UNITED STATES
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, 1997
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. [ ]
Aggregate market value of the voting stock (which consists solely of shares of
Common Stock) held by non-affiliates of the registrant as of December 5,
1997, computed by reference to the closing price of the registrant's Common
Stock, as quoted in the NASDAQ National Market System on such date:
$88,595,651.
Number of shares of the registrant's Common Stock outstanding at December 5,
1997: 11,998,840.
Portions of the registrant's annual report to shareholders for the fiscal year
ended September 30, 1997 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 22, 1998 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, finish and shape 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, finish and shape specified by its customers and
distributing the processed steel from its Kentucky, Indiana, Michigan,
Maryland, North Carolina and Mexico plants to locations in 36 states primarily
in the East, Midwest and South, as well as into Mexico and Canada. The
Company's principal processed products include hot-rolled strip and sheet,
high strength low alloy strip and sheet, hot-rolled pickle and oil and coated
strip and sheet, pickling of hot-rolled black coils, blanking and cut-to-length
processing of coil steel, cold-rolled strip and sheet, cold-rolled one-pass
strip, and high carbon and alloy 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. One of the
first processing functions involves the pickling of hot rolled black coil
steel. This process is a cleaning process that improves the quality of hot
rolled steel by removing the scale on the surface of the steel and prepares
the hot rolled steel for further processing. Pickling is performed on both
a toll basis as well as on hot rolled steel which is owned by the Company
and will be further processed. The next processing function typically involves
slitting coils to 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 modern and efficient equipment used to perform the pickling,
slitting, cold reduction, annealing and blanking processes. The Company's
pickling facility is capable of high volume pickling, leveling, coating and
slitting of hot rolled steel to greater than industry standards. 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. The Company's blanking lines are capable of producing blanks
from coils up to 84 inches in width and a maximum gauge of .25 inches thick.
Flatness of the steel is controlled by an automatic hydraulic leveler and
diagnostic equipment that continually monitors the steel during processing to
minimize scrap and provide up-to-the minute production information.
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 97.7% of the
Company's raw material has conformed to the requirements for which it
was purchased. Most of the 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 to less than 1.5% of sales in each of the last
three years ended 1997, 1996 and 1995. 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 sales personnel located in Michigan,
Indiana, Kentucky, Tennessee, Illinois, Missouri, Ohio, Pennsylvania, Maryland,
Wisconsin, North Carolina and Mexico. In addition to cultivating additional
business from existing customers and developing new accounts, these sales
personnel are responsible for identifying market trends in their assigned
areas. The marketing staff is supported by an Executive Vice President, four
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 November 30, 1997 was $36,504,000,
approximately 14% higher than the $31,938,000 at November 30, 1996.
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 1997, 1996,and
1995 sales to the automotive industry accounted for 15%, 16% and 16% of the
Company's sales, respectively; sales to the automotive supply industry
accounted for 50%, 58% and 58%, respectively. The Company believes its
long-term relationships with its major customers are a significant factor
in its business.
The Company supplies processed steel to approximately 670 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 tractor-trailer trucks
to provide flexible delivery service to those customers who do not arrange for
their own shipping needs.
SUPPLIERS
In 1997, the Company obtained its steel for processing from a number of primary
producers and mini-mills including AK Steel Corporation, Weirton Steel
Corporation, LTV Steel Company, Gallatin Steel Company, and Rouge Steel
Company. 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. A third processing
facility, the first for Mi-Tech with pickling capabilities, opened in
December 1997 in Decatur, Alabama. Steel Technologies is providing management
services for the Mi-Tech Steel operations.
In October 1990, Processing Technology, Inc., was established. The Company
holds a 5% investment in this 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
number of other intermediate steel processors who are capable of process-
ing steel to closer than standard tolerance. 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, 1997, the Company employed 815 people, including 117 at its
Eminence plant, 141 at its Portage plant, 119 at its Canton plant, 28 at its
Elkton plant, 11 at its Peru plant, 94 at its Mexico plant, 93 at its Ghent
plant, 112 at its Louisville/Shelbyville locations, 83 at its Clinton and
Edenton, North Carolina locations and 17 sales personnel located in their
respective market areas. The hourly employees in the Company's Canton,
Michigan facility are represented by the United Auto Workers under a collective
bargaining agreement. In 1995 the Portage, Indiana hourly employees voted to
be represented by the United Steel Workers. The Company is currently
negotiating a collective bargaining agreement with the union. 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 Opened/ Production
Plant Location Capacity Size Acquired Capabilities
<S> <C> <C> <C> <C>
Eminence, Kentucky 150,000 tons 140,000 sq.ft. 1971 S,R,A,B
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,C
Ghent, Kentucky 500,000 tons 205,000 sq.ft. 1995 S,P
Clinton, North Carolina 126,000 tons 109,600 sq.ft. 1997 S,C
Edenton, North Carolina 60,000 tons 13,500 sq.ft. 1997 S
</TABLE>
S=Slitting
R=Cold Reduction
A=Annealing
P=Pickling and Leveling
C=Cut to Length
B=Blanking
Seven of the Company's nine processing plants are majority-owned by the Company.
The Company entered into ten-year operating lease agreements for the processing
plants in North Carolina. During 1997, the Company sold approximately 603,000
tons of processed steel from its manufacturing plants. In addition, the Ghent
pickling facility processed approximately 202,000 tons of material owned by
others. The remaining facilities processed an additional 55,000 tons of
material owned by others.
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 currently 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. In December 1997, Mi-Tech Steel Alabama, a
wholly-owned subsidiary of Mi-Tech Steel, Inc. opened a new $25 million
pickling and slitting facility in Decatur, Alabama. This 160,000 square foot
facility has a processing capacity of 1,000,000 tons annually.
All operating properties 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 68 Chairman of the Board and Chief
Executive Officer
Bradford T. Ray 39 President and Chief Operating Officer
Michael J. Carroll 40 Executive Vice President
Howard F. Bates, Jr. 51 Vice President-Technical Services
Joseph P. Bellino 47 Chief Financial Officer and Treasurer
Officers are elected annually by and serve at the discretion of the Board of
Directors. Messrs. Merwin Ray, Bradford Ray, 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. Joseph P. Bellino has served as Chief Financial Officer and Treasurer
of the Company since October 1997. He previously held the position of
President of Beacon Capital Advisors Company from 1996 to 1997. From 1989 to
1995, Mr. Bellino served as President of Rhawn Enterprises, Inc., a venture
capital, acquisition and consulting services company.
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 12 of the
Company's annual report to shareholders for the year ended September 30, 1997.
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 11 of the Company's annual
report to shareholders for the year ended September 30, 1997.
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 13 through 16 of the Company's annual
report to shareholders for the year ended September 30, 1997.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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, 1997, on pages
13 through 27 and the section entitled " Quarterly Financial Data" on
page 12 thereof are incorporated herein by reference.
Consolidated Balance Sheets-September 30, 1997 and 1996
Consolidated Statements of Income-Years ended September 30, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity-Years ended September 30,
1997, 1996 and 1995
Consolidated Statements of Cash Flows-Years ended September 30, 1997, 1996 and
1995
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 6, and "Election of
Directors Section 16(a) Beneficial Ownership Reporting Compliance" on page 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 22, 1998. 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".
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
22, 1998.
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 22, 1998 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 6 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 22, 1998.
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 page 9 and "Election of Directors"
contained on pages 3 through 6 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 22, 1998.
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.
(a) (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, 1997.
(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, 1997
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
(h) 10.1 Amended and Restated Loan Agreement dated as of March
26, 1997, between the Registrant and PNC Bank,
Kentucky, Inc., National City Bank of Kentucky,
NBD Bank, N.A., and SunTrust Bank, Nashville, N.A.
10.1(a) First Amendment dated October 10, 1997, between the
Registrant and PNC Bank, Kentucky, Inc., Inc.,
National City Bank, Kentucky, NBD Bank, N.A., and
Suntrust Bank, Nashville, N.A.
(f) 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
10.2 (a) Request for Consent to Amendment of Note Agreement
10.2 (b) Request for Consent to Second Amendment of Note Agreement
(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 *
(f) 10.3 (c) Registrant's 1995 Stock Option Plan *
(h) 10.4 Stock Purchase Agreement between Registrant and
Shareholders of Atlantic Coil Processing, Inc.
effective April 1, 1997.
(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
(g) 10.11 Collective Bargaining Agreement Between the United Auto
Workers and Steel Technologies Inc.
(g) 10.12 Nonemployee Directors Stock Plan *
11 Statement Re: Computation of Per Share Earnings
13 1997 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
Quarterly Report on Form 10-Q (file # 0-14061) for the quarter ended
March 31, 1995.
(g) Incorporate herein by reference to exhibits filed with the Company's
Annual Report of Form 10-K (file # 0-14061) for the fiscal year ended
September 30, 1996.
(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, 1997.
* 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, 1997:
Allowance for doubtful accounts $874,772 $588,434 - $534,248(A) $928,958
===================================================================
Year Ended September 30, 1996:
Allowance for doubtful accounts $855,000 $269,300 - $249,528(A) $874,772
===================================================================
Year Ended September 30, 1995:
Allowance for doubtful accounts $910,000 $ 27,729 - $ 82,729(A) $855,000
===================================================================
(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 October 24, 1997 has been incorporated by reference in
this Form 10-K from page 27 of the 1997 Annual Report to Shareholders of Steel
Technologies Inc. and Subsidiaries. In connection with our audits of such
consolidated financial statements, we have also audited the related
consolidated financial statement schedule listed in the index in Item 14(a)(2)
of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated 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
October 24, 1997
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: 12/22/97 By: /s/ Joseph P. Bellino
----------------
Joseph P. Bellino
Chief Financial Officer,
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 12/22/97 Chairman of the Board of Directors
------------- Chief Executive Officer
Merwin J. Ray (Principal Executive Officer)
/s/ BRADFORD T. RAY 12/22/97
--------------- Director, President and Chief
Bradford T. Ray Operating Officer
/s/ HOWARD R. BATES, JR. 12/22/97
-------------------- Director and Vice President-Technical
Howard F. Bates, Jr. Services
/s/ MICHAEL J. CARROLL 12/22/97
------------------
Michael J. Carroll Director and Executive Vice President
/s/ RALPH W. MCINTYRE 12/22/97
-----------------
Ralph W. McIntyre Director
/s/ ANDREW J. PAYTON 12/22/97
---------------
Andrew J. Payton Director
/s/ WILLIAM E. HELLMANN 12/22/97
-------------------
William E. Hellmann Director
/s/ DALE L. ARMSTRONG 12/22/97
----------------- Director
Dale L. Armstrong
/s/ JIMMY DAN CONNER 12/22/97
---------------- Director
Jimmy Dan Conner
EXHIBIT 13
Management's Discussion and Analysis of Financial
Condition and Results of Operations
When used in the following discussion, the word "expects" and other similar
expressions are intended to identify forward-looking statements, which are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those projected. Specific risks and uncertainties include, but are not
limited to, general business and econmic conditions; cyclicality of demand in
the steel industry, specifically in the automotive market; work stoppages or
other business interruptions affecting automotive manufacturers; competitive
factors such as the pricing and availability of steel; reliance on key
customers; and potential equipment malfunctions. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect the occurrence of unanticipated events
or circumstances after the date hereof.
RESULTS OF OPERATIONS - FISCAL 1997 COMPARED TO FISCAL 1996
The Company recorded sales of $345,624,000 in fiscal 1997, an increase of
17% from 1996 sales of $294,161,000. The increase in revenues in fiscal 1997
benefited from the inclusion of $25,500,000 of revenues from Atlantic Coil
Processing (ACP). Revenues from the other steel processing operations
increased $26,000,000 or 9% from a year ago. 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 idustry. Demand in the automotive
and other steel consuming markets was comparable throughout the fiscal year.
The Company continues to increase its market share and to be successful in
developing a substantial amount of new business with both existing and new
customers. As a result of the ACP acquisition and market share gains, tons
shipped in 1997 increased by 20% while average selling prices compared to
fiscal 1996 declined approximately 3% from a year ago. The Company did
experience softer sales in the fourth quarter as compared to fiscal 1996
fourth quarter. The Company attributed the softness to seasonal factors being
more severe than anticipated as a result of a high number of model year
changeovers with the Company's automotive customers. Additionally, inventory
adjustments by parts manufacturers precipitated by labor disruptions early
in the fiscal year with major automotive end-users slowed down the order
growth from normal patterns.
The capital investments completed in recent years have added new capacity and
increased the products and services offered by the Company. The most recent
expansion of the Company's processing capabilities is the blanking lines added
in November 1997 at the Eminence, Kentucky facility. The additional product
offerings are allowing the Company to pursue significant new business
opportunities and to further enhance its market share. The acquisition of ACP
adds new capacity, geographic diversity and cut-to-length capabilities, which
will further enhance the Company's position in the marketplace.
The gross profit margin decreased to 10.8% in 1997 compared to 13.7% in 1996
as a result of increases in the purchase price of raw materials from the
primary steel mills. These purchase price increases were not fully offset
with selling price increases to customers. During 1997, a number of steel
mills experienced temporary production problems and work stoppages which
negatively impacted the available supply of raw materials. The Company
expects the raw material supply, especially in hot rolled steel, to improve
as new steelmaking capacity and increased imports enter the market. The
additional raw material supply is expected to alleviate the upward pressure on
the price of flat rolled steel in fiscal 1998. However, should raw material
prices increase, margins would be negatively impacted until corresponding
selling price increases are passed along to customers. The gross margin is
expected to be postively impacted by production cost efficiencies associated
with the anticipated higher sales volumes. Additionally, the Company expects
to increase the amount of higher margin toll processing revenue generated by
the Company's pickling facility and blanking lines. Toll processing, primarily
of customer-owned steel, generates higher gross margin percentages than the
Company's traditional processing customers.
The Company continues to actively manage the level at which selling, general
and administrative expenses are added to the cost structure. Sales increased
17% in fiscal 1997, while selling, general and administrative costs increased
6% from a year ago. Selling, general and administrative expenses were 5.8%
and 6.4% of sales in 1997 and 1996, respectively.
The Company's equity in the net income of Mi-Tech Steel, Inc., its
unconsolidated corporate joint venture, decreased slightly to $1,609,000
in 1997 from $1,672,000 in 1996. The equity income decrease is principally
the result of lower steel margins which offset the higher sales levels
achieved in 1997.
Interest expense increased to $5,673,000 in 1997 from $5,008,000 in 1996. The
increase is the result of higher average borrowings used to finance the
acquisition of ACP, capital additions and working capital needs of the Company
in 1997.
The Company's effective income tax rate was 35.2% in 1997 compared to 35.7% in
1996. 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.
Fiscal 1996 Compared to Fiscal 1995
The Company posted sales of $294,161,000 in fiscal 1996, an increase of
16% from 1995 sales of $252,730,000. Demand in the automotive
markets improved throughout the fiscal year, yet automotive production remained
slightly below the levels of the prior fiscal year. The Company continued to
increase its market share and be successful in developing a substantial amount
of new business with both existing customers and new accounts. As a result,
tons shipped in 1996 increased by 24% while average selling prices declined by
8% from 1995.
The gross profit margin increased to 13.7% in 1996 compared to 12.1% in 1995.
The gross profit margin in 1996 benefited from reductions in the purchase price
of raw materials as a reult of a decline in the prevailing market price for
flat rolled steel. The Company generated additional raw material cost
reductions from the savings associated with pickling steel for internal use.
In addition, the gross margin was positively impacted by toll processing
revenues from the Company's pickling facility which partially offset production
cost increases associated with the new production capacity added in 1995.
Selling, general and adminstrative expenses remained at 6.4% of sales in 1996
and 1995. Overall, these expenses increased 16% in 1996, a rate comparable to
the growth in sales but substantially lower than the 24% gain in tons shipped.
A significant portion of the cost increase in 1996 was related to expenses
associated with the new production capacity added in 1995.
The Company's equity in the net income of its unconsolidated corporate joint
venture increased to $1,672,000 in 1996 from $1,414,000 in 1995. The equity
income increase was principally the result of higher sales levels achieved by
Mi-Tech Steel, Inc.
The Company recorded a charge of $601,000 in 1995 to account for the
impact of the Mexican peso devaluation on dollar denominated borrowings
provided to the Company's 80% owned Mexican subsidiary. These borrowings
were capitalized as an additional equity contribution to the Mexican subsidiary
in fiscal 1996 and were considered a part of the Company's long-term investment
in the subsidiary. The impact of currency fluctuations relating to the equity
contribution are now reflected as a component of shareholders' equity.
Interest expense increased to $5,008,000 in 1996 from $3,939,000 in 1995. The
increase was the result of higher average borrowings used to finance the capital
additional and working capital needs of the Company in 1996. Higher interest
rates also contributed to the increase in the interest expense as well as lower
levels of capitalized interest in 1996.
The Company's effective income tax rate was 35.7% in 1996 compared to 34.3% in
1995. The Company's earnings in 1996 were subject to higher statutory federal
and state income tax rates than in the prior year. In addition a smaller
percentage of the Company's overall earnings were generated by the Mi-Tech
Steel joint venture which were not fully taxable to the Company.
Liquidity and Capital Resources
At September 30, 1997, the Company had $90,317,000 of working capital,
maintained a current ratio of 3.3:1 and had total long-term debt at 48% of
total capitalization. The Company continues to manage the levels of
accounts receivable, inventories and other working capital items in relation
to the trends in sales and the overall market. In fiscal 1997 accounts
receivables, inventories and other working capital needs have increased to
support the higher sales levels. These working capital items were financed
primarily with borrowings from the Company's bank credit facility.
For 1998, the combination of the expected sales levels and increased
availability of raw material will increase the inventory turnover, reducing
the number of days carried in inventory. The Company expects the sales trend
to remain strong during the 1998 fiscal year based on the current backlog and
order activity. The working capital needs associated with the higher sales
levels are anticipated to be funded with a combination of cash flows from
operations and available borrowing capabilities.
The Company's capital expenditures for 1997 totaled $9,481,000 excluding
amounts for acquisitions and investments in joint ventures. The Company has
expanded its production and processing capacity over the last several years
and expects capital additions for all facilities including Mexico to
approximate $7,000,000 for 1998. The capital expenditures for 1997 were
financed primarily with proceeds from long-term debt.
On April 1, 1997, the Company completed the purchase of 100% of the common
stock of Atlantic Coil Processing, Inc. (ACP) for approximately $19,600,000
in cash, notes and assumption of liabilities. The Company financed the
transaction by borrowing approximately $10,900,000 on the line of credit,
issuing a $3,625,000 note payable to the former ACP shareholders and assuming
$5,100,000 in liabilities of ACP.
Pursuant to a joint venture agreement, Steel Technologies has guaranteed
$6,250,000 of the bank financing required for the working capital purposes
of Mi-Tech Steel, Inc. Mi-Tech Steel had significant capital additions in 1997
to construct a pickling and slitting facility in Decatur, Alabama. To
participate equally with its joint venture partner in the financing of this
project, Steel Technologies contributed $5,000,000 of additional equity to the
joint venture. Further equity contributions are not anticipated for the
foreseeable future.
The Company believes that it has sufficient liquidity and available capital
resources to meet its existing needs. In October 1997, the Company increased
the limit on its unsecured bank line of credit to $80,000,000 from $55,000,000,
The $25,000,000 increase brings the long-term portion, due in the year 2000,
to $55,000,000. This additional availability along with funds generated from
operations are expected to be sufficient to finance the capital expenditure
plans as well as the working capital requirements of the fiscal year. At
this time the Company has no known material obligations, 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. The Company intends to use any additional
funds for its growth, including strategic acquisitions and joint ventures,
the construction of new plants and the investment in 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, 1997, the Company had $97,190,000 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.
The Company maintains an equity investment of approximately $6,700,000 in its
80% owned Mexican subsidiary. In fiscal 1998, the Company plans to invest
approximately $2,700,000 in additional production equipment and expansion of
the existing production facility in Mexico. The cumulative inflation rate in
Mexico over the three year period ended December 31, 1996 was approximately
100%, resulting in the Mexican economy being considered hyper-inflationary
for financial reporting. Accordingly, the Company now uses the monetary/non-
monetary method of accounting. The impact on the Company's profitability is
limited to the effect of currency fluctuations related to monetary assets,
which approximates $1,700,000 at September 30, 1997. Due to the costs of
hedging currency risks, the Company did not enter into any hedging
arrangements.
The Company maintains an investment, principally in the preferred stock of
Processing Technology, Inc., a corporate joint venture. The Company
periodically evaluates 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 $9,200,000 of the joint venture's loan and
lease commitments. The conversion is not expected to occur in the near term.
The Company believes its manufacturing facilties 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.
STEEL TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
September 30 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,467 $ 4,218
Trade accounts receivable, less allowance for
doubtful accounts; 1997, $929; 1996, $875 43,110 39,732
Inventories 81,086 59,374
Deferred income taxes 1,714 1,631
Prepaid expenses and other assets 896 369
---------- ----------
Total current assets 130,273 105,324
---------- ----------
Property, plant and equipment, at cost:
Land and improvements 5,309 5,233
Buildings and improvements 42,217 41,284
Machinery and equipment 98,620 89,472
Construction in progress 7,054 1,984
---------- ----------
153,200 137,973
Less accumulated depreciation and
amortization 49,404 37,956
---------- ----------
103,796 100,017
---------- ----------
Investments in corporate joint ventures 17,626 11,016
---------- ----------
Goodwill, net of amortization: 1997, $254;
1996, $118 5,147 142
---------- ----------
Other assets 668 642
---------- ----------
$ 257,510 $ 217,141
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,605 $ 34,528
Accrued liabilities 5,156 5,146
Long-term debt due within one year 2,195 385
---------- ----------
Total current liabilities 39,956 40,059
---------- ----------
Long-term debt 97,190 67,260
---------- ----------
Deferred income taxes 11,535 8,461
---------- ----------
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:
11,994,760 in 1997 and 11,962,238 in 1996 16,893 16,662
Additional paid-in capital 4,909 4,909
Retained earnings 88,467 81,161
Foreign currency translation adjustment (1,440) (1,371)
---------- ----------
108,829 101,361
---------- ----------
$ 257,510 $ 217,141
========== ==========
</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 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $ 345,624 $ 294,161 $ 252,730
Cost of goods sold 308,448 253,845 222,121
---------- ---------- --------
Gross profit 37,176 40,316 30,609
Selling, general and administrative
expenses 19,989 18,811 16,185
Equity in net income of unconsolidated
corporate joint venture 1,609 1,672 1,414
---------- ---------- --------
Operating income 18,796 23,177 15,838
Interest expense 5,673 5,008 3,939
Foreign currency exchange loss - - 601
---------- ---------- --------
Income before income taxes 13,123 18,169 11,298
Provision for income taxes 4,621 6,483 3,875
---------- ---------- --------
Net income $ 8,502 $ 11,686 $ 7,423
========== ========== ========
Weighted average number of common
shares outstanding 11,976 11,980 12,147
========== ========== ========
Earnings per common share $ 0.71 $ 0.98 $ 0.61
========== ========== ========
</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, 1997, 1996 and 1995
<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, 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 ($.08 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
Net income 11,686 11,686
Net issuance of common stock under incentive
stock option plan 9 18 18
Cash dividends on common stock ($.09 per share) (1,079) (1,079)
Purchase and retirement of common stock (164) (1,570) (1,570)
Foreign currency translation adjustment $ (691) (691)
---------- ---------- -------- ------- ------- ------
Balances, September 30, 1996 11,962 16,662 4,909 81,161 (1,371) 101,361
Net income 8,502 8,502
Net issuance of common stock under incentive
stock option plan 33 231 231
Cash dividends on common stock ($.10 per share) (1,196) (1,196)
Foreign currency translation adjustment $ (69) (69)
---------- ---------- -------- ------- ------- --------
Balances, September 30, 1997 11,995 $ 16,893 $ 4,909 $ 88,467 $(1,440) $108,829
========== ========== ======== ======= ====== =======
</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 1997 1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 8,502 $ 11,686 $ 7,423
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 10,364 9,484 7,108
Amortization 136 51 49
Deferred income taxes 1,637 1,644 2,002
Equity in net income of unconsolidated corporate
joint venture (1,609) (1,672) (1,414)
Loss (gain) on sale of assets 4 (475) (293)
Increase (decrease) in cash resulting from changes in:
Trade accounts receivable 610 (8,499) 3,036
Inventories (15,123) (15,770) 36,652
Prepaid expenses and other assets (1,141) 1,420 (1,333)
Accounts payable (5,816) 11,018 (19,836)
Accrued liabilities (125) 2,440 (178)
---------- ------- -------
Net cash (used in) provided by operating activities (2,561) 11,327 33,216
---------- ------- -------
Cash Flows From Investing Activities:
Purchases of property, plant and equipment (9,481) (6,473) (37,914)
Proceeds from sale of property, plant and equipment 7 737 582
Acquisition, net of cash acquired (10,860) - -
Investment in unconsolidated joint venture (5,000) - -
---------- ------- -------
Net cash used in investing activities (25,334) (5,736) (37,332)
---------- ------- -------
Cash Flows From Financing Activities:
Proceeds from long-term debt 28,500 6,014 71,005
Principal payments on long-term debt (385) (7,399) (63,590)
Cash dividends on common stock (1,196) (1,079) (973)
Net issuance of common stock under incentive
stock option plan 231 18 7
Repurchase of common stock - (1,570) (418)
---------- ------- --------
Net cash provided by (used in) financing activities 27,150 (4,016) 6,031
---------- ------- -------
Effect of exchange rate changes on cash (6) (55) (225)
---------- ------- -------
Net (decrease) increase in cash and cash equivalents (751) 1,520 1,690
Cash and cash equivalents, beginning of year 4,218 2,698 1,008
---------- ------- -------
Cash and cash equivalents, end of year $ 3,467 $ 4,218 $ 2,698
========== ======= =======
Supplemental Cash Flow Disclosures:
Cash payments for interest $ 5,652 $ 5,143 $ 5,038
========== ======= =======
Cash payments for income taxes $ 3,693 $ 3,245 $ 2,471
========== ======= =======
Supplemental Schedule of Noncash Investing and
Financing Activities:
Fair value of assets acquired, net of cash acquired
of $8 $ 19,600
Liabilities assumed 8,740
--------
Net cash paid $ 10,860
========
</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: Steel Technologies Inc. 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 its sales are to industrial customers in North
America, 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 $202,000, $122,000 and
$1,293,000 were capitalized in 1997, 1996 and 1995, respectively.
Revenue Recognition: The Company recognizes revenue when goods are shipped.
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: Prior to January 1, 1997, the assets and
liabilities of the Mexican subsidiary were translated into U.S. dollars at the
year-end rate of exchange and revenues and expenses were translated at average
rates of exchange in effect during the period. Resulting translation
adjustments were accumulated in a separate component of shareholders' equity.
Foreign currency transaction gains and losses were included in net income when
incurred. Effective January 1, 1997, the Company changed to the monetary/non-
monetary method of accounting for foreign currency translation as the Mexican
economy is now considered hyper-inflationary for financial reporting. This
method requires non-monetary assets and liabilities to be translated at
historical rates of exchange and the functional currency to be U.S. dollars.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications: Certain reclassifications have been made to previously
issued financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS:
On April 1, 1997, the Company completed the purchase of 100% of the common
stock of Atlantic Coil Processing, Inc. (ACP) for approximately $19,600,000
in cash, notes and assumption of liabilities. The Company financed the
transaction by borrowing approximately $10,900,000 on the line of credit,
issuing a $3,625,000 note payable to the former ACP shareholders and assuming
$5,100,000 in liabilities of ACP.
3. INVENTORIES:
Inventories at September 30 consist of 1997 1996
(in thousands):
------------------------------
Raw materials $ 67,463 $ 49,617
Finished goods and work in process 13,623 9,757
---------- ----------
$ 81,086 $ 59,374
========== ==========
4. 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 1997 1996
Assets: ----------------------------------------------------
<S> <C> <C>
Current assets $ 45,922 $ 36,943
Other assets 39,329 18,460
Liabilities:
Current liabilities $ 50,862 $ 26,035
Non current liabilities 1,244 9,442
</TABLE>
<TABLE>
Income Statement: Fiscal Years Ended September 30 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 109,482 $ 94,992 $ 88,204
Net income $ 3,219 $ 3,345 $ 2,828
</TABLE>
The Company has various transactions with Mi-Tech Steel, Inc. Included in
operating income of the Company are management and other fees and equity
from the joint venture earnings totaling $2,970,000, $2,248,000 and
$2,273,000 in 1997, 1996 and 1995, respectively. The Company is a guarantor
on $6,250,000 of Mi-Tech bank borrowings. The borrowings, due in October 1998,
consist of notes payable bearing variable rates of interest, which at September
30, 1997 was 7.02%. The Company's equity in undistributed net income of
Mi-Tech Steel, Inc. was $7,573,000 at September 30, 1997. During 1997, the
Company made an additional capital contribution of $5,000,000 to the joint
venture.
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 periodically evaluates 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 $9,200,000, of the joint venture's loan and lease commitments.
The conversion is not expected to occur in the near term.
5. Long-Term Debt:
Long-term debt at September 30 consists of the
following (in thousands): 1997 1996
- ------------------------------------------------------------------------------
Notes payable, unsecured, interest due
monthly at 8.52% $ 40,000 $40,000
Notes payable to bank, unsecured under current
line of credit; interest rates at September
30, 1997 were 6.91% and 6.94% 50,000 $ 21,500
Variable rate industrial revenue development
bonds payable in annual installments through
November 1, 2014; interest rate at September
30, 1997, was 4.25% 4,400 4,500
Notes payable at 7.00%, unsecured, payable in
annual installments through April 1, 1999 3,625 -
Mortgage notes payable in installments through
2003; interest rates averaging 8.15% 1,333 1,600
All other debt 27 45
---------- ----------
99,385 67,645
Less amounts due within one year 2,195 385
---------- ----------
$ 97,190 $ 67,260
========== ==========
In April 1995, the Company entered into a $40,000,000 private note placement.
Annual principal payments of $5,720,000 begin March 1, 1999 and continue through
March 1, 2005.
In October 1997, the Company increased its unsecured bank line of credit to
$80,000,000 from $55,000,000. The term on the $25,000,000 portion of the bank
line of credit was extended through October 12, 1998. The remaining $55,000,000
portion of the bank line of credit is due on October 11, 2000. 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, 1997, are: 1998, $2,195,000; 1999, $27,916,000;
2000, $6,091,000; 2001, $36,091,000; and 2002, $6,092,000. 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. The Company estimates that the
fair value of all debt approximates $99,085,000 at September 30, 1997. The
fair value of the Company's debt is estimated based on quoted market rates
or current rates offered to the Company on comparable remaining maturities.
6. 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 $513,000 in 1997, $470,000 in
1996 and $482,000 in 1995. 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):
1997 1996 1995
---------- ---------- --------
<S> <C> <C> <C>
Current:
Federal $ 2,311 $ 3,974 $ 1,586
State and local 673 865 287
---------- ---------- --------
2,984 4,839 1,873
---------- ---------- --------
Deferred:
Federal 1,481 1,433 1,688
State and local 156 211 314
---------- ---------- --------
1,637 1,644 2,002
---------- ---------- --------
$ 4,621 $ 6,483 $ 3,875
========== ========== ========
</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>
1997 1996
Assets Liabilities Assets Liabilities
--------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
Income tax effects at September 30:
Accelerated depreciation $ $ 10,349 $ 7,997
Inventory capitalization 1,099 $ 1,088
Provision for doubtful accounts 354 340
Non deductible liabilities 261 203
Other, net 1,186 464
--------- --------- -------- -------
$ 1,714 $ 11,535 $ 1,631 $ 8,461
========= ========= ======== =======
</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>
1997 1996 1995
---------- ---------- -------
<S> <C> <C> <C>
Provision at federal statutory rate 34.0 % 35.0 % 34.0 %
Increases (decreases) resulting from:
State and local income taxes, net
of federal income tax benefit 4.7 4.1 3.5
Equity in net income of unconsolidated
corporate joint venture (3.7) (2.6) (3.4)
Other 0.2 (0.8) 0.2
---------- --------- --------
35.2 % 35.7 % 34.3 %
========== ========= ========
</TABLE>
8. 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 Company applies APB Opinion 25, "Accounting for Stock Issued to Employees,"
and related interpretations in accounting for its plans. Generally, the
exercise price of options awarded under these plans has been equal to the fair
market value of the underlying common stock on the date of grant. Accordingly,
no compensation cost has been recognized for stock-based compensation plans.
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation," net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
(Amounts in thousands except per share data) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Net income-as reported $ 8,502 $11,686
Net income-pro forma $ 8,397 11,575
- -------------------------------------------------------------------
Earnings per share-as reported $ .71 $ .98
Earnings per share-pro forma $ .70 $ .97
</TABLE>
The pro forma effects on net income for 1997 and 1996 are not representative
of the pro forma effect on net income in future years because they do not
take into consideration pro forma compensation expense related to grants made
prior to 1996. The fair value of options granted during 1997 and 1996 is
$5.90 and $4.65 per share, respectively.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
<TABLE> 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Expected dividend yield .8% .7%
Expected stock price volatility 42.4% 45.9%
Weighted average risk-free interest rate 6.5% 5.2%
Expected life of options (years) 7.0 4.0
- -----------------------------------------------------------------------
</TABLE>
The summary of the status of the Company's stock incentive plans as of
September 30, 1997, 1996 and 1995 and changes during the years then ended
are presented below:
<TABLE>
Shares Under Range of Option Weighted Average
Plan Prices Per Share Exercise Price
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, September 30, 1994 498,825
Granted 61,500
Exercised (1,000)
Canceled (24,000)
- ----------------------------------------------------------------------------------------------
Balance, Setpember 30, 1995 535,325 $ 6.67 - $11.73 $ 9.95
Granted 110,000 11.63 - 12.79 11.84
Exercised (17,700) 6.67 - 6.87 6.84
- ----------------------------------------------------------------------------------------------
Balance, September 30, 1996 627,625 6.67 - 12.79 10.37
Granted 5,000 11.63 11.63
Exercised (103,725) 6.67 - 10.67 9.88
Canceled (14,650) 10.00 - 11.00 10.21
- ----------------------------------------------------------------------------------------------
Balance, September 30, 1997 514,250 $ 6.67 - 12.79 $10.49
==============================================================================================
</TABLE>
At September 30, 1997 and 1996, optins for 352,950 and 384,763 were
exercisable, respectively. The following table summarizes information about
stock options outstanding at September 30, 1997:
<TABLE>
Options Outstanding: Options Exercisable:
--------------------------------------------- ----------------------
Weighted Weighted
Number Average Average Number Weighted
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 9/30/97 Contracted Life Price at 9/30/97 Price
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 6.67 - $10.08 117,500 2.4 years $ 8.06 117,500 $ 8.06
$10.09 - $12.79 396,750 5.3 years $11.20 235,450 $11.07
- ------------------------------------------------------------------------------------------------------
$ 6.67 - $12.79 514,250 4.7 years $10.49 352,950 $10.07
======================================================================================================
</TABLE>
At September 30, 1997 and 1996, shares available for granting of stock options
under the Company's stock option plans were 285,000 and 290,000 shares,
respectively. All unexercised options expire not later than the year 2007.
9. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS No. 128). SFAS No. 128 is effective for financial statements issued for
periods ended after December 15, 1997. The Company does not expect adoption
of this statement will have material impact on its financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997. SFAS
No. 130 requires companies to classify items defined as "other comprehensive
income" by their nature in a financial statement, and to display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The adoption of SFAS No. 130 will not have a material impact on our
consolidated financial statements.
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, 1997 and 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended September 30, 1996. 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1997 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
------------------------
Coopers & Lybrand L.L.P.
Louisville, Kentucky
October 24, 1997
[CAPTION]
SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
<TABLE>
Years Ended September 30 1997 1996 1995 1994 1993
Income Statement Data ---------- ---------- -------- ------- -------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 345,624 $ 294,161 $ 252,730 $ 241,160 $ 198,157
Cost of goods sold 308,448 253,845 222,121 210,131 168,295
Gross profit 37,176 40,316 30,609 31,029 29,862
Selling, general and administrative expenses 19,989 18,811 16,185 14,544 14,044
Equity in net income of unconsolidated
corporate joint venture 1,609 1,672 1,414 1,437 934
Operating income 18,796 23,177 15,838 17,922 16,752
Income before income taxes 13,123 18,169 11,298 16,606 15,849
Net income 8,502 11,686 7,423 10,512 9,946
Earnings per common share $ .71 $ .98 $ .61 $ .87 $ .83
Cash dividends per common share $ .10 $ .09 $ .08 $ .07 $ .053
Weighted average number of common
shares outstanding 11,976 11,980 12,147 12,150 12,055
September 30 1997 1996 1995 1994 1993
Balance Sheet Data ---------- ---------- -------- ------- -------
- ---------------------------------------------------------------------------------------------------------------------------
Working capital $ 90,317 $ 65,265 $ 53,385 $ 70,511 $ 50,134
Net fixed assets 103,796 100,017 103,846 73,329 54,218
Total assets 257,510 217,141 194,730 200,413 143,821
Long-term debt 97,190 67,260 68,645 60,805 30,006
Shareholders' equity 108,829 101,361 92,997 87,638 77,964
Years Ended September 30 1997 1996 1995 1994 1993
Other Financial Data ---------- ---------- --------- -------- --------
- ----------------------------------------------------------------------------------------------------------------------------
Capital expenditures, including acquisitions
and investments in joint ventures $ 25,341 $ 6,473 $ 37,914 $ 24,481 $ 11,470
Shareholders' equity per common share 9.07 8.47 7.67 7.21 6.42
Depreciation and amortization 10,500 9,535 7,157 5,030 4,397
</TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
(Amounts in thousands, except per share data)
<TABLE>
Fiscal Year 1997 First Second Third Fourth
<S> <C> <C> <C> <C>
Sales $ 78,030 $ 79,799 $ 101,082 $ 86,713
Gross profit 9,404 8,271 10,840 8,661
Net income 2,463 1,736 2,764 1,539
Earnings per common share $ .21 $ .15 $ .23 $ .13
Fiscal Year 1996 First Second Third Fourth
<S> <C> <C> <C> <C>
Sales $ 65,708 $ 76,630 $ 76,623 $ 75,200
Gross profit 8,466 11,026 10,820 10,004
Net income 2,111 3,366 3,333 2,876
Earnings per common share $ .18 $ .28 $ .28 $ .24
</TABLE>
MARKET PRICE AND DIVIDEND INFORMATION
The Company's common stock trades on The Nasdaq Stock Market under the
symbol STTX. At October 31, 1997, there were approximately 593 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 1997 and 1996.
Nasdaq National Market System quotations are based on actual transactions.
<TABLE>
Stock Price
Fiscal Year 1997 High Low Dividends
<S> <C> <C> <C>
First Quarter $ 13.625 $ 12.125 $ 0.05
Second Quarter $ 13.625 $ 10.250
Third Quarter $ 12.000 $ 9.250 $ 0.05
Fourth Quarter $ 13.500 $ 10.563
Stock Price
Fiscal Year 1996 High Low Dividends
<S> <C> <C> <C>
First Quarter $ 10.500 $ 6.250 $ 0.04
Second Quarter $ 12.500 $ 8.625
Third Quarter $ 15.875 $ 11.500 $ 0.05
Fourth Quarter $ 15.500 $ 10.250
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet at September 30, 1997 and condensed
consolidated statement of income for the fiscal year ended September 30,
1997 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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,467
<SECURITIES> 0
<RECEIVABLES> 44,039
<ALLOWANCES> (929)
<INVENTORY> 81,086
<CURRENT-ASSETS> 130,273
<PP&E> 153,200
<DEPRECIATION> (49,404)
<TOTAL-ASSETS> 257,510
<CURRENT-LIABILITIES> 39,956
<BONDS> 97,190
<COMMON> 16,893
0
0
<OTHER-SE> 91,936
<TOTAL-LIABILITY-AND-EQUITY> 257,510
<SALES> 345,624
<TOTAL-REVENUES> 345,624
<CGS> 308,448
<TOTAL-COSTS> 308,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 588
<INTEREST-EXPENSE> 5,673
<INCOME-PRETAX> 13,123
<INCOME-TAX> 4,621
<INCOME-CONTINUING> 8,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,502
<EPS-PRIMARY> $.71
<EPS-DILUTED> $.71
</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 1997 1996 1995
- -------------------------------------------------------------------------------
ACTUAL
<S> <C> <C> <C>
Weighted average shares
outstanding 11,976 11,980 12,147
==============================
Net income $ 8,502 $11,686 $ 7,423
==============================
Earnings per share $ 0.71 $ 0.98 $ 0.61
==============================
PRIMARY
Weighted average shares
outstanding 11,976 11,980 12,147
Dilutive effect of stock options 59 74 81
------------------------------
12,035 12,054 12,228
==============================
Net income $ 8,502 $11,686 $ 7,423
==============================
Earnings per share $ 0.71 $ 0.97 $ 0.61
==============================
FULLY DILUTED
Weighted average shares
outstanding 11,976 11,980 12,147
Dilutive effect of stock options 81 107 81
------------------------------
12,057 12,087 12,228
==============================
Net income $ 8,502 $11,686 $ 7,423
==============================
Earnings per share $ 0.71 $ 0.97 $ 0.61
==============================
</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 Nos. 333-66318,
333-21279 and 333-21359) of our reports dated October 24, 1997, on our audits
of the consolidated financial statements and financial statement schedule of
Steel Technologies Inc. and Subsidiaries as of September 30, 1997 and 1996 and
for the years ended September 30, 1997, 1996 and 1995, which reports are
incorporated by reference and included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND
-----------------
Coopers & Lybrand
Louisville, Kentucky
December 22, 1997
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.)
Steel Technologies North
Carolina, Inc. North Carolina Steel Technologies North Carolina 100%
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.
FIRST AMENDMENT
TO AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN
AGREEMENT (this "Amendment") is made and entered into as of October
10, 1997, 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 OF KENTUCKY, a national banking association with
principal office and place of business in Louisville, Kentucky
("National City"), (c) NBD BANK, N.A., a national banking associa-
tion with principal office and place of business in Indianapolis,
Indiana ("NBD"), and (d) SUNTRUST BANK, NASHVILLE, N.A., a national
banking association with principal office and place of business in
Nashville, Tennessee ("Suntrust") (each of PNC, National City, NBD
and Suntrust is 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").
PRELIMINARY STATEMENTS
A. Borrower, the Banks and the Agent are parties to a
certain Amended and Restated Loan Agreement dated as of March 26,
1997 (the "Loan Agreement") (certain capitalized terms used in this
Amendment have the meanings set forth for them in the Loan
Agreement unless expressly otherwise defined herein), pursuant to
which, among other things, the Banks established the Revolver in
favor of Borrower in the amount of $30,000,000, and the Line of
Credit in favor of Borrower in the amount of $25,000,000, and PNC
established the Swing Line Loan Commitment in favor of Borrower in
the amount of $5,000,000.
B. Borrower has requested that PNC extend the Swing
Line Loan Commitment Termination Date from October 10, 1997, until
October 12, 1998, and that the Banks extend the Line of Credit
Commitment Termination Date from October 10, 1997 until October 12,
1998, extend the Revolving Loan Commitment Termination Date from
October 11, 1999 until October 11, 2000, increase the maximum
permitted aggregate outstanding principal amount of the Revolver
from $30,000,000 to $55,000,000, reduce the existing Pricing Levels
and establish additional Pricing Levels as hereinafter set forth,
and modify certain financial covenants applicable under the Loan
Agreement, and PNC and the other Banks have agreed to do so subject
to and in accordance with the provisions of this Amendment, and
Borrower, the Banks and the Agent have agreed to modify the Loan
Agreement otherwise as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein and for other good
and valuable consideration, the mutuality, receipt and sufficiency
of which are hereby acknowledged, it is hereby agreed as follows:
ARTICLE 1.
Amendments to Loan Agreement
Subject to delivery to the Agent of each of the "Amend-
ment Documents" more particularly described in Article 2 of this
Amendment and fulfillment to the satisfaction of the Agent and the
Banks of each of the other conditions described in Article 2 of
this Amendment, the Loan Agreement is hereby amended as follows:
1.1 A new Section 1.7A is added to the Loan Agreement
immediately following existing Section 1.7 and shall read as
follows:
1.7A. "Applicable Line of Credit Commitment Fee"
means each per annum percentage set forth in the table
appearing in Section 2.3A(ii) of this Loan Agreement.
1.2 Exhibit E-1 and Exhibit E-2, each in the form attached
to and made a part of this Amendment, shall be substituted for
Exhibit E-1 and Exhibit E-2, respectively, in the forms originally
made part of the Loan Agreement, and the references in Section 1.10
of the Loan Agreement and each other reference contained in the
Loan Agreement and the other Loan Instruments to Exhibit E-1 and
Exhibit E-2, respectively, or to the Assignment Agreement, shall
mean and be deemed to refer to, respectively, Exhibits E-1 and E-2
to this Amendment and to the Assignment Agreement between an
Assigning Bank and its Eligible Assignee, substantially in the form
of Exhibit E-1 annexed to this Amendment with respect to the
Revolving Loan Commitment, and Exhibit E-2 annexed to this
Amendment with respect to the Line of Credit Commitment.
1.3 Exhibit A in the form attached to and made a part of
this Amendment shall be substituted for Exhibit A in the form
originally made part of the Loan Agreement, and the reference in
Section 1.12 of the Loan Agreement and each other reference
contained in the Loan Agreement and the other Loan Instruments to
Exhibit A and to the Atlantic Guaranty Agreement shall mean and be
deemed to refer to, respectively, Exhibit A to this Amendment and
to the absolute, unconditional and joint and several guarantee of
payment by Atlantic of the Obligations, substantially in the form
of Exhibit A to this Amendment.
1.4 Exhibit D in the form attached to and made a part of
this Amendment shall be substituted for Exhibit D in the form
originally made a part of the Loan Agreement, and the reference in
Section 1.26 of the Loan Agreement and each other reference
contained in the Loan Agreement and the other Loan Instruments to
Exhibit D and to the Compliance Certificate shall mean and be
deemed to refer to, respectively, Exhibit D to this Amendment and
to a certificate substantially in the form of Exhibit D attached to
this Amendment delivered by the Borrower to the Agent on behalf of
the Banks pursuant to Section 5.3(c) of the Loan Agreement.
1.5 The Line of Credit Commitment Termination Date, which
prior to the effectiveness of this Article 1 of this Amendment is
October 10, 1997 as provided in Section 1.75 of the Loan Agreement,
is extended to and shall be October 12, 1998.
1.6 Section 1.92 of the Loan Agreement is amended and
restated in its entirety as follows:
1.92. "Pricing Level" means, for any Pricing
Period, Pricing Level I, Pricing Level II, Pricing Level
III, Pricing Level IV or Pricing Level V, as may be in
effect for such Pricing Period; provided that the
Default Rate shall be in effect upon the occurrence and
during the continuation of any Event of Default.
1.7 Section 1.95 of the Loan Agreement is hereby amended and
restated in its entirety as follows:
1.95. "Pricing Level III" means the Pricing Level
that will be in effect for the applicable Pricing Period
if, as of the relevant Date of Determination, the
Leverage Ratio of the Borrower is equal to or greater
than .40 to 1.0 but less than .50 to 1.0.
1.8 New Sections 1.95A and 1.95B are added to the Loan
Agreement immediately following Section 1.95, as follows:
1.95A. "Pricing Level IV" means the Pricing Level
that will be in effect for the applicable Pricing Period
if, as of the relevant Date of Determination, the
Leverage Ratio of the Borrower is equal to or greater
than .50 to 1.0 but less than .60 to 1.0.
1.95B. "Pricing Level V" means the Pricing Level
that will be in effect for the applicable Pricing Period
if, as of the relevant Date of Determination, the
Leverage Ratio of the Borrower is equal to or greater
than .60 to 1.0.
1.9 The first sentence of Section 1.107 of the Loan
Agreement shall be amended and restated in its entirety as follows:
1.107. "Revolver" means the revolving credit
facility established by the Banks pursuant to this Loan
Agreement in favor of the Borrower in the maximum
permitted aggregate principal amount at any one time
outstanding of Fifty-five Million Dollars ($55,000,000),
pursuant to which the Borrower may obtain Revolving
Loans and Letters of Credit during the term of the
Revolver upon the terms and conditions set forth in this
Loan Agreement.
1.10 The Revolving Loan Commitment Termination Date, which
prior to the effectiveness of this Article 1 of this Amendment is
October 11, 1999 as provided in Section 1.109 of the Loan Agree-
ment, is extended to and shall be October 11, 2000.
1.11 Section 1.111 of the Loan Agreement is amended and
restated in its entirety as follows:
1.111. "Revolving Note" means, collectively, the
Amended and Restated Revolving Promissory Notes, all
dated as of October 11, 1997 and made by Borrower to the
order of, respectively, PNC in face principal amount of
$20,625,000, NBD in face principal amount of
$13,750,000, Suntrust in face principal amount of
$13,750,000 and National City in face principal amount
of $6,875,000, in the forms attached to and made a part
of this Loan Agreement as Exhibits L-1, L-2, L-3 and L-
4, respectively, together with all amendments,
modifications, renewals, extensions, restatements and
replacements of each of them, respectively.
1.12 The Swing Line Loan Commitment Termination Date, which
prior to the effectiveness of this Article 1 to the this Amendment
is October 10, 1997 as provided in Section 1.116 of the Loan
Agreement, is extended to and shall be October 12, 1998.
1.13 Exhibit K in the form attached to and made a part of
this Amendment shall be substituted for Exhibit K in the form
originally made a part of the Loan Agreement, each reference in the
Loan Agreement and the other Loan Instruments to Exhibit K or to
the Wabash Guaranty Agreement shall mean and be deemed to refer to,
respectively, Exhibit K to this Amendment and to the Amended and
Restated Guaranty Agreement delivered by Wabash substantially in
the form of Exhibit K to this Agreement, and Section 1.125 of the
Loan Agreement is amended and restated in its entirety as follows:
1.125. "Wabash Guaranty Agreement" means that
certain Amended and Restated Guaranty Agreement required
to be delivered by Wabash in favor of Agent for the
benefit of the Banks in satisfaction of one of the
conditions precedent to the effectiveness of the modifi-
cations to the Loan Agreement provided in the First
Amendment to Amended and Restated Loan Agreement dated
as of October 10, 1997 and, if applicable, any and all
amendments, modifications, renewals, extensions,
restatements and replacements thereof.
1.14 The first sentence of Section 2 of the Loan Agreement,
entitled "Revolver", is amended and restated in its entirety as
follows:
2. Revolver. Subject to the terms and conditions
of this Loan Agreement, the Banks hereby establish the
Revolver in favor of the Borrower in the maximum permit-
ted aggregate principal amount at any one time outstand-
ing of Fifty-Five Million Dollars ($55,000,000).
1.15 The second sentence of Section 2.1A of the Loan Agree-
ment, entitled "Revolving Loan Commitments", is amended and
restated in its entirety as follows:
The amount of each Bank's Revolving Loan Commitment is
equal to the Pro Rata Share Revolving Loan Commitment
set forth opposite its name on Schedule 2.1 annexed
hereto applied to the maximum permitted aggregate
outstanding principal amount of the Revolving Loan
Commitment in effect from time to time, and the maximum
permitted aggregate outstanding principal amount of the
Revolving Loan Commitments presently is Fifty-Five
Million Dollars ($55,000,000); provided that the amount
of the Revolving Loan Commitments shall be reduced from
time to time by the amount of any reductions thereto
made pursuant to Section 2.4C hereof (it being
understood that all references to the Revolving Loan
Commitments of the Banks set forth in this Loan
Agreement shall mean the initial Revolving Loan
Commitments of the Banks set forth on Schedule 2.1
annexed hereto as reduced by voluntary reductions of the
Revolving Loan Commitments effected by the Borrower
pursuant to Section 2.4C hereof).
1.16 The date "October 11, 2000" is substituted for the date
"October 11, 1999" in the third sentence of Section 2.1B of the
Loan Agreement entitled "Term of Revolving Loan Commitments."
1.17 Pricing Levels I, II and III, and the related Applicable
LIBOR Rate Margins, all as set forth at the end of clause (ii)
contained in Section 2.2A of the Loan Agreement entitled "Rates of
Interest", are deleted and the following Pricing Levels and related
Applicable LIBOR Rate Margins are substituted therefor:
Applicable
Pricing Level LIBOR Rate Margin
Pricing Level I .450%
Pricing Level II .525%
Pricing Level III .575%
Pricing Level IV .625%
Pricing Level V .750%
1.18 The Pricing Levels and related Applicable Revolver
Commitment Fee percentages set forth in Section 2.3A(i), entitled
"Revolver Commitment Fee", are deleted and the following Pricing
Levels and related Applicable Revolving Commitment Fee percentages
are substituted therefor:
Applicable Revolver
Pricing Levels Commitment Fee
Pricing Level I .150%
Pricing Level II .175%
Pricing Level III .200%
Pricing Level IV .225%
Pricing Level V .250%
1.19 Section 2.3A(ii), entitled "Line of Credit Commitment
Fee", is amended and restated in its entirety as follows:
(ii) Line of Credit Commitment Fee. Borrower
agrees to pay to the Agent, for the benefit of the Banks
in proportion to their respective Line of Credit Commit-
ment Fee Pro Rata Shares, commitment fees ("the Line of
Credit Commitment Fees") for the period from and includ-
ing October 11, 1997 to and excluding the Line of Credit
Termination Date, equal to the average of the daily
excess of the Line of Credit Commitments (as reduced
pursuant to section 2.4C hereof) over the aggregate
principal amount of Line of Credit Advances multiplied
by the Applicable Line of Credit Commitment Fee per
annum. The Line of Credit Commitment Fees shall be
calculated on the basis of a 360-day year and the actual
number of days elapsed and shall be payable quarterly in
arrears on the last day of each Fiscal Quarter,
commencing on the first such date to occur after October
11, 1997, and on the Line of Credit Commitment
Termination Date. The Borrower shall have no liability
to any Bank for any Line of Credit Commitment Fees paid
to the Agent which the Agent does not properly remit to
such Bank, and any such Bank's sole remedy in respect
thereof shall be against the Agent. The Applicable Line
of Credit Commitment Fee in effect for the Pricing
Period commencing on the first day of each Fiscal
Quarter and continuing for the term of the Fiscal
Quarter that begins on such first day of the Fiscal
Quarter shall be the Applicable Line of Credit
Commitment Fee corresponding to the Pricing Level in
effect for such period, as applicable:
Applicable Line of Credit
Pricing Level Commitment Fee
Pricing Level I .100%
Pricing Level II .100%
Pricing Level III .100%
Pricing Level IV .125%
Pricing Level V .125%
1.20 The Pricing Levels and related Applicable Letter of
Credit Fee percentages set forth at the end of clause (ii) of
Section 2.7F, entitled "Compensation", are deleted and the
following are substituted therefor:
Applicable
Pricing Level Letter of Credit Fee
Pricing Level I .450%
Pricing Level II .525%
Pricing Level III .575%
Pricing Level IV .625%
Pricing Level V .750%
1.21 The amount "Ten Million Dollars ($10,000,000.00)"
contained in Section 6.5 (iv)(A) is deleted and the amount "Twelve
Million Dollars ($12,000,000.00)" is substituted therefor.
1.22 The amount "Ten Million Dollars ($10,000,000.00)"
contained in Section 6.5(ix)(A) is deleted and the amount "Twelve
Million Dollars ($12,000,000.00)" is substituted therefor.
1.23 Section 6.9 of the Loan Agreement is amended and
restated in its entirety as follows:
6.9. Consolidated Total Debt to Consolidated Total
Capitalization. The Borrower will not permit the ratio
of its Consolidated Total Debt to its Consolidated Total
Capitalization to exceed .60 to 1.0 as at any Fiscal
Quarter end.
1.24 Section 6.10 of the Loan Agreement is amended and
restated in its entirety as follows:
6.10. Consolidated Interest Expense and
Consolidated Rent Expense Coverage Ratio. The Borrower
will not permit, as of each Fiscal Quarter end, the
ratio of (a) its Consolidated Net Income plus
Consolidated Interest Expense, provisions for all taxes
and Consolidated Rent Expense for the four-Fiscal
Quarter period ended on such Fiscal Quarter end, to (b)
the sum of its Consolidated Interest Expense and
Consolidated Rent Expense for the four-Fiscal Quarter
period ended on such Fiscal Quarter end, to be less than
2.0 to 1.0 as at any Fiscal Quarter end.
1.25 The date "September 30, 1997" is substituted for the
date "September 30, 1996" appearing in Section 6.11(ii), the date
"October 11, 1997" is substituted for the date "October 11, 1996"
appearing in Section 6.11(ii), and Section 6.11(i) is amended and
restated in its entirety as follows:
(i) As of September 30, 1997 to be less than
Ninety Million Dollars ($90,000,000); and
1.26 A new Section 6.13 is added to the Loan Agreement
immediately after existing Section 6.12, to read as follows:
6.13. Change in Manner of Conducting Business.
Neither the Borrower nor any Subsidiary will engage in
any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would
then be engaged in by the Borrower and its Subsidiaries
would be substantially changed from the general nature
of the business engaged in by the Borrower and its
Subsidiaries as of September 30, 1997.
1.27 A new Section 10F is added to the Loan Agreement
immediately following existing Section 10E, to read as follows:
10F. Notwithstanding the provisions of Section
10A, no consent of the Borrower shall be required as a
condition to any sale, assignment, transfer or negotia-
tion pursuant to Section 10A if such sale, assignment,
transfer or negotiation occurs following a Potential
Event of Default that has not either been cured in a
manner permitted under this Loan Agreement and the other
Loan Instruments or expressly waived in writing by all
of the Banks or by the Agent with the consent of all of
the Banks. Without limitation of the foregoing or of
Section 10A, Borrower shall not unreasonably withhold
its consent to any sale, assignment, transfer or
negotiation requested by a Bank pursuant to Section 10A
if such request is made with regard to a prospective
assignee contacted by the Agent for the purpose of
facilitating the syndication of the funding for all or
part of the Obligations. Each sale, assignment,
transfer or negotiation by a Bank pursuant to Section
10A, other than a sale, assignment, transfer or
negotiation to an Affiliate of such Bank, shall, at the
sole and exclusive option of the Agent, be conditioned
upon the payment to the Agent by the assigning Bank of a
service fee in the amount of $3,500 as a condition
precedent to such sale, assignment, transfer or
negotiation.
ARTICLE 2
Conditions Precedent
2.1 The modifications to the Loan Agreement described in
Article 1 of this Amendment shall become effective on that date
(the "Effective Date") on which each of the following documents
(collectively, the "Amendment Documents") has been executed by each
of the parties to them and delivered to the Agent, on behalf of the
Banks, and when the Agent determines to its satisfaction that each
other condition set forth below has been fulfilled:
A. This Amendment, duly executed by the Borrower,
Agent and each of the Banks;
B. The Revolving Notes payable by Borrower to the
order of each of the Banks, in the forms of Exhibits L-1, L-2, L-3
and L-4 to this Amendment, duly executed and delivered on behalf of
Borrower;
C. The Wabash Guaranty Agreement in the form of
Exhibit K to this Amendment, duly executed on behalf of Wabash; and
D. Certified Resolutions of the Board of Directors of
the Borrower, authorizing the execution and delivery by Borrower of
this Amendment, each of the Revolving Notes and each of the other
Amendment Documents executed and delivered by the Borrower;
E. Certified Resolutions of the Board of Directors of
Wabash, authorizing the execution and delivery of the Wabash
Guaranty Agreement in the form of Exhibit K to this Amendment;
F. Supplemental written opinions of counsel to the
Borrower and Wabash, respectively, substantially in the form of
Exhibits H-1 and H-2 attached to and made a part of this Amendment;
G. A copy of an amendment, as executed and delivered
by the Borrower and each of the Note Purchasers, to the Note
Purchase Agreement, modifying certain financial covenants contained
in the Note Purchase Agreement to the satisfaction of the Banks and
otherwise in form and substance satisfactory to the Banks; and
H. Borrower shall have delivered to Agent a certain
letter agreement in the form requested by Agent from Borrower
confirming Borrower's agreement to pay the fees to the Agent
described therein.
ARTICLE 3
Other Stipulations
3.1 Upon the Effective Date, the provisions of and Exhibits
referenced in Article 1 of this Amendment shall become effective
and modify or supersede and replace, as applicable, the applicable
provisions and Exhibits of the Loan Agreement recited as being
modified by them and, without limitation of the foregoing, the
Revolving Notes and the Wabash Guaranty Agreement delivered as part
of the Amendment Documents described in Article 2 of this Amendment
shall supersede and replace the Revolving Notes and the Wabash
Guaranty Agreement as in effect immediately prior to the Effective
Date. From and after the Effective Date each reference to the
"Loan Agreement" or words of like import shall mean and be deemed a
reference to the Loan Agreement as modified by this Amendment but,
except as modified by this Amendment and the other Amendment
Documents, the Loan Agreement and the other Loan Instruments shall
remain in full force and effect in the same form as existed
immediately prior to the Effective Date.
3.2 If each of the Amendment Documents has not been fully
executed and delivered to the Agent on or before October 10, 1997,
this Amendment shall be voidable at any time prior to the delivery
of each of such Amendment Documents upon notice given by Borrower
to the Banks or by notice given by the Agent, acting at the
direction of the Requisite Banks, to the Borrower.
3.3 This Amendment and the other Amendment Documents contain
the final, complete and exclusive agreement of the parties to them
with regard to their subject matter, may not be amended except in
writing signed by each of the parties to them, shall be binding
upon and inure to the benefit of the respective successors and
assigns of each of the parties to them (subject to applicable
provisions of the Loan Agreement), and shall be construed in
accordance with and otherwise governed in all respects by the laws
of the Commonwealth of Kentucky. This Amendment may be executed in
counterparts, and all counterparts collectively shall constitute
but one original document. Borrower hereby agrees to reimburse the
Agent for all costs and expenses incurred by the Agent in connec-
tion with the preparation, negotiation, documentation, execution
and delivery of this Amendment and the other Amendment Documents,
including but not limited to the reasonable fees of legal counsel
to Agent.
IN WITNESS WHEREOF, the parties hereto have caused this
Loan Agreement to be duly executed as of the day and year first
above written.
(the "Borrower")
STEEL TECHNOLOGIES INC.
By:/s/ Kenneth R. Bates________
(signature)
Name: Kenneth R. Bates________
(type or print)
Title:_Chief Financial Officer_
(type or print)
("PNC")
PNC BANK, KENTUCKY, INC.
By:__/s/ Ralph Phillips__
(signature)
Name:__Ralph Phillips__
(type or print)
Title:_Vice President__
(type or print)
Address: PNC Bank, Kentucky, Inc.
Citizens Plaza
500 West Jefferson Street
Louisville, KY 40202
Attn: Ralph A. Phillips
Vice President
Telephone: (502) 581-4543
Telecopy: (502) 581-2302
("National City")
NATIONAL CITY BANK OF KENTUCKY
By:_/s/ Deroy Scott__
(signature)
Name:___Deroy Scott_
(type or print)
Title:__Vice President
(type or print)
Address: 101 South Fifth Street
Louisville, KY 40202
Attn: Deroy Scott
Vice President
Telephone: (502) 581-7821
Telecopy: (502) 581-4424
("NBD")
NBD BANK, N.A.
By:__/s/ Randall K. Stephens__
(signature)
Name:____Randall K. Stephens_
(type or print)
Title:___First Vice President
(type or print)
Address: One Indiana Square
Suite 7028
Indianapolis, IN 46266
Attn: Randall K. Stephens
Telephone: (317) 266-6704
Telecopy: (317) 266-6042
("SunTrust")
SUNTRUST BANK, NASHVILLE, N.A.
By:_/s/ Jeffery L. Howard_
(signature)
Name:___Jeffery L. Howard_
(type or print)
Title:__Senior Vice President
(type or print)
Address: 201 Fourth Avenue North
Nashville, TN 37219
Attn: Jeffrey L. Howard
Senior Vice President
Telephone: (615) 748-5579
Telecopy: (615) 259-4119
(collectively, the "Banks")
(the "Agent")
PNC BANK, KENTUCKY, INC., in its
capacity as Agent
By:/s/ Ralph A. Phillips
Ralph A. Phillips
Vice President
ADOPTION AGREEMENT #003
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))
[X ] (a) No exclusions.
[ ] (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 October 1, 1996 (provisions
related to Atlantic Coil Processing and Loans are effective August 1, 1997).
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):
Mi-Tech Steel Inc. (for Steel Technologies employees), Steel Technologies
Inc. (for Mi-Tech Steel Inc. employees) and Atlantic Coil Processing.
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) January 1, April 1, July 1 and October 1.
Solely for purposes of employees of Steel Technologies Inc. North Carolina,
August 1, 1997 shall be an entry date.
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.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(Choose (j) or (k))
[X ] (j) All Employees of the Employer, except: (Choose (1) or (2))
[X ] (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)
Note: Enter "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).] Steel
Technologies Inc. (see attached for the Mi-Tech Steel matching contribution
formula)
[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.
[X ] (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.
[ ] (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).]
[ ] (i) Definition of eligible contributions. Subject to the requirements of
Option (j), the term "eligible contributions" means: (Choose any combination
of (1) through (3))
[ ] (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.
[ ] (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
[X ] (4) (Specify) No match to the Canton, Michigan facility of Steel
Technologies Inc.
.
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)
.
[ ] (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: each
payroll date .
[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))
[ ] (m) Without regard to which contributing related group member employs
the Participant.
[X ] (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))
[X ] (1) 1,000 Hours of Service. Applies to nonelective contributions and
QNECs only.
[ ] (2) (Specify, but the number of Hours of Service may not exceed 1,000)
.
[ ] (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:
[ ] (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))
[ ] (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:
.
[X ] (f) (Specify other conditions, if applicable): Collectively bargained
employees at the Canton, Michigan facility of Steel Technologies Inc. are
not eligible to receive an allocation of either the Matching Contribution
or Nonelective Employer Contribution
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%" 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:
.
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))
[ ] (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 except that age 60 will be the Normal Retirement Age solely for
purposes of amounts transferred from the Atlantic Coil Processing Profit
Sharing - 401(k) Plan [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. *See Attachment A for additional
schedule.
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.
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 ninety days
following termination unless the participant has reached his Normal
Retirement Age or has reached age 55 and 10 years of service, in which case
his distribution date shall be as soon as practical after his 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) ninety days 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 separates from service on or after his
Normal Retirement Age or the date he reaches age 55 and 10 years of
service, his distribution date shall be as soon as practical after he
separates 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 administratively feasible 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.
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))
[X ] (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.
[X ] (l) (Specify) Amount of hardship distribution is limited to lesser of
(1) Participant's Deferral Contribution Account balance or (2) the
cumulative amount the Participant has deferred (less the amount of any prior
hardship distribution). [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).
[ ] (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))
[ ] (a) May not exceed 10% of Plan assets.
[X ] (b) May not exceed 100 % 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))
[ ] (a) No other mandatory valuation dates.
[X ] (b) (Specify) The plan is valued daily
.
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, as of the
30th day of September, 1997 .
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.
PARTICIPATION AGREEMENT
For Participation by Additional Employers
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 Steel Technologies Inc.
, 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: January 1, 1997 .
2. The undersigned Employer's adoption of this Plan constitutes:
[ ] (a) The adoption of a new plan by the Participating Employer.
[X ] (b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as The Mi-Tech Steel Inc. 401(k)
Savings Plan , and having an original effective date of
Dated as of the 30th day of September, 1997 .
Name of Participating Employer: Mi-Tech Steel Inc.
Signed:
Participating Employer's EIN: 62-1317462
Acceptance by the Signatory Employer to the Execution Page of the Adoption
Agreement and by the Trustee.
Name of Signatory Employer: Steel Technologies Inc.
Accepted:__________________
[Date] Signed:
Name(s) of Trustee: The Charles Schwab Trust Company
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/stetd4
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 Steel Technologies Inc.
, 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: August 1, 1997 .
2. The undersigned Employer's adoption of this Plan constitutes:
[X ] (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 as of the 30th day of September, 1997.
Name of Participating Employer: Steel Technologies North Carolina, Inc.
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: Steel Technologies Inc.
Accepted:__________________
[Date] Signed:
Name(s) of Trustee: The Charles Schwab Trust Company
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.]
Part II. [Options (h) through (j)] Matching contribution formula. [Note: If
the Employer elected Option (b), complete Options (h), (i) and (j).]
Mi-Tech Steel Inc.
[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.
[X ] (2) An amount equal to 100 % 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: 50%
.
[ ] (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.
[ ] (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).]
[ ] (i) Definition of eligible contributions. Subject to the requirements
of Option (j), the term "eligible contributions" means: (Choose any
combination of (1) through (3))
[ ] (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: 1% of compensation
The subsequent tiers of eligible contributions are: the next 4% of
compensation
[ ] (4) (Specify)
.
agree/stetd4
Part II. [Options (h) through (j)] Matching contribution formula. [Note:
If the Employer elected Option (b), complete Options (h), (i) and (j).]
Steel Technologies North Carolina, Inc.
[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))
[X ] (1) An amount equal to 25 % 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:
.
[ ] (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.
[ ] (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).]
[ ] (i) Definition of eligible contributions. Subject to the requirements
of Option (j), the term "eligible contributions" means: (Choose any
combination of (1) through (3))
[ ] (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.
[X ] (2) The Advisory Committee will disregard eligible contributions
exceeding 4% of compensation .
[ ] (3) The Advisory Committee will treat as the first tier of eligible
contributions, an amount not
exceeding:
The subsequent tiers of eligible contributions are:
[ ] (4) (Specify)
.
agree/stetd4
35
STEEL TECHNOLOGIES INC.
15415 Shelbyville Road
Louisville, Kentucky 40245
REQUEST FOR CONSENT TO SECOND AMENDMENT OF
NOTE AGREEMENT
Re: $40,000,000 8.52% Senior Notes
Due March 1, 2005
To the Holders named on Schedule I
to this Request for Consent
THIS REQUEST FOR CONSENT TO SECOND AMENDMENT OF NOTE
AGREEMENT (the "Second Request for Consent") is submitted by
STEEL TECHNOLOGIES INC., a Kentucky corporation (the "Company"),
as of the 9th day of October, 1997, pursuant to Section 7 of that
certain Note Agreement dated as of March 1, 1995 (as previously
amended, the "Note Agreement") by and among the Company and the
Purchasers named on Schedule I attached thereto regarding the
$40,000,000 8.52% Senior Notes due March 1, 2005. To the extent
not otherwise defined herein, all capitalized terms used herein
shall have the meanings assigned them in the Note Agreement.
The Purchasers represent and warrant that each holds the
Notes in the principal amount as set forth on Schedule I.
The Company hereby requests that the Note Agreement be
amended in the following respects:
a. Section 5.7(i) of the Note Agreement. The Company
requests that Section 5.7(i) be amended so as to change the
initial date from March 31, 1995, to September 30, 1997, and
to change the initial amount from $78,000,000 to
$95,000,000;
b. Section 5.8 of the Note Agreement. The Company
requests that (i) Section 5.8 be amended so as to convert
the covenant from a restriction upon the incurrence of
additional indebtedness to a restriction upon the existence
of outstanding indebtedness, (ii) Section 5.8(a)(3)(i) be
amended so as to reduce the minimum ratio of Net Income
Available for Fixed Charges to Fixed Charges from 300% to
200%, and (iii) Section 5.8(a)(3)(ii) be amended so as to
increase the maximum ratio of Consolidated Indebtedness to
Consolidated Total Capitalization from 50% to 55%;
c. Section 5.11(i) of the Note Agreement. The
Company requests that Section 5.11(i) be amended so as to
increase the permitted other Investments from 10% of
Consolidated Net Worth to the greater of (i) Fifteen Million
Dollars ($15,000,000), or (ii) ten percent (10%) of
Consolidated Net Worth.
In consideration of, and subject to, your agreement to the
foregoing amendments, the Company is willing to agree to amend
the Note Agreement and each of the Notes issued pursuant thereto
so as to change the due dates for each installment of interest on
the Notes from semiannually on the first day of each March and
September to monthly on the first day of each calendar month.
By execution and delivery to the Company of a counterpart of
this letter, you agree as follows:
2. Section 1.1 of the Note Agreement is hereby
modified and amended so that, as modified and amended, it shall
provide in its entirety as follows:
"Section 1.1. Description of Notes. The Company
will authorize the issue and sale of $40,000,000
aggregate principal amount of its 8.52% Senior Notes
(the "Notes"), to be dated the date of issue, to bear
interest from such date at the rate of 8.52% per annum,
payable semiannually on the first day of each March and
September of each year (commencing September 1, 1995)
until October 31, 1997, and thereafter monthly on the
first day of each calendar month (commencing November
1, 1997), and at maturity and to bear interest on
overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any,
and (to the extent legally enforceable) on any overdue
installment of interest at the rate of 10.52% per annum
after the due date, whether by acceleration or
otherwise, until paid, to be expressed to mature on
March 1, 2005, and to be substantially in the form
attached hereto as Exhibit A. Interest on the Notes
shall be computed on the basis of a 360-day year of
twelve 30-day months. The Notes are not subject to
prepayment or redemption at the option of the Company
prior to their expressed maturity dates except on the
terms and conditions and in the amounts and with the
premium, if any, set forth in 2 of this Agreement.
The term "Notes" as used herein shall include each Note
delivered pursuant to this Agreement."
3. Section 5.7 of the Note Agreement shall be, and it
hereby is, amended and modified so that, as amended and modified,
it shall read in its entirety as follows:
"5.7. Consolidated Net Worth. The
Company will at all times keep and maintain
Consolidated Net Worth at an amount not less
than (i) for the fiscal quarter of the
Company ending September 30, 1997,
$95,000,000, and (ii) for each fiscal quarter
thereafter, the sum of the Consolidated Net
Worth required to be maintained during the
immediately preceding fiscal quarter of the
Company plus an amount equal to 50% of
Consolidated Net Income for such preceding
fiscal quarter (but without deduction in the
case of a deficit in Consolidated Net
Income)."
4. Section 5.8 of the Note Agreement shall be, and it
hereby is, amended and modified so that, as amended and modified,
it shall read in its entirety as follows:
"5.8. Limitations on Indebtedness. (a) The Company
will not, and will not permit any Subsidiary to, at any
time be or become liable in respect of any
Indebtedness, except:
(1) Indebtedness evidenced by the Notes;
(2) Indebtedness of the Company and its
Subsidiaries outstanding as of the date of this
Agreement and reflected in Annex B to Exhibit C,
less amounts required to be paid from the proceeds
of the Notes;
(3) additional Indebtedness of the Company and
its Subsidiaries, provided that at the time of
incurrence thereof and after giving effect thereto
and to the application of the proceeds thereof the
Company remains in compliance with Section 5.8A.
of this Agreement; and
(4) Indebtedness of a Subsidiary to the Company
or to a Wholly-owned Subsidiary."
5. A new Section 5.8A. is hereby added to the Note
Agreement, which Section 5.8A shall provide in its entirety as
follows:
"5.8A. Certain Financial Covenants.
(a) The Company will at all times keep and
maintain a ratio of Net Income Available for Fixed
Charges for the period of the four consecutive fiscal
quarters then most recently ended to Fixed Charges for
such period of at least 200%.
(b) The Company will at all times keep and
maintain a ratio of Consolidated Indebtedness to
Consolidated Total Capitalization as at the end of the
fiscal quarter of the Company most recently ended not
to exceed 55%.
(c) The Company will at all times keep and
maintain a ratio of Priority Debt to Consolidated Net
Worth not to exceed 5%."
6. Section 5.11(i) of the Note Agreement is hereby
modified and amended so that, as modified and amended, it shall
read in its entirety as follows:
"(i) other Investments of the Company and its
Subsidiaries (in addition to those permitted by the
foregoing provisions of this 5.11) not to exceed the
greater of 10% of Consolidated Net Worth, or
$15,000,000."
7. That this Second Request for Consent satisfies the
requirements of Section 7 of the Note Agreement and, upon
execution of this Second Request for Consent by the Holders of
all of the outstanding Notes, shall be binding upon the Holders
and the Company. Except as expressly set forth in this Second
Request for Consent and in the Request for Consent to Amendment
of Note Agreement previously granted by the Holders, the Note
Agreement has not been amended and remains and continues in full
force and effect.
8. This Second Request for Consent may be executed in
any number of counterparts, each of which shall be deemed to be
an original, but all of which together shall constitute one and
the same instrument. This Second Request for Consent may be
executed by each party upon separate copies, which copies, when
combined so as to include the signatures of all parties, shall
constitute a single counterpart of this Second Request for
Consent.
STEEL TECHNOLOGIES INC.
By: /s/ Kenneth R. Bates
Its: Chief Financial Officer
ACKNOWLEDGED AND AGREED:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Sarah J. Pitts
Its: Its:
By: /s/ Frederick A. Bell
Its:
ACKNOWLEDGED AND AGREED:
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By: Lincoln Investment Management,
Inc., its Attorney-in-Fact
By: /s/ Timothy J. Powell
Its:
ACKNOWLEDGED AND AGREED:
FIRST PENN-PACIFIC LIFE INSURANCE
COMPANY
By: Lincoln Investment Management,
Inc., its Attorney-in-Fact
By: /s/ Timothy J. Powell
Its:
ACKNOWLEDGED AND AGREED:
LINCOLN NATIONAL LIFE REINSURANCE
COMPANY
By: Lincoln Investment Management,
Inc., its Attorney-in-Fact
By: /s/ Timothy J. Powell
Its:
ACKNOWLEDGED AND AGREED:
LINCOLN NATIONAL INCOME FUND, INC.
By: /s/ Ann L. Warner
Its:
ACKNOWLEDGED AND AGREED:
AMERICAN STATES LIFE INSURANCE
COMPANY
By: Lincoln Investment Management,
Inc., its Attorney-in-Fact
By: /s/ Paul Gouber
Its:
ACKNOWLEDGED AND AGREED:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By: /s/ Robert E. Whallen, II
Its:
ACKNOWLEDGED AND AGREED:
NORTHERN LIFE INSURANCE COMPANY
By: /s/ James V. Wittich
Its:
ACKNOWLEDGED AND AGREED:
RELIASTAR LIFE INSURANCE COMPANY,
as successor to Northwestern
National Life Insurance Company
By: /s/ James V. Wittich
Its:
Schedule 1
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
FIRST PENN-PACIFIC LIFE INSURANCE
COMPANY
LINCOLN NATIONAL LIFE REINSURANCE
COMPANY
LINCOLN NATIONAL INCOME FUND, INC.
AMERICAN STATES LIFE INSURANCE
COMPANY
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
NORTHERN LIFE INSURANCE COMPANY
RELIASTAR LIFE INSURANCE COMPANY,
as successor to Northwestern
National Life Insurance Company
84647:Lou3
STEEL TECHNOLOGIES INC.
15415 Shelbyville Road
Louisville, Kentucky 40245
REQUEST FOR CONSENT TO AMENDMENT OF
NOTE AGREEMENT
Re: $40,000,000 8.52% Senior Notes
Due March 1, 2005
To the Holders named on Schedule I
to this Request for Consent
THIS REQUEST FOR CONSENT TO AMENDMENT OF NOTE AGREEMENT (the
"Request for Consent") is submitted by STEEL TECHNOLOGIES INC., a
Kentucky corporation (the "Company"), as of the 13th day of June,
1997, pursuant to Section 7 of that certain Note Agreement dated
as of March 1, 1995 (the "Note Agreement") by and among the
Company and the Purchasers named on Schedule I attached thereto
regarding the $40,000,000 8.52% Senior Notes due March 1, 2005.
To the extent not otherwise defined herein, all capitalized terms
used herein shall have the meanings assigned them in the Note
Agreement.
The Purchasers represent and warrant that each holds the
Notes in the principal amount as set forth on Schedule I.
As the Company informed you by letter dated April 28, 1997,
the Company has acquired all of the outstanding capital stock of
Atlantic Coil Processing, Inc., a North Carolina corporation
("ACP"), and ACP now constitutes a Subsidiary of the Company.
Pursuant to the Company's Loan Agreement with its bank
lenders, the bank lenders have requested that the Company cause
ACP to execute and deliver a Guaranty Agreement substantially in
the form attached hereto as Exhibit A (the "Bank Guaranty
Agreement"), guarantying the payment and performance of the
Company's obligations to the bank lenders.
Section 5.14 of the Note Agreement prohibits the Company
from permitting any Subsidiary to be or become liable with
respect to any Guaranty except, inter alia, Guaranties by
Subsidiaries expressly permitted by Section 5.11(g) of the Note
Agreement.
Section 5.11(g) currently does not expressly permit ACP to
execute and deliver the Bank Guaranty Agreement.
The Company hereby requests that Section 5.11(g) of the Note
Agreement be amended so as to permit ACP to execute and deliver
the Bank Guaranty Agreement. In order to induce the Purchasers
to consent to such an amendment, the Company is willing to cause
ACP to execute and deliver to each of the Holders a Guaranty
Agreement substantially in the form attached hereto as Exhibit B
(the "Holder Guaranty Agreements"), guarantying the payment and
performance of the Company's obligations to each of the Holders.
By execution and delivery to the Company of a counterpart of
this letter, you agree as follows:
1. That effective upon ACP's execution and delivery
to each of the Holders of a Holder Guaranty Agreement, section
5.11(g) of the Note Agreement shall be amended and modified so
that, as amended and modified, it shall read in its entirety as
follows:
(g) Guaranties by Wabash Steel Corporation,
Atlantic Coil Processing Inc., a North
Carolina Corporation, and the Mexican
Subsidiary of (x) certain Indebtedness for
borrowed money by the Company under the Loan
Agreement and (y) the Notes.
2. That this Request for Consent satisfies the
requirements of Section 7 of the Note Agreement and, upon
execution of Requests for Consent by the Holders of at least 66-
2/3% in aggregate principal amount of outstanding Notes, shall be
binding upon the Holders and the Company. Except as expressly
set forth in this Request for Consent, the Note Agreement has not
been amended and remains and continues in full force and effect.
3. This Request for Consent may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument. This Request for Consent may be executed by
each party upon separate copies, which copies, when combined so
as to include the signatures of all parties, shall constitute a
single counterpart of this Request for Consent.
STEEL TECHNOLOGIES INC.
By:/s/ Kenneth R. Bates
Its Chief Financial Officer
ACKNOWLEDGED AND AGREED:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ John D. Cleavenger
/s/ Kent T. Kelsey
Its
ACKNOWLEDGED AND AGREED:
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By: Lincoln National Investment
Management Company, its Attorney-
in-Fact
By: /s/ Timothy J. Powell
Its
ACKNOWLEDGED AND AGREED:
FIRST PENN-PACIFIC LIFE INSURANCE
COMPANY
By: Lincoln National Investment
Management Company, its Attorney-
in-Fact
By: /s/ Timothy J. Powell
Its
ACKNOWLEDGED AND AGREED:
LINCOLN NATIONAL LIFE REINSURANCE
COMPANY
By: Lincoln National Investment
Management Company, its Attorney-
in-Fact
By: /s/ Timothy J. Powell
Its
ACKNOWLEDGED AND AGREED:
LINCOLN NATIONAL INCOME FUND, INC.
By: /s/ David C. Fischer
Its
ACKNOWLEDGED AND AGREED:
AMERICAN STATES LIFE INSURANCE
COMPANY
By: Lincoln National Investment
Management Company, its Attorney-
in-Fact
By: /s/ Timothy J. Powell
Its
ACKNOWLEDGED AND AGREED:
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By: /s/ Robert E. Whallen, II
Its
ACKNOWLEDGED AND AGREED:
NORTHERN LIFE INSURANCE COMPANY
By: /s/ James V. Wittich
Its
ACKNOWLEDGED AND AGREED:
NORTHWESTERN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ James V. Wittich
Its
77863:Lou3
