the Tax
Reform Act of 1986, if applicable.]
[ ] (b) Eligibility conditions. The eligibility
conditions specified in Adoption Agreement Section
2.01 are effective for Plan Years beginning after
.
[ ] (c) Suspension of Years of Service. The suspension
of Years of Service rule elected under Adoption
Agreement Section 2.03 is effective for Plan Years
beginning after
.
[ ] (d) Contribution/allocation formula. The
contribution formula elected under Adoption Agreement
Section 3.01 and the method of allocation elected
under Adoption Agreement Section 3.04 is effective for
Plan Years beginning after
.
[ ] (e) Accrual requirements. The accrual requirements
of Section 3.06 are effective for Plan Years beginning
after
.
[ ] (f) Employment condition. The employment condition
of Section 3.06 is effective for Plan Years beginning
after
.
[ ] (g) Elimination of Net Profits. The requirement for
the Employer not to have net profits to contribute to
this Plan is effective for Plan Years beginning after
. [Note: The date
specified may not be earlier than December 31, 1985.]
[ ] (h) Vesting Schedule. The vesting schedule elected
under Adoption Agreement Section 5.03 is effective for
Plan Years beginning after
.
[ ] (i) Allocation of Earnings. The special allocation
provisions elected under Adoption Agreement Section
9.11 are effective for Plan Years beginning after
.
[ ] (j) (Specify)
.
For Plan Years prior to the special Effective Date, the
terms of the Plan prior to its restatement under this Adoption
Agreement will control for purposes of the designated
provisions. A special Effective Date may not result in the
delay of a Plan provision beyond the permissible Effective
Date under any applicable law requirements. Execution Page
The Trustee (and Custodian, if applicable), by executing
this Adoption Agreement, accepts its position and agrees to
all of the obligations, responsibilities and duties imposed
upon the Trustee (or Custodian) under the Prototype Plan and
Trust. The Employer hereby agrees to the provisions of this
Plan and Trust, and in witness of its agreement, the Employer
by its duly authorized officers, has executed this Adoption
Agreement, and the Trustee (and Custodian, if applicable)
signified its acceptance, on this day of
September ,
19 95 .
Name and EIN of Employer: Steel Technologies Inc.
EIN: 61-0712014
Signed:
Name(s) of Trustee: The Charles Schwab Trust Company
Signed:
Name of Custodian:
Signed:
[Note: A Trustee is mandatory, but a Custodian is optional.
See Section 10.03 of the Plan.]
Plan Number. The 3-digit plan number the Employer assigns to
this Plan for ERISA reporting purposes (Form 5500 Series) is:
002 .
Use of Adoption Agreement. Failure to complete properly the
elections in this Adoption Agreement may result in
disqualification of the Employer's Plan. The 3-digit number
assigned to this Adoption Agreement (see page 1) is solely for
the Regional Prototype Plan Sponsor's recordkeeping purposes
and does not necessarily correspond to the plan number the
Employer designated in the prior paragraph.
Reliance on Notification Letter. The Employer may not rely on
the Regional Prototype Plan Sponsor's notification letter
covering this Adoption Agreement. For reliance on the Plan's
qualification, the Employer must obtain a determination letter
from the applicable IRS Key District office.
<PAGE>
PARTICIPATION AGREEMENT
For Participation by Related Group Members (Plan Section
1.30)
The undersigned Employer, by executing this Participation
Agreement, elects to become a Participating Employer in the
Plan identified in Section 1.03 of the accompanying Adoption
Agreement, as if the Participating Employer were a signatory
to that Agreement. The Participating Employer accepts, and
agrees to be bound by, all of the elections granted under the
provisions of the Prototype Plan as made by
, the Signatory Employer to the Execution
Page of the Adoption Agreement.
1. The Effective Date of the undersigned Employer's
participation in the designated Plan is:
.
2. The undersigned Employer's adoption of this Plan
constitutes:
[ ] (a) The adoption of a new plan by the Participating
Employer.
[ ] (b) The adoption of an amendment and restatement of
a plan currently maintained by the Employer,
identified as
, and having an original effective date of
.
Dated this _____ day of ______________________ ,
19___.
Name of Participating Employer:
Signed:
Participating Employer's EIN:
Acceptance by the Signatory Employer to the Execution Page of
the Adoption Agreement and by the Trustee.
Name of Signatory Employer:
Accepted:__________________
[Date] Signed:
Name(s) of Trustee:
Accepted:___________________
[Date]
Signed:
[Note: Each Participating Employer must execute a separate
Participation Agreement. See the Execution Page of the
Adoption Agreement for important Prototype Plan information.]
AGREE/stetd
