SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
                                   (Mark One)
                   [X] QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2006

                                       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) (Zip Code)

                                 (502) 245-2110
              (Registrant's telephone number, including area code)

                                 Not applicable
--------------------------------------------------------------------------------
 (Former name, former address and former fiscal year, if changed since last
                                     report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by  Sections  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  Registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.
Yes   X    No

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.  Large
accelerated filer __   Accelerated filer X   Non-accelerated filer __

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X].

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
common stock as of the latest practical date.

There were 12,953,632 shares outstanding of the Registrant's  common stock as of
April 30, 2006.


<PAGE>





                             STEEL TECHNOLOGIES INC.

                                      INDEX



                                                                     Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Condensed Consolidated Balance Sheets
        March 31, 2006 and September 30, 2005 .............................  3

        Condensed Consolidated Statements of Income
        Three and Six months Ended March 31, 2006 and 2005 ................  4

        Condensed Consolidated Statements of Comprehensive Income
        Three and Six months Ended March 31, 2006 and 2005 ................  5

        Condensed Consolidated Statements of Cash Flows Six Months
        Ended March 31, 2006 and 2005 .....................................  6

        Notes to Condensed Consolidated Financial Statements .............. 7-15

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations .............................................16-27

Item 3. Quantitative and Qualitative Disclosures About Market
        Risk .............................................................. 27

Item 4. Controls and Procedures ........................................... 28

PART II.OTHER INFORMATION

Item 5.  OTHER INFORMATION ................................................ 28

Item 6. Exhibits .......................................................... 28

Signature ................................................................. 29



<PAGE>

                         Part I. - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                             STEEL TECHNOLOGIES INC.
                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except shares)                           March 31    September 30
(Unaudited)                                               2006          2005
--------------------------------------------------------------------------------
 <S>                                                   <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents ...................      $  11,732       $  30,991
   Trade accounts receivable, net ..............        121,599         112,033
   Inventories .................................        154,400         114,128
   Deferred income taxes .......................            620             605
   Prepaid expenses and other assets ...........          7,485           6,289
   Assets helf for sale ........................            -            20,475
                                                      ---------       ---------
      Total current assets .....................        295,836         284,521
                                                      ---------       ---------

Property, plant and equipment, net .............        110,715         106,492
Investments in unconsolidated affiliates .......         26,512          25,182
Goodwill .......................................          8,991           8,991
Other assets ...................................          3,395           2,737
                                                      ---------       ---------
                                                      $ 445,449       $ 427,923
                                                      =========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ............................      $  65,636       $  59,559
   Accrued liabilities .........................         16,246          13,380
   Income taxes payable ........................          3,750           1,244
   Deferred income taxes .......................            118             254
   Liabilities associated with
      assets helf for sale .....................            -               185
                                                      ---------       ---------
      Total current liabilities ................         85,750          74,622
                                                      ---------       ---------

Long-term debt .................................         80,000          80,000
Deferred income taxes ..........................         13,496          14,785
Other long-term liabilities.....................          4,594           3,757
                                                      ---------       ---------
      Total liabilities ........................        183,840         173,164
                                                      ---------       ---------
Commitments and contingencies

 Shareholders' equity:
   Preferred stock, no par value: 500,000 shares
    authorized; none issued or outstanding.....            -               -
   Common stock, no par value: 50,000,000 shares
    authorized; issued and outstanding shares:
    12,952,372 at March 31, 2006 and
    12,927,826 at September 30, 2005............         70,912          70,662
   Treasury stock at cost:  2,635,513 shares at
    March 31, 2006 and 2,635,114 at September
    30, 2005....................................        (24,486)        (24,475)
   Additional paid-in capital ..................          6,068           5,494
   Retained earnings ...........................        211,382         207,116
   Accumulated other comprehensive loss ........         (2,267)         (4,038)
                                                      ---------       ---------
      Total shareholders' equity ...............        261,609         254,759
                                                      ---------       ---------
                                                      $ 445,449       $ 427,923
                                                      =========       =========
</TABLE>


   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
                                       3
<PAGE>

                             STEEL TECHNOLOGIES INC.
                   Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
In thousands, except per share data)   Three Months Ended     Six Months Ended
(Unaudited)                                  March 31              March 31
--------------------------------------------------------------------------------
                                        2006       2005       2006       2005
                                      ------------------------------------------
<S>                                   <C>        <C>        <C>        <C>
Sales ................................ $238,336   $275,278   $439,521  $520,954
Cost of goods sold ...................  225,839    245,788    415,010   460,636
                                       --------   --------   --------  --------
      Gross profit ...................   12,497     29,490     24,511    60,318

Selling, general and
   administrative expenses ...........    9,270      9,327     17,816    19,225
Equity in net income of unconsolidated
   affiliates ........................      627      1,746      1,475     3,217
                                       --------   --------   --------   -------
   Operating income ..................    3,854     21,909      8,170    44,310

Interest expense, net ................      750      1,066      1,209     2,021
                                       --------   --------   --------   -------
   Income before income taxes ........    3,104     20,843      6,961    42,289

Provision for income taxes ...........      776      6,566      1,868    14,256
                                       --------   --------   --------   -------
   Income from continuing operations .    2,328     14,277      5,093    28,033

Discontinuing operations, net
   (including gain on disposal of
   $246, net of tax for the three and
   six months ended March 31, 2006) ..      645      1,077      1,114     1,838
                                       --------   --------   --------   -------
Net income ........................... $  2,973   $ 15,354   $  6,207   $29,871
                                       ========   ========   ========   =======

Diluted weighted average number of
   common shares outstanding .........   13,101     13,104     13,093    13,097
                                       ========   ========   ========   =======

Diluted earnings per common share:
   From continuing operations ........ $   0.18   $   1.09   $   0.39   $  2.14
   From discontined operation ........     0.05       0.08       0.09      0.14
                                       --------   --------   --------   -------
                                       $   0.23   $   1.17   $   0.47   $  2.28
                                       ========   ========   ========   =======

Basic weighted average number of
   common shares outstanding .........   12,948     12,890     12,942    12,865
                                       ========   ========   ========   =======

Basic earnings per common share:
   From continuing operations ........ $   0.18   $   1.11   $   0.39   $  2.18
   From discontined operation ........     0.05       0.08       0.09      0.14
                                       --------   --------   --------   -------
                                       $   0.23   $   1.19   $   0.48   $  2.32
                                       ========   ========   ========   =======

Cash dividends per common share ...... $    --    $    --    $   0.15   $  0.10
                                       ========   ========   ========   =======
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


                                       4
<PAGE>

            Condensed Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>

In thousands)                        Three Months Ended     Six Months Ended
(Unaudited)                                March 31              March 31
--------------------------------------------------------------------------------
                                        2006       2005       2006       2005
                                      ------------------------------------------
<S>                                   <C>        <C>        <C>       <C>
Net income ........................... $  2,973   $ 15,354   $   6,207  $29,871
  Foreign currency translation
        adjustment ...................      450        532       1,530    1,030
  Change in unrealized loss on cash
        flow hedges, net of taxes ....      154        -           241      -
                                       --------   --------    --------  --------
Comprehensive income ................. $  3,577   $ 15,886    $  7,978  $30,901
                                       ========   ========    ========  ========
</TABLE>


   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


                                       5
<PAGE>

                             STEEL TECHNOLOGIES INC.
                 Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)                                                Six Months Ended
(Unaudited)                                                       March 31
--------------------------------------------------------------------------------
                                                             2006       2005
                                                           ---------------------
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income .........................................   $  6,207    $ 29,871
   Adjustments to reconcile net income to net cash
    (used in) provided by operating activities:
       Depreciation ...................................      8,078       7,453
       Stock-based compensation expense ...............        297         -
       Deferred income taxes ..........................     (1,795)       (293)
       Equity in net income of unconsolidated
        affiliates ....................................     (1,475)     (3,217)
       Provision for bad debts ........................        178         419
       Gain on sale of Custom Steel ...................       (246)        -
       Increase (decrease) in cash resulting from
         changes in:
             Trade accounts receivable ................     (8,955)      7,257
             Inventories ..............................    (36,082)    (21,780)
             Prepaids expenses and other assets .......     (1,043)        684
             Accounts payable .........................      5,738      (4,773)
             Income taxes payable .....................      3,454        (691)
             Accrued liabilities ......................      1,351       2,975
                                                          --------    --------
Net cash (used in) provided by operating activities ...    (24,293)     17,905
                                                          --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment .........    (11,809)     (9,434)
   Net cash proceeds fromsale of Custom Steel .........     17,974         -
   Proceeds from sale fo property, plant
     and equipment.....................................        -           116
   Distribution from unconsolidated affiliate .........        145         -
                                                          --------    --------
Net cash provided by (used in) investing activities ...      6,310      (9,318)
                                                          --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt .......................     17,000      78,000
   Principal payments on long-term debt ...............    (17,000)    (80,000)
   Cash dividends on common stock .....................     (1,941)     (1,284)
   Proceeds from stock option exercises................        239         867
   Excess tax benefits from stock options .............         52         -
                                                          --------    --------
Net cash used in financing activities .................     (1,650)     (2,417)
                                                          --------    --------
Effect of exchange rate changes on cash ...............        374         195
                                                          --------    --------
Net (decrease) increase in cash and cash equivalents ..    (19,259)      6,365
Cash and cash equivalents, beginning of year ..........     30,991       2,273
                                                          --------    --------
Cash and cash equivalents, end of period ..............   $ 11,732    $  8,638
                                                          ========    ========
Supplemental Cash Flow Disclosures:
Cash payment for interest .............................   $  1,888    $  1,634
Cash payment for income taxes .........................   $    932    $ 15,507

</TABLE>

   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.

                                       6
<PAGE>

                             STEEL TECHNOLOGIES INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  BASIS OF PRESENTATION

The condensed  consolidated balance sheet as of March 31, 2006 and the condensed
consolidated statements of income and comprehensive income for the three and six
months ended March 31, 2006 and 2005, and condensed  consolidated cash flows for
the six  months  ended  March 31,  2006 and 2005,  have been  prepared  by Steel
Technologies Inc. (the Company) without audit. In the opinion of management, all
adjustments  (which  include  only normal  recurring  adjustments)  necessary to
present fairly the financial  position,  results of operations and cash flows as
of and for the three and six months  ended  March 31,  2006 and for all  periods
presented have been made.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have  been  condensed  or  omitted.   It  is  suggested  that  these   condensed
consolidated  financial  statements  be read in  conjunction  with the financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the fiscal year ended September 30, 2005. The results of operations for
the three and six months ended March 31, 2006 are not necessarily  indicative of
the operating results for the full year.


2.  RECLASSIFICATIONS

Certain  prior year amounts have been  reclassified  to conform with the current
year presentation with no effect on net income or shareholders' equity.

3.  SALE OF CUSTOM STEEL

On March 24, 2006, the Company  entered into a Stock Purchase  Agreement to sell
all the capital stock of its  wholly-owned  Custom Steel,  Inc.  (Custom  Steel)
subsidiary to American Railcar  Industries,  Inc. (ARI). Custom Steel operates a
facility located in Kennett,  Missouri adjacent to ARI's component manufacturing
facility that produces value-added fabricated steel parts that primarily support
ARI's railcar  manufacturing  operations.  Substantially  all of Custom  Steel's
sales are to ARI.

In connection  with the closing of this  transaction,  the final sales price was
approximately $17,061,000. In addition, the Company retained certain obligations
consisting primarily of trade accounts payable, accrued liabilities and deferred
taxes totaling approximately $3,012,000.

On March 31, 2006, ARI remitted approximately  $17,974,000 to the Company and an
additional  $750,000 to a third  party  escrow  agent.  On April 27,  2006,  the
Company  returned  approximately  $1,663,000 to ARI,  which  represents  amounts
received by the Company in excess of the final sales price.


                                       7
<PAGE>
Under the terms of the Stock  Purchase  Agreement,  the  Company  has  agreed to
indemnify  ARI  for any  payments  required  to be  made by ARI for  liabilities
incurred by the Company prior to March 31, 2006. The indemnification  provisions
for most liabilities  expire on March 31, 2008 and require the buyer to incur at
least  $75,000  in  aggregate  liabilities  before  a  claim  can  be  asserted.
Indemnification provisions for certain liabilities, primarily taxes, expire with
applicable  statutes of  limitations  and the  remaining  provisions,  primarily
environmental,  do not expire.  The Company has not recorded any liabilities for
these  indemnifications  since  management has determined it is not probable the
Company  will  incur  such  liabilities.  Pursuant  to the  terms  of an  Escrow
Agreement,  the $750,000 in escrow will be distributed to the Company at various
times prior to March 31, 2008 to the extent there are no indemnification  claims
made by ARI.

In accordance with Statement of Financial  Accounting  Standards (SFAS) No. 144,
"Accounting  for the  Impairment or Disposal of Long-Lived  Assets," the sale of
Custom Steel has been  accounted for as a discontinued  operation.  Accordingly,
the  results  of  operations  and the gain on the sale have been  classified  as
discontinued  operations,  net of income taxes,  in the  accompanying  condensed
consolidated  statements  of income.  Interest  expense  on debt that  cannot be
attributed to other operations of the Company has been allocated to discontinued
operations.

Summarized condensed  consolidated income statement  information of Custom Steel
follows:

<TABLE>


In thousands)                          Three Months Ended     Six Months Ended
(Unaudited)                                 March 31              March 31
--------------------------------------------------------------------------------
                                        2006       2005       2006       2005
                                      ------------------------------------------
<S>                                   <C>        <C>        <C>       <C>
Sales ................................ $ 12,101   $ 11,680   $  23,470  $20,020
Income before income taxes ...........      702      1,657       1,423    2,828
Income from continuing operations ....      399      1,077         868    1,838
Gain on sale, net of income taxes ....      246        -           246      -
Net income ...........................      645      1,077       1,114    1,838

</TABLE>

A summary of the assets and liabilities of Custom Steel held for sale follows:
<TABLE>

(In thousands)                                                  September 30
(Unaudited)                                                         2005
-------------------------------------------------------------- --------------
     <S>                                                       <C>

     Inventories                                                $    7,295
     Property, plant and equipment, net                              4,009
     Goodwill                                                        9,157
     Other assets                                                       14
                                                                 ------------
     Assets held for sale                                           20,475
                                                                 ------------
     Accrued liabilities                                                14
     Deferred income tax liability                                     171
                                                                 ------------
    Liabilities associated with assets held for sale                   185
                                                                 ------------
    Net assets held for sale                                     $  20,290
                                                                 ============
</TABLE>

                                       8
<PAGE>


4.  INVENTORIES

<TABLE>
<CAPTION>
Inventories consists of:


(In thousands)                                        March 31     September 30
(Unaudited)                                             2005           2005
-------------------------------------------------------------------------------
<S>                                                 <C>           <C>
Raw materials ....................................   $  104,990   $   79,813
Finished goods and work in process ...............       49,410       34,315
                                                     ----------   ----------
                                                     $  154,400   $  114,128
                                                     ==========   ==========
</TABLE>


5.  STOCK OPTIONS

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 of the Company's Board of Directors.  Generally,  options
are  exercisable at the rate of 20% a year beginning one year from date of grant
and expire ten years from the date of grant.  On November 4, 2005, the remaining
91,000 shares available were granted at an average exercise price of $25.42.

On January 26, 2006,  the  shareholders  of the Company  voted to adopt the 2006
Restricted  Stock Plan (the 2006  Plan),  which was  previously  approved by the
Board of Directors on November 4, 2005.  The 2006 Plan  authorizes  the award of
stock for up to 300,000  shares of the  Company's  Common  Stock,  no par value,
which may be awarded as authorized, but unissued, shares. The terms of any award
of  shares  will  be  determined  by the  Compensation  Committee  in  its  sole
discretion  at  the  time  of  the  award.  Unless  otherwise  specified  by the
Committee,  none of the shares  awarded shall be restricted for a period of less
than one year or more than ten years.  The number of shares which may be awarded
to any single employee will not be limited by the 2006 Plan.

On October 1, 2005, the Company adopted SFAS No. 123(R),  "Share-Based Payment,"
using  the  modified   prospective   transition   method.   Under  this  method,
compensation cost is recognized for all share-based payments granted this fiscal
year and for all unvested  awards granted to employees  prior to the adoption of
SFAS No. 123(R).  The Company recognizes  compensation  expense for stock option
grants  on a  graded-vesting  basis  over  the  employee's  vesting  period.  In
accordance  with the  modified  prospective  transition  method,  the  financial
statements for prior periods have not been restated.

On April 28, 2006,  80,000  restricted  shares were granted  under the 2006 Plan
which  vest at a rate of 33.33% a year  over  three  years.  As a result of this
grant, the Company will record compensation expense of approximately  $1,692,000
based on the fair  value of the stock on the date of grant of  $22.56  per share
over the vesting period of three years using the straight-line method.

Since all outstanding options are incentive stock options,  the Company does not
receive  any  income tax  deductions  for  options  granted  unless  there is an
exercise and disqualifying  disposition of those shares as defined under current
tax laws.  Upon the  occurrence  of a  disqualifying  disposition,  the  Company
recognizes  the income tax  benefit  that  corresponds  to the  cumulative  book
compensation  cost as a reduction to income tax expense and any excess  benefits
are recorded as an addition to additional paid-in capital.



                                       9

<PAGE>


As a result of  adopting  SFAS No.  123(R),  the  Company  recorded  stock-based
compensation expense included in selling, general and administrative expenses of
$166,000  and  $297,000  for the  three and six  months  ended  March 31,  2006,
respectively.  In  addition,  the  Company  recognized  an income tax benefit of
$52,000  and  $84,000  during the three and six  months  ended  March 31,  2006,
respectively,  of which  approximately  $15,000 and  $32,000  was  recorded as a
reduction in income tax expense  during the three and six months ended March 31,
2006, 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  for the
options granted on November 4, 2005:



<TABLE>
<S>                                     <C>
Expected dividend yield                    1.4%
Expected stock price volatility           46.0%
Weighted average risk-free interest rate   4.6%
Expected life option (years)               6.5
</TABLE>

                                       7
<PAGE>
The assumptions for expected dividend yield, expected stock price volatility and
expected life of options are based on historical  trends.  The weighted  average
risk-free interest rate is based on a traded zero-coupon U.S. Treasury bond with
a term equal to the option's  expected life. The weighted average fair value for
the  options  granted  during  the first six  months  of fiscal  2006  using the
assumptions listed above was $11.52 per share.

The summary of the status of all of the Company's  stock  incentive  plans as of
March 31,  2006 and  changes  during the six  months  ended  March 31,  2006 are
presented below.


<TABLE>
                                                  Weighted
                                  Shares          Average
                                   Under          Exercise
                                   Plans           Price
   --------------------------------------------------------
   <S>                             <C>            <C>
   Balance, September 30, 2005     304,500        $ 9.32
   Granted                          91,000         25.42
   Exercised                       (22,600)         8.75
   Canceled                            -             -
                                   -------        ---------
   Balance, March 31, 2006         372,900        $ 13.31
                                   =======        =========
  </TABLE>


<TABLE>

                                Weighted    Weighted     Aggregrate
                      Shares     Average     Average     Intrinsic     Aggregate
                       Under    Exercise   Contractual   Value Per     Intrinsic
                       Plan      Price        Term       Share (1)     Value (1)
--------------------------------------------------------------------------------
<S>                    <C>          <C>          <C>        <C>         <C>
Options outstanding
  at March 31, 2006    372,900    $ 13.31    6.08 years   $ 11.27     $4,201,000
Options exercisable
  at March 31, 2006    169,100       8.54    4.20 years     15.76      2,665,000
Options vested and
  expected to vest     358,200      13.11    5.98 years     11.45      4,101,000

</TABLE>

(1)  Computed  based  upon the  amount  by which  the fair  market  value of the
Company's  common  stock at March 31,  2006 of $24.30  per  share  exceeded  the
weighted average exercise price.



                                       10
<PAGE>

The total  intrinsic value of stock options  exercised  during the three and six
months ended March 31, 2006 was $169,000 and $395,000, respectively, compared to
$1,477,000  and  $2,488,000,  respectively,  for the three and six months  ended
March  31,  2005.  All  unexercised  options  expire  from  2008 to 2015.  Total
compensation   costs  related  to  nonvested  options  not  yet  recognized  was
approximately  $1,046,000  at March  31,  2006.  We expect  to  recognized  this
compensation cost as follows using the graded vesting method:


<TABLE>
                                       Amount
                                   --------------
        <S>                          <C>

         Remainder of fiscal 2006     $320,000
         2007                          370,000
         2008                          204,000
         2009                           98,000
         2010                           43,000
         2011                            3,000
                                   --------------
         Total                       $1,046,000
                                   ==============
</TABLE>


Prior to fiscal 2006, as permitted by SFAS No. 123  "Accounting  for Stock-Based
Compensation"  and  amended  by  SFAS  No.  148,   "Accounting  for  Stock-Based
Compensation-Transition  and Disclosure," the Company followed the provisions of
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees," and related Interpretations in accounting for its stock option plans
under the intrinsic value based method. Accordingly, no stock-based compensation
expense was  recognized  for stock  options  issued under the plans as all stock
options  granted  under the plans had an  exercise  price at least  equal to the
market  value  of the  underlying  common  stock  on the  date  of  grant.   Had
compensation  expense  been  determined  based  on the fair  value of the  stock
options at the grant date  consistent  with the  provisions of SFAS No. 123, the
Company's  net income and basic and diluted net income per common  share for the
three and six months ended March 31, 2005 would have been impacted as follows:


<table>
<caption>
(In thousands except per share data)        Three Months Ended  Six Months Ended
(Unaudited)                                      March 31           March 31
-------------------------------------------------------------------------------
                                                   2005              2005
                                                  ------            ------
<S>                                              <C>                <C>
Net income - as reported                         $15,354            $29,871
Total stock-based employee compensation
   expense determined under
   fair value method for all awards,
   net of taxes                                       54                110
                                                 -------            -------
Net income - pro forma                           $15,300            $29,761
                                                 =======            =======

Diluted net income per share - as reported        $ 1.17             $ 2.28
Diluted net income per share - pro forma          $ 1.17             $ 2.28
Basic net income per share - as reported          $ 1.19             $ 2.32
Basic net income per share - pro forma            $ 1.19             $ 2.31
</table>


6.  NET INCOME PER SHARE COMPUTATIONS

The following is a  reconciliation  of the  denominator of the basic and diluted
per common share computations:
<TABLE>
<CAPTION>

                                                           Three Months Ended
(In thousands, except per common share data)                     March 31
(Unaudited)                                                  2006        2005
-------------------------------------------------------   ----------  ----------
<S>                                                       <C>         <C>
Net income from continuing operations .................   $   2,328   $  14,277
Discontinued operations ...............................         645       1,077
                                                          ---------   ---------
Net income ............................................   $   2,973   $  15,354
                                                          =========   =========
Shares (denominator) used for diluted
   per share computations:
    Weighted average shares of common  stock
        outstanding ...................................      12,948      12,890
    Plus: dilutive effect of stock options ............         153         214
                                                          ---------   ---------
           Diluted weighted average shares ............      13,101      13,104
                                                          ---------   ---------
Shares (denominator) used for basic per
   share computations:
   Weighted average shares of common stock
       outstanding ....................................      12,948      12,890
                                                          ---------   ---------
Net income per share data:
    Diluted
       From continuing operations .....................   $    0.18   $    1.09
       From discontinued operations ...................        0.05        0.08
                                                          ---------   ---------
                                                          $    0.23   $    1.17
                                                          =========   =========
    Basic
       From continuing operations .....................   $    0.18   $    1.11
       From discontinued operations ...................        0.05        0.08
                                                          ---------   ---------
                                                          $    0.23   $    1.19
                                                          =========   =========
</TABLE>

                                       12
<PAGE>
<TABLE>
<CAPTION>

                                                             Six Months Ended
(In thousands, except per common share data)                     March 31
(Unaudited)                                                  2006        2005
-------------------------------------------------------   ----------  ----------
<S>                                                       <C>         <C>
Net income from continuing operations .................   $   5,093   $  28,033
Discontinued operations ...............................       1,114       1,838
                                                          ---------   ---------
Net income ............................................   $   6,207   $  29,871
                                                          =========   =========
Shares (denominator) used for diluted
   per share computations:
    Weighted average shares of common  stock
        outstanding ...................................      12,942      12,865
    Plus: dilutive effect of stock options ............         151         232
                                                          ---------   ---------
           Diluted weighted average shares ............      13,093      13,097
                                                          ---------   ---------
Shares (denominator) used for basic per
   share computations:
   Weighted average shares of common stock
       outstanding ....................................      12,942      12,865
                                                          ---------   ---------
Net income per share data:
    Diluted
       From continuing operations .....................   $    0.39   $    2.14
       From discontinued operations ...................        0.09        0.14
                                                          ---------   ---------
                                                          $    0.47   $    2.28
                                                          =========   =========
    Basic
       From continuing operations .....................   $    0.39   $    2.18
       From discontinued operations ...................        0.09        0.14
                                                          ---------   ---------
                                                          $    0.48   $    2.32
                                                          =========   =========
</TABLE>
Outstanding  options of 7,500 shares were excluded from the diluted earnings per
common  share  calculation  for the three and six months  ended March 31,  2006,
respectively,  because the  exercise  price of the options was greater  than the
average market price of the Company's common stock. All outstanding  options are
included in the diluted  earnings  per common  share  calculation  above for the
three and six months ended March 31, 2005.

7.  RELATED PARTIES

Summarized condensed consolidated income statement information of Mi-Tech Steel,
Inc. (Mi-Tech Steel), a fifty percent owned  unconsolidated  affiliate accounted
for by the equity method, follows:

<TABLE>
<CAPTION>
(In Thousands)          Three Months Ended            Six Months Ended
(Unaudited)                  March 31                     March 31
-----------------      ---------------------      -----------------------
                         2006         2005          2006           2005
                         ----         ----          ----           ----

                    <c>          <c>           <c>            <c>
Sales                  $67,929      $80,859       $134,645        $151,400
Gross profit             3,745        8,177          8,523          15,216
Net income               1,110        3,352          2,648           6,153
</TABLE>
                                       13
<PAGE>

The Company has various  transactions  with Mi-Tech Steel.  Both the Company and
Mi-Tech  Steel buy and sell  products and services at  prevailing  market prices
from each other.  Beginning in February 2005, the Company incurred expenses from
Mi-Tech Steel for toll processing and storage services  provided at its Decatur,
Alabama facility at agreed upon rates. Prior to February 2005, Mi-Tech Steel was
reimbursed for operating costs incurred at its Decatur,  Alabama facility by its
owners.  Equity in the net income of Mi-Tech Steel and management fee income are
also  included in  operating  income of the Company.  A summary of  transactions
between  the Company and  Mi-Tech  Steel  during the three and six months  ended
March 31, 2006 and 2005 follows:



<TABLE>
<CAPTION>
(In Thousands)                     Three Months Ended          Six Months Ended
(Unaudited)                             March 31                   March 31
-----------------                 ---------------------     --------------------
                                    2006         2005         2006        2005
                                    ----         ----         ----        ----

                                <c>          <c>         <c>         <c>
Sales to Mi-Tech Steel              $  894       $ 993      $ 2,013    $ 1,817
Purchases from and expense
   reimbursements to Mi-Tech Steel     330         602          871      1,139
Interest income from Mi-Tech Steel      -           24           -          44
Equity in net income of
   Mi-Tech Steel                       555       1,676        1,324      3,077

</TABLE>


As a result of the transactions  above,  accounts  receivable from Mi-Tech Steel
was  $496,000  and  $302,000  as of March  31,  2006  and  September  30,  2005,
respectively,  and accounts payable to Mi-Tech Steel was $72,000 and $103,000 as
of March 31, 2006 and September 30, 2005, respectively.

During the three and six months ended March 31, 2006, the Company recorded sales
of $3,295,000 and $6,679,000, respectively, for scrap products sold to a company
owned  by a  director  of the  Company  compared  to  sales  of  $4,756,000  and
$12,227,000, respectively, during the three and six months ended March 31, 2005.
Accounts  receivable  from  the  aforementioned   company  were  $2,523,000  and
$2,508,000 as of March 31, 2006 and September 30, 2005, respectively. Management
reports these  transactions  to the Audit Committee of the Board of Directors as
frequently as requested by the Committee,  but at least annually. Most recently,
in April 2006, the Audit Committee reviewed and approved these transactions. The
Company has the ability to continue or cease selling scrap steel to this company
at any time.

8.       FINANCIAL INSTRUMENTS

In order to mitigate a portion of the market risk on its variable rate debt, the
Company  entered  into an interest  rate swap  contract  with a major  financial
institution on June 20, 2005. Under the terms of the contract,  which matures in
September  2008, the Company  receives a LIBOR based variable  interest rate and
pays a fixed  interest rate of 4.31% on a notional  amount of  $30,000,000.  The
variable  interest  rate paid on the contract is  determined  based on the three
month LIBOR rate,  which is consistent with the variable rate  determination  on
the underlying debt.



                                       14

<PAGE>


SFAS No. 133, "Accounting for Derivative  Instruments and Hedging Activities" as
amended,  establishes  accounting and reporting  standards  requiring that every
derivative  financial  instrument  be recorded on the balance  sheet at its fair
value.  SFAS No. 133 requires all  derivatives be recognized as either assets or
liabilities in the balance sheet at their fair value,  and sets forth the manner
in which gains and losses  thereon are to be  recorded.  The  treatment  of such
gains or losses is dependent  upon the type of  exposure,  if any, for which the
derivative is designated as a hedge.  Gains and losses for qualifying hedges can
be deferred in accumulated other comprehensive loss and recognized in the income
statement  along  with the  related  results of the  hedged  item.  SFAS No. 133
requires  that  the  Company  formally   document,   designate  and  assess  the
effectiveness  of such  transactions  in order to qualify  for hedge  accounting
treatment.

The Company  designated  its interest rate swap contract as a cash flow hedge of
anticipated  interest payments under its variable rate line of credit agreement.
Gains and losses on these swaps are recorded in accumulated other  comprehensive
loss and are  reclassified  into net  income  as  interest  expense,  net in the
periods in which the related variable interest is paid.

9.  INCOME TAXES

On October 22, 2004 the  American  Jobs  Creation  Act of 2004 was passed and is
effective  for  fiscal  2006.  This law  provides a phased in  deduction  for a
percentage of qualified income from domestic production activities and a special
one-time tax deduction on the  repatriation  of foreign  earnings.  The Company
estimates this law will lower its effective  income tax rate by less than 1% for
fiscal 2006.

10.  SUBSEQUENT EVENTS

On April 28, 2006,  our Board of Directors  declared the  Company's  semi-annual
cash dividend of $0.15 per share.  The dividend is payable on  May 23, 2006,  to
shareholders of record as of May 8, 2006.

On May 8, 2006,  the Company  completed an  acquisition  of all the  outstanding
stock of privately held Kasle Steel  Corporation  (Kasle) in Dearborn,  Michigan
pursuant to a Stock Purchase Agreement.  Through its five processing facilities,
including three joint ventures,  Kasle is North  America's  largest  independent
supplier of  automotive  steel  blanks,  shipping over 1.5 million tons annually
across a variety of platforms.  The purchase price is approximately $49 million,
which includes the assumption of approximately  $15 million of liabilities.  The
Company  increased  its  borrowings  under  the line of credit  facility  by $40
million to finance the acquisition.


                                       15
<PAGE>


     Item 2. Management's Discussion and Analysis of Financial Condition and
                             Results of Operations

When  used  in  the  following  discussion,   the  words  "expects,"  "intends,"
"anticipates," "believes" 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,  competitive  factors
such as  pricing  and  availability  of  steel;  cyclical  demand  in the  steel
industry,  specifically  in the  automotive  market;  our  ability  to make  and
integrate acquisitions;  our inability to obtain sufficient capital resources to
fund our operations  and our growth;  risk of business  interruptions  affecting
automotive manufacturers;  and reliance on key customers.  Readers are cautioned
not to place undue  reliance on these  forward-looking  statements,  which speak
only as of the date  hereof.  We undertake no  obligation  to republish  revised
forward-looking  statements to reflect the occurrence of unanticipated events or
circumstances  after the date  hereof.  Unless the context  otherwise  requires,
references to "we," "us" or "our" refer  collectively to Steel Technologies Inc.
and its subsidiaries.

We  completed  the sale of our Custom  Steel,  Inc.  subsidiary  in March  2006.
Accordingly,  results of operations  and gain on the sale of Custom Steel,  Inc.
are  treated  as  discontinued   operations.   In  addition,  we  completed  the
acquisition of Kasle Steel Corporation (Kasle) on May 8, 2006 and the results of
operations of Kasle will be included in our results beginning in May 2006.


Application of Critical Accounting Policies
-------------------------------------------

Our condensed consolidated financial statements have been prepared in accordance
with  generally  accepted  accounting  principles.   The  preparation  of  these
financial  statements requires management to make estimates and assumptions that
affect the amounts reported in the  consolidated  financial  statements.  Actual
results  could  differ  from these  estimates  under  different  assumptions  or
conditions.  On an ongoing  basis,  we monitor and  evaluate our  estimates  and
assumptions.

A summary of  significant  accounting  policies used in the  preparation  of the
condensed  consolidated  financial statements is included in Note 1 of the Notes
to Consolidated  Financial  Statements in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2005.

Our  most  critical  accounting  policies  include  the  valuation  of  accounts
receivable,  which impacts selling,  general and administrative expense, and the
assessment  of  recoverability  of goodwill and  long-lived  assets.  Management
reviews the estimates, including, but not limited to, the allowance for doubtful
accounts  on  a  regular  basis  and  makes   adjustments  based  on  historical
experiences,  current  conditions  and  future  expectations.  The  reviews  are
performed  regularly and adjustments are made as required by currently available
information. We believe these estimates are reasonable, but actual results could
differ from these estimates.

                                     16

<PAGE>


     Allowance for Doubtful Accounts Receivable
     ------------------------------------------

     Our accounts  receivable  represent  those amounts that have been billed to
     our customers but not yet collected.  An allowance for doubtful accounts is
     maintained  for  estimated  losses  resulting  from  the  inability  of our
     customers to make required payments. The allowance is maintained at a level
     considered  appropriate  based on historical  and other factors that affect
     collectibility. The factors include historical trends of write-offs, sales,
     recoveries and credit losses,  the monitoring of portfolio  credit quality,
     and current and projected economic and market conditions.  If the financial
     condition of our customers was to  deteriorate,  resulting in an impairment
     of the  ability  to make  payments  beyond  previously  established  terms,
     additional  allowances may be required.  Uncollectible  accounts receivable
     are written off against the allowance for doubtful accounts receivable when
     management  determines  that the  probability  of  payment  is  remote  and
     collection efforts have ceased.

     Long-Lived Assets
     -----------------

     Long-lived  assets with  estimated  useful lives are  depreciated  to their
     residual  values over the useful lives in proportion to the economic  value
     consumed.  We  review  the  carrying  value of our  long-lived  assets  for
     impairment  whenever changes in events and circumstances  indicate that the
     carrying amount of the assets may not be recoverable. If an evaluation were
     required,  the estimated future  undiscounted cash flows associated with an
     asset would be compared to the asset's  carrying  value to  determine  if a
     write-down  to market value or  undiscounted  cash flows value is required.
     Future changes in circumstances,  cash flow estimates and estimates of fair
     value could affect the valuations.

     Goodwill is reviewed annually, or sooner if indicators of impairment exist,
     for impairment using the present value technique to determine the estimated
     fair  value of  goodwill  associated  with each  reporting  entity.  If the
     goodwill is indicated as being  impaired  (the present  value of cash flows
     (fair value) of the reporting unit is less than the carrying  amount),  the
     fair value of the reporting  unit would then be allocated to our assets and
     liabilities in a manner  similar to the purchase price  allocation in order
     to determine the implied fair value of the reporting  unit  goodwill.  This
     implied fair value of the reporting  unit  goodwill  would then be compared
     with the carrying  amount of the  reporting  unit  goodwill and, if it were
     less, we would then recognize an impairment loss.

     Considerable  management  judgment is  necessary to assess  impairment  and
     estimate fair value.  The  projection of future cash flows for the goodwill
     impairment  analysis  requires  significant  judgment  and  estimates  with
     respect to future  revenues  related  to the  assets  and the  future  cash
     outlays related to those  revenues.  Actual revenues and related cash flows
     or changes in  anticipated  revenues and related cash flows could result in
     changes  in  the  assessment  and  result  in  an  impairment  charge.  The
     assumptions used in our evaluations,  such as forecasted growth rates, cost
     of capital,  tax rates and residual values are consistent with our internal
     projections  and  operating  plans.  The  use  of  different   assumptions,
     including  cash flows and discount  rates,  could  increase or decrease the
     related impairment charge.

                                       17
<PAGE>


Overview
--------

We are one of the largest  independent  flat-rolled steel processors and exposed
automotive  blankers  in  North  America.  Our  North  American  platform  of 23
facilities, including our unconsolidated affiliates, is strategically positioned
in the steel  producing and consuming  markets  throughout the United States and
Mexico.  We bring value to our customers  through  precision steel processing as
well as supply chain  management,  quality  control and  technical  support.  We
utilize the most advanced  equipment to produce  high-quality steel products and
specialize  in  meeting  exact  specifications  for  customers  in a variety  of
industries  and end use  markets  including  automotive,  lawn  and  garden  and
appliance  industries.  Our  broad  geographic  coverage  allows  us to  provide
precision steel products to our customers with efficient just-in-time delivery.

We focus our sales and  marketing  strategies  to leverage  more fully our North
American platform of value added steel processing  facilities.  In recent years,
we have been  successful  in growing our volume across all  operations  and have
gained meaningful  market growth,  both with existing and new customers across a
wide range of end use markets.  Our broad  capabilities and geographic  presence
offer  distinct  competitive  advantages  to  customers  that  have  multi-plant
operations  throughout the United States, Canada and Mexico. This has allowed us
to expand with regional and large national accounts.

For the three months ended March 31, 2006,  sales were $238.3  million  compared
with a  record  $275.3  million  in the  same  period a year  ago.  Income  from
continuing operations for the second quarter of fiscal 2006 totaled $2.3 million
or $0.18 per diluted  share versus $14.3  million or $1.09 per diluted  share in
the same period last year. Net income for the quarter, including a $246,000 gain
on the sale of  Custom  Steel,  was $3.0  million  or $0.23  per  diluted  share
compared with net income of $15.4 million or $1.17 per diluted share in the same
period a year ago. Results for the second quarter of 2005 included an income tax
benefit of $0.06 per diluted share, reflecting changes in the tax laws effective
January 1, 2005, for the Company's Mexican operations.

For the first six months of fiscal 2006 sales were $439.5 million  compared with
a record $521.0  million for the same period last year.  Income from  continuing
operations  for the first half of fiscal 2006  totaled $5.1 million or $0.39 per
diluted  share  versus  $28.0  million or $2.14 per  diluted  share for the same
period last year.  Year-to-date  net income for fiscal 2006 was $6.2  million or
$0.47 per  diluted  share  compared  with a record  $29.9  million  or $2.28 per
diluted share in the first six months of fiscal 2005.

Foreign  currency  transaction  losses  included  in  sales  were  $774,000  and
$1,095,000  during the three and six months ended March 31, 2006,  respectively,
reflecting a stronger  average  exchange  rate of the peso  relative to the U.S.
dollar.  Foreign currency transaction losses included in sales for the three and
six months ended March 31, 2005 were $230,000 and $396,000, respectively.

Tons sold of  company-owned  steel products in our second quarter of fiscal 2006
were  308,000,  reflecting  an increase of 20% over the first  quarter of fiscal
2006.  We  forecast  sales  to  the  automotive  industry  based  on  production
schedules.  We expect  production  schedules  to be similar to last year for our
third quarter of fiscal 2006. The automotive industry accounts for approximately
45% of our sales.

Our largest unconsolidated affiliate,  Mi-Tech Steel, continues to contribute to
our overall  success and is  continuing to be awarded  additional  programs with
domestic  automotive

                                       18
<PAGE>



companies.  Mi-Tech Steel plays an important role in our North American platform
and is included in our marketing strategies as we expand our position with large
national customers.

On March 24, 2006, the Company  entered into a Stock Purchase  Agreement to sell
all the capital stock of its  wholly-owned  Custom Steel,  Inc.  (Custom  Steel)
subsidiary to American Railcar  Industries,  Inc. (ARI). Custom Steel operates a
facility located in Kennett,  Missouri adjacent to ARI's component manufacturing
facility that produces value-added fabricated steel parts that primarily support
ARI's railcar  manufacturing  operations.  Substantially  all of Custom  Steel's
sales are to ARI.

In connection  with the closing of this  transaction,  the final sales price was
approximately  $17,061,000.  On  March  31,  2006,  ARI  remitted  approximately
$17,974,000  to the Company and an  additional  $750,000 to a third party escrow
agent. On April 27, 2006, the Company returned approximately  $1,663,000 to ARI,
which  represents  amounts  received by the Company in excess of the final sales
price. The proceeds were used to reduce  indebtedness under our revolving credit
agreement.

On May 8, 2006,  the Company  completed an  acquisition  of all the  outstanding
stock of privately held Kasle Steel  Corporation  (Kasle) in Dearborn,  Michigan
pursuant to a Stock Purchase Agreement.  Through its five processing facilities,
including three joint ventures,  Kasle is North  America's  largest  independent
supplier of  automotive  steel  blanks,  shipping over 1.5 million tons annually
across a variety of platforms.  The purchase price is approximately $49 million,
which includes the assumption of approximately  $15 million of liabilities.  The
Company  increased  its  borrowings  under  the line of credit  facility  by $40
million to finance the acquisition.

As we continue to strengthen our balance sheet,  we are well positioned to focus
on our  future  growth  initiatives.  These  initiatives  include  acquisitions,
investments to current  operations,  Greenfield  expansions  and  investments in
joint  ventures.  We have recently  completed two of our major capital  projects
included in our $25 million capital  expenditures  budget for fiscal 2006. These
completed  projects include new leveling  capabilities to our pickling operation
in Ghent,  Kentucky and adding  additional  multi-blanking  capabilities  to our
Berkeley,  South  Carolina  facility.  Both  projects  are  geared to  expanding
capacity,  improving  quality and services to customers and lowering  conversion
costs.  Our third major  project for fiscal 2006 is a new  operation  in Juarez,
Mexico.  We are scheduled to begin  processing  in the second  quarter of fiscal
2007.

                                       19
<PAGE>


    Financial Highlights (in thousands except per share data and percentages)
    -------------------------------------------------------------------------

<table>
<caption>


                                  For the Three Months Ended March 31
                                         2006             2005
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>
Sales                            $238,336  100.0%   $275,278  100.0%     (13)%
Gross profit                       12,497    5.2      29,490   10.7      (58)
Selling, general and
   administrative expenses          9,270    3.9       9,327    3.4       (1)
Equity in net income of
   unconsolidated affiliates          627    0.3       1,746    0.6      (64)
Operating income                    3,854    1.6      21,909    8.0      (82)
Interest expense, net                 750    0.3       1,066    0.4      (30)
Net income from continuing
   operations                       2,328    1.0      14,277    5.2      (84)
Diluted earnings per common share
   from continuing operations       $0.18              $1.09             (84)

Other data
----------
Average days sales outstanding      45.9               38.1               20
Inventory turnover                   5.9                4.9               20
Return on equity (annualized)        4.5%              23.0%             (80)

</table>


<table>
<caption>


                                  For the Six Months Ended March 31
                                         2006             2005
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>
Sales                            $439,521  100.0%   $520,954  100.0%     (16)%
Gross profit                       24,511    5.6      60,318   11.6      (59)
Selling, general and
   administrative expenses         17,816    4.1      19,225    3.7       (7)
Equity in net income of
   unconsolidated affiliates        1,475    0.3       3,217    0.6      (54)
Operating income                    8,170    1.9      44,310    8.5      (82)
Interest expense, net               1,209    0.3       2,021    0.4      (40)
Net income from continuing
   operations                       5,093    1.2      28,033    5.4      (82)
Diluted earnings per common share
   from continuing operations       $0.39              $2.14             (82)
Cash dividends per common share     $0.15              $0.10              50

Other data
----------
Average days sales outstanding      48.5               40.2               21
Inventory turnover                   5.5                4.6               20
Return on equity (annualized)        4.7%              22.5%             (79)

</table>

                                       20
<PAGE>


Results of Operations
---------------------

     Sales
     -----

     We posted net sales of $238,336,000  for the second quarter ended March 31,
     2006, a decrease of 13% from sales of  $275,278,000  for the second  fiscal
     quarter ended March 31, 2005. Tons shipped of company-owned  steel products
     in the second  quarter of fiscal 2006 were 308,000 tons, a 3% decrease from
     the  second  quarter  of  fiscal  2005.   The  average   selling  price  of
     company-owned  steel products  decreased  approximately 12% from the second
     quarter of fiscal 2006 as compared to the peak levels of second  quarter of
     fiscal 2005 as customers  have  negotiated  lower  selling  price levels to
     reflect  the  reduction  in raw  material  costs  since last year.  We have
     closely  worked with our customers  and  negotiated  more flexible  pricing
     arrangements that in many cases adjust with market indices.

     Sales for the six months ended March 31, 2006 were $439,521,000  reflecting
     a decrease  of 16% from sales for the six months  ended  March 31,  2005 of
     $520,954,000. Tons shipped in the first six months of fiscal 2006 decreased
     6% compared to the first six months of fiscal 2005.  Average selling prices
     of steel for the first six months of fiscal  2006  decreased  approximately
     10% compared to fiscal 2005.


     Gross profit
     ------------

     Our gross profit margin from  continuing  operations was 5.2% in the second
     quarter of fiscal 2006  compared  to 10.7% in the second  quarter of fiscal
     2005.  Cost of goods sold  decreased  8.1% in the second  quarter of fiscal
     2006 compared to the second quarter of fiscal 2005.  Cost of materials sold
     decreased $21,643,000 in the second quarter of fiscal 2006 primarily due to
     lower average raw material costs and lower shipment  levels.  This decrease
     was offset by an  increase in delivery  costs of  $499,000  primarily  from
     increases in fuel costs offset by lower sales  volumes.  The remaining cost
     of goods sold in the second  quarter of fiscal 2006 increased by $1,195,000
     compared to the second quarter of fiscal 2005 and was primarily a result of
     fixed costs  spread over a lower sales volume  coupled with higher  utility
     and natural gas costs.

     For the first six months of fiscal  2006 our gross  profit  margin was 5.6%
     compared  to 11.6% for the first six months of fiscal  2005.  Cost of goods
     sold  decreased 9.9% in the first six months of fiscal 2006 compared to the
     first  six  months  of  fiscal  2005.  Cost  of  materials  sold  decreased
     $46,867,000  primarily  due to lower  average  raw  material  costs on less
     volume.  The  remaining  increase  in cost of goods sold for the six months
     ended March 31, 2006 compared to March 31, 2005 of $1,241,000 was primarily
     a result of  delivery  costs,  increased  labor  costs and  related  fringe
     benefits.

     Our gross profit margin  decreased to 5.2% in the second  quarter of fiscal
     2006 from 6.2% in the first quarter of fiscal 2006 primarily as a result of
     a very competitive pricing environment. We expect our selling prices during
     the third  quarter of fiscal  2006 will  continue  to be  impacted  by this
     competitive environment.  Accordingly,  we expect modest gains in our gross
     profit  margin  in the  third  quarter  of fiscal  2006 as we  continue  to
     aggressively  manage our inventory levels. We may offset lower gross profit
     trends  by  achieving   production  cost   efficiencies   and  product  mix
     improvements.


                                       21
<PAGE>

     Selling, general and administrative expenses
     --------------------------------------------

     Selling,  general and administrative costs were $9,270,000 or 3.9% of sales
     for the three months ended March 31, 2006,  compared to  $9,327,000 or 3.4%
     of sales  for the three  months  ended  March 31,  2005.  The  decrease  is
     primarily  attributable to decreases in company wide bonus plan expenses of
     $1,307,000 due to lower earnings.  This decrease was offset by increases in
     professional services of approximately $309,000 due primarily to the timing
     of fees incurred for  compliance  with Sarbanes Oxley  legislation,  higher
     property tax expense of $227,000  primarily  as a result of the  successful
     appeal of a state  property  tax  assessment  during the second  quarter of
     fiscal  2005,  an increase  in bad debt  expense of $195,000 as a result of
     weaker economic trends, an increase in stock option compensation expense of
     $166,000  as a result  of  adopting  SFAS No.  123(R)  and an  increase  of
     $353,000 in remaining selling, general and administrative expenses.

     Selling,  general and  administrative  costs were  $17,816,000  for the six
     months ended March 31,  2006,  compared to  $19,225,000  for the six months
     ended March 31, 2005. The decrease is primarily  attributable  to decreases
     in company wide bonus plan expenses of $2,622,000 due to lower earnings and
     a  decrease  in bad debt  expense  of  $240,000  as a result  of  favorable
     collection  efforts in the first  quarter of fiscal  2006  offset by weaker
     economic  trends during the second quarter of fiscal 2006.  These decreases
     were offset by increases in professional services of $477,000 due primarily
     to  the  timing  of  fees  incurred  for  compliance  with  Sarbanes  Oxley
     legislation,  higher property tax expense of $266,000 primarily as a result
     of the  successful  appeal of a state  property tax  assessment  during the
     second  quarter of fiscal 2005,  an increase in stock  option  compensation
     expense of $297,000 as a result of adopting SFAS No. 123(R) and an increase
     of $413,000 in remaining selling, general and administrative expenses.

     We  continue  to actively  manage the level at which  selling,  general and
     administrative expenses are added to our cost structure.

     Equity in net income of unconsolidated affiliates
     -------------------------------------------------

     Our share of the income of our  unconsolidated  affiliates was $627,000 for
     the second  quarter of fiscal 2006 compared to $1,746,000 in 2005.  For the
     six months ended March 31, 2006 income from  unconsolidated  affiliates was
     $1,475,000 compared to $3,217,000 for the six months ended March 31, 2005.

     Our largest unconsolidated  affiliate,  Mi-Tech Steel, reported $67,929,000
     in sales  for the  second  quarter  of fiscal  2006,  a  decrease  of 16.0%
     compared  to the second  quarter of fiscal  2005.  Sales for the six months
     ended March 31, 2006 were $134,645,000, down 11.1% compared to $151,400,000
     for the six months ended March 31, 2005. Mi-Tech Steel continues to play an
     important  role in our  North  American  platform  and is  included  in our
     marketing  strategies  as  we  expand  our  position  with  large  national
     customers.

                                       22
<PAGE>


     Interest expense
     ----------------

     Net  interest  expense for the second  quarter of fiscal 2006 was  $750,000
     compared to $1,066,000  for the second quarter of fiscal 2005. Net interest
     expense for the six months ended March 31, 2006 was $1,209,000  compared to
     $2,021,000 during the same period of fiscal 2005. The decrease is primarily
     attributable  to  an  increase  in  interest  income  from  higher  average
     short-term  investment  balances  during  the three and first six months of
     fiscal 2006 of $167,000 and $398,000,  respectively. The remaining decrease
     of $149,000  and $414,000 for the three and six months ended March 31, 2006
     compared to March 31,  2005 is  primarily  a result of lower  average  debt
     balances during fiscal 2006 compared to fiscal 2005.


     Income tax expense
     ------------------

     Our  effective  income  tax  rate  was   approximately   25.0%  and  31.5%,
     respectively,  for the second quarters of fiscal 2006 and 2005. For the six
     months of fiscal 2006 and 2005 our effective  income tax rate was 26.8% and
     33.7%,  respectively.  The decrease between years is primarily attributable
     to a higher  percentage  of overall  earnings from Mi-Tech Steel during the
     second  quarter of fiscal 2006,  which are not fully taxable to our Company
     and a decline in Mexico's  statutory income tax rate from 30% to 29% during
     the second quarter of fiscal 2006.

     On October 22, 2004 the American  Jobs  Creation Act of 2004 was passed and
     is effective  for fiscal 2006. This law provides a phased in deduction for
     a percentage of qualified income from domestic production  activities and a
     special one-time tax deduction on the repatriation of foreign earnings. We
     estimate this law will lower our effective  income tax rate by less than 1%
     for fiscal 2006.

     Discontinued Operations
     -----------------------

     On March 31, 2006,  we completed  the sale of all the capital  stock of our
     Custom  Steel  subsidiary  to ARI (see  Note 3 of our  Notes  to  Condensed
     Consolidated Financial Statements).

     Summarized  condensed  consolidated income statement  information of Custom
     Steel follows:
<TABLE>


In thousands)                          Three Months Ended     Six Months Ended
(Unaudited)                                 March 31              March 31
--------------------------------------------------------------------------------
                                        2006       2005       2006       2005
                                      ------------------------------------------
<S>                                   <C>        <C>        <C>       <C>
Sales ................................ $ 12,101   $ 11,680   $  23,470  $20,020
Income before income taxes ...........      702      1,657       1,423    2,828
Income from continuing operations ....      399      1,077         868    1,838
Gain on sale, net of income taxes ....      246        -           246      -
Net income ...........................      645      1,077       1,114    1,838

</TABLE>

Liquidity and Capital Resources
-------------------------------

As of March 31,  2006,  we had  $210,086,000  of working  capital,  maintained a
current ratio of 3.4:1 and had total debt at 23% of  capitalization.  Generally,
in periods of economic  expansion  and increased  demand for our  products,  our
working capital requirements

                                       23
<PAGE>


increase.  Conversely, in periods of economic contraction and reduced demand for
our products, our working capital requirements decrease.

Average days sales  outstanding  to  customers  was 46 days as of March 31, 2006
compared to 38 as of March 31, 2005.  Average days  inventory  was 62 days as of
March 31, 2006 compared to 74 days as of March 31, 2005. We expect  average days
sales  outstanding and average days inventory to remain  consistent in the third
quarter of fiscal 2006 with the second quarter levels.

Our average  payment days to suppliers was 26 days as of March 31, 2006 compared
to 32 days as of March 31, 2005. We expect average  payment days to suppliers to
increase to more normal levels of approximately 30 days during the third quarter
of fiscal 2006.

During  the  first  six  months of fiscal  2006,  cash  used in  operations  was
$24,493,000,  primarily  from  lower net  income  offset by  changes  in working
capital  compared  to cash  provided by  operations  of  $17,905,000,  primarily
working capital related, during the first six months of fiscal 2005.

During  the  first  six  months  of  fiscal  2006,  we  increased  inventory  by
$36,082,000  to more  normal  levels  to  support  our  sales  levels.  Accounts
receivable  increased by  $8,955,000  primarily  due to  increased  sales in the
latter portion of the second quarter.  Accounts payable  increased by $5,738,000
related  to the  increase  in our  inventory  purchases  offset by  meeting  our
obligations to suppliers.

Capital   expenditures   for  the  first  six  months  of  fiscal  2006  totaled
approximately  $11,809,000.  We continue to expand production  capacity to serve
the growing needs of customers,  improve  information systems as well as quality
and service to our customers  and invest in  automation to improve  productivity
and make our operations more efficient.  For fiscal 2006, the capital  additions
to  all  facilities,   including  the  new  Juarez  facility,  are  expected  to
approximate $25,000,000.

We  maintain  an equity  investment  of  $25,744,000  in our  90%-owned  Mexican
subsidiary. Additional investments in our Mexican operations, if required, would
be financed with available funds from our credit facility.

The translation of the financial statements of our Mexican subsidiary from local
currencies to the U.S.  dollar  subjects us to exposure  relating to fluctuating
exchange  rates.  However,  this  exposure  is  mitigated  somewhat  by a  large
percentage of transactions  denominated in the U.S.  dollar.  We do not consider
our exposure to exchange rate risks to be material and consider the Mexican peso
a relatively  stable  currency.  We do not typically  manage our related foreign
currency  exchange rate risk through the use of financial  instruments.  Foreign
currency  transaction  losses  included in sales were  $774,000  and  $1,095,000
during the three and six months ended March 31, 2006, respectively, reflecting a
stronger average exchange rate of the peso relative to the U.S. dollar.  Foreign
currency transaction losses included in sales for the three and six months ended
March 31, 2005 were $230,000 and $396,000, respectively.

                                       24
<PAGE>

We maintain a 50% equity investment in Mi-Tech Steel and a 49% equity investment
in  Ferrolux  Metals.  Additional  equity  contributions  to our  unconsolidated
affiliates  are not  required and we do not  guarantee  any  obligations  of our
unconsolidated affiliates. While distributions from Mi-Tech Steel are permitted,
if authorized by Mi-Tech  Steel's board of  directors,  such  distributions  are
restricted by one of Mi-Tech Steel's loan agreements.  Such  restrictions  limit
distributions  to 15%  of  Mi-Tech  Steel's  net  income  in  any  fiscal  year.
Distributions  from Mi-Tech Steel are not, and are not expected to be,  material
sources of liquidity for us. Mi-Tech  Steel's  liquidity needs are met primarily
by their  cash flows  from  operating  activities  and  existing  line of credit
facility.  Cash flows from operations and available  borrowing  capabilities are
expected to meet Mi-Tech Steel's future needs.

On March 24, 2006, the Company  entered into a Stock Purchase  Agreement to sell
all the capital stock of its  wholly-owned  Custom Steel,  Inc.  (Custom  Steel)
subsidiary to American Railcar  Industries,  Inc. (ARI). Custom Steel operates a
facility located in Kennett,  Missouri adjacent to ARI's component manufacturing
facility that produces value-added fabricated steel parts that primarily support
ARI's railcar  manufacturing  operations.  Substantially  all of Custom  Steel's
sales are to ARI.

In connection  with the closing of this  transaction,  the final sales price was
approximately  $17,061,000.  On  March  31,  2006,  ARI  remitted  approximately
$17,974,000  to the Company and an  additional  $750,000 to a third party escrow
agent. On April 27, 2006, the Company returned approximately  $1,663,000 to ARI,
which  represents  amounts  received by the Company in excess of the final sales
price. The proceeds were used to reduce  indebtedness under our revolving credit
agreement.

In October 2004, we issued  $50,000,000 in unsecured senior notes,  which have a
blended  interest rate of 5.67%. The notes are comprised of $10,000,000 of 5.33%
Series A Senior  Notes due October 21, 2011 and  $40,000,000  of 5.75%  Series B
Senior Notes due October 21,  2014.  Semiannual  interest  payments are required
until maturity.

Borrowings  and repayments  under our line of credit  agreement are initiated as
needed to fund our operating and investing  activities  described above.  During
the first six months of fiscal  2006,  we  borrowed  $17,000,000  to finance our
working capital needs and paid $17,000,000 on our bank line of credit.

We have a $135,000,000  unsecured revolving credit facility that matures October
2010.  Our  existing  banking  group  can elect to expand  the  availability  to
$200,000,000  at  our  request  under  certain  circumstances.  Interest  on the
facility is paid with various  variable  options on the interest  rate,  none of
which is greater  than the  bank's  prime  rate.  At March 31,  2006,  there was
$30,000,000 outstanding on the credit facility. On May 8, 2006, we completed the
acquisition  of Kasle  and  increased  our  borrowings  under the line of credit
facility by $40,000,000. As of May 8, 2006, there was $70,000,000 outstanding on
the credit facility.

Provisions  contained in our debt  agreements  require us to maintain  specified
levels of net  worth,  maintain  certain  financial  ratios  and  limit  capital
expenditures,   operating  leases,   capital  leases  and  additional  debt.  In
connection  with the  acquisition  of Kasle,  we amended our credit  facility to
permit  certain  debt   obligations  and  limited   guarantees  of  Kasle  which
approximates $10 million. We are in compliance with our loan covenants, and none
of these  covenants  would restrict the completion of currently  planned capital
expenditures.

                                       25
<PAGE>

Cash Requirements, Contractual Obligations and Contingencies
------------------------------------------------------------

Our  liquidity  needs  are  met  primarily  by our  cash  flows  from  operating
activities  and our line of credit  facility.  Operating cash flows are somewhat
influenced by  cyclicality  of demand in the steel  industry,  especially in the
automotive  market.  We  anticipate  borrowing  on our  existing  line of credit
facility to support our continued  growth and to meet our working capital needs.
Cash flows from operations and available borrowing  capabilities are expected to
meet our future needs.

In  connection  with the sale of Custom  Steel,  the  Company  retained  certain
obligations consisting primarily of trade accounts payable,  accrued liabilities
and deferred taxes totaling approximately  $3,012,000.  In addition, the Company
has agreed to  indemnify  ARI for any  payments  required to be made by them for
liabilities incurred by the Company prior to March 31, 2006. The indemnification
provisions for most  liabilities  expire on March 31, 2008 and require the buyer
to  incur  at least  $75,000  in  aggregate  liabilities  before a claim  can be
asserted.  Indemnification provisions for certain liabilities,  primarily taxes,
expire with  applicable  statutes of limitations  and the remaining  provisions,
primarily  environmental,  do not  expire.  The  Company  has not  recorded  any
liabilities for these indemnifications since management has determined it is not
probable  the Company will incur such  liabilities.  Pursuant to the terms of an
Escrow  Agreement,  the $750,000 in escrow will be distributed to the Company at
various times prior to March 31, 2008 to the extent there are no indemnification
claims made by ARI.

On April 28, 2006,  our Board of Directors  declared the  Company's  semi-annual
cash  dividend of $0.15 per share.  The dividend is payable on May 23, 2006,  to
shareholders of record as of May 8, 2006.

On May 8, 2006,  the Company  completed an  acquisition  of all the  outstanding
stock of privately held Kasle Steel  Corporation  (Kasle) in Dearborn,  Michigan
pursuant to a Stock Purchase Agreement.  Through its five processing facilities,
including three joint ventures,  Kasle is North  America's  largest  independent
supplier of  automotive  steel  blanks,  shipping over 1.5 million tons annually
across a variety of platforms.  The purchase price is approximately $49 million,
which includes the assumption of approximately  $15 million of liabilities.  The
Company  increased  its  borrowings  under  the line of credit  facility  by $40
million to finance the acquisition.

We have  entered  into  leases  to  meet  the  needs  of our  facilities.  These
obligations,  along  with our  obligations  for  outstanding  debt and  interest
payments,  have not changed  significantly  from those  disclosed  in our Annual
Report on Form 10-K for the year ended September 30, 2005.

We maintain a contract with our union employees in our Canton, Michigan facility
which expires in March 2010.

At this time, we have no other known material  off-balance  sheet  arrangements,
contractual obligations,  contingent liabilities or commitments that must be met
beyond the next twelve months.

We believe  all  manufacturing  facilities  are in  compliance  with  applicable
federal and state environmental  regulations.  We are not presently aware of any
fact or  circumstance,  which would require the expenditure of material  amounts
for environmental compliance.



                                       26
<PAGE>

Related Party Transactions
--------------------------

We have various transactions with Mi-Tech Steel and we sell scrap steel products
to a company owned by Stuart N. Ray, a director of Steel  Technologies (see Note
7 of our  Notes to  Condensed  Consolidated  Financial  Statements).  Management
reports these  transactions  to the Audit Committee of the Board of Directors as
frequently as requested by the Committee,  but at least annually. Most recently,
in April 2006, the Audit Committee reviewed and approved these transactions.  We
have the ability to continue or cease selling scrap steel to this company at any
time.


       Item 3. Quantitative and Qualitative Disclosures About Market Risk

In order to mitigate a portion of the market risk on its variable rate debt, the
Company  entered  into an interest  rate swap  contract  with a major  financial
institution on June 20, 2005. Under the terms of the contract,  which matures in
September  2008, the Company  receives a LIBOR based variable  interest rate and
pays a fixed  interest rate of 4.31% on a notional  amount of  $30,000,000.  The
variable  interest  rate paid on the contract is  determined  based on the three
month LIBOR rate,  which is consistent with the variable rate  determination  on
the underlying debt.

There has been no  material  change  during the six months  ended March 31, 2006
from the  disclosures  about market risk  provided in our Annual  Report on Form
10-K for the year ended September 30, 2005.

                         Item 4. Controls and Procedures

Management,  including our Chief Executive Officer and Chief Financial  Officer,
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and  procedures as of the end of the second fiscal  quarter  covered by
this  Quarterly  Report on Form  10-Q.  Based  upon that  evaluation,  our Chief
Executive  Officer and Chief  Financial  Officer  concluded  that the disclosure
controls  and  procedures  are  effective  to ensure that  material  information
required to be disclosed  in the reports we file or submit under the  Securities
Exchange Act of 1934 is made known to us by others within our company, including
our consolidated subsidiaries,  particularly during the period for which reports
of our company, including this Quarterly Report on Form 10-Q, are being prepared
and to permit our  company to report  that  information  within the time  period
specified to the Securities and Exchange Commission.

There were no changes in our internal  control  over  financial  reporting  that
occurred during our second fiscal quarter that have materially affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


                                       27
<PAGE>
                           Part II - Other Information

                            Item 5. Other Information

On May 8, 2006, the Company  amended its Credit  Agreement dated as of September
2,  2004,  by and  between  the  Registrant  and the  banks  named  therein,  in
connection with the acquisition of Kasle Steel Corporation.  The Company amended
its credit facility to permit certain debt obligations and limited guarantees of
Kasle  which  approximates  $10  million.  The Credit  Agreement  is attached as
Exhibit 10.

                                Item 6. Exhibits

Exhibits filed or furnished with this report:

   Exhibit 2       Stock  Purchase  Agreement  among  Roger  Kasle,  Matthew
                   Kasle,  Julie Kasle and Michael A. Limauro,  as Sellers
                   and Kasle  Steel  Corporation,  as the Company and Roger
                   Kasle as Kasle Sellers'  Representative and Kasle Acquisition
                   Company,  LLC as Buyer and Joined In By Steel Technologies
                   Inc., dated as of May 8, 2006

   Exhibit 10      Third  Amendment to Credit  Agreement by and between the
                   Registrant  and PNC Bank,  National Association,  as Agent,
                   SunTrust Bank, as Syndication  Agent and JPMorgan Chase
                   Bank,  N.A.& Company, as Documentation Agent,
                   dated as of May 8, 2006

   Exhibit 31.1    Certification of Chief Executive  Officer Pursuant to
                   Section 302 of the  Sarbanes-Oxley  Act of 2002

   Exhibit 31.2    Certification of Chief Financial  Officer Pursuant to
                   Section 302 of the  Sarbanes-Oxley  Act of 2002

   Exhibit 32.1    Certification of Chief Executive  Officer  Pursuant to
                   Title 18, United States Code,  Section 1350 as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   Exhibit 32.2    Certification of Chief Financial  Officer  Pursuant to
                   Title 18, United States Code,  Section 1350 as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.









        STEEL TECHNOLOGIES INC.
        ----------------------
             (Registrant)







By      /s/ Joseph P. Bellino
        -----------------------------
        Joseph P. Bellino
        Chief Financial Officer
        (Principal Financial and Chief Accounting Officer)




Dated:  May 10, 2006

                                       21

<PAGE>
                                  EXHIBIT 31.1
                CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bradford T. Ray, certify that:

1.   I have reviewed this  quarterly  report on Form 10-Q of Steel  Technologies
     Inc. for the fiscal quarter ended March 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and  15d-15(e))and  internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          second fiscal quarter that has materially  affected,  or is reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: May 10, 2006

/s/ Bradford T. Ray
--------------------
Bradford T. Ray
Chief Executive Officer


<PAGE>

                                  EXHIBIT 31.2
                CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph P. Bellino, certify that:

1.   I have reviewed this  quarterly  report on Form 10-Q of Steel  Technologies
     Inc. for the fiscal quarter ended March 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f))for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;


     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          second fiscal quarter that has materially  affected,  or is reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: May 10, 2006

/s/ Joseph P. Bellino
---------------------
Joseph P. Bellino
Chief Financial Officer


<page>

                                  EXHIBIT 32.1


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
             PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Title 18, United States Code,  Section 1350, as adopted  pursuant to
Section  906 of the  Sarbanes-Oxley  Act of 2002,  I,  Bradford  T.  Ray,  Chief
Executive Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended March 31, 2006:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

                                                      /s/ Bradford T. Ray
                                                      -------------------
                                                      Bradford T. Ray
                                                      Chief Executive Officer
                                                      Date: May 10, 2006

<page>
                                  EXHIBIT 32.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
             PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Title 18, United States Code,  Section 1350, as adopted  pursuant to
Section  906 of the  Sarbanes-Oxley  Act of 2002,  I,  Joseph P. Bellino,  Chief
Financial Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended March 31, 2006:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

                                                      /s/ Joseph P. Bellino
                                                      ---------------------
                                                      Joseph P. Bellino
                                                      Chief Financial Officer
                                                      Date: May 10, 2006




<PAGE>

                                   EXHIBIT 2

                            STOCK PURCHASE AGREEMENT

                                      among

         ROGER KASLE, MATTHEW KASLE, JULIE KASLE AND MICHAEL A. LIMAURO,
                                   as Sellers

                                       and

                            KASLE STEEL CORPORATION,
                                 as the Company

                                       and


                                   ROGER KASLE
                        as Kasle Sellers' Representative

                                       and

                         KASLE ACQUISITION COMPANY, LLC
                                    as Buyer

                                and joined in by

                            STEEL TECHNOLOGIES INC.,
                                  as Steel Tech

                             Dated as of May 8, 2006

<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<S>       <C>         <C>                                                                                      <C>


ARTICLE I             DEFINITIONS................................................................................2

         Section 1.1         Certain Defined Terms...............................................................2
         Section 1.2         Use of Plural; Gender...............................................................2

ARTICLE II            PURCHASE AND SALE..........................................................................2

         Section 2.1         Purchase and Sale of the Shares.....................................................2
         Section 2.2         Purchase Price......................................................................2
         Section 2.3         Escrow..............................................................................2
         Section 2.4         Purchase Price Adjustments..........................................................2
         Section 2.5         Taxes...............................................................................2
         Section 2.6         Closing.............................................................................2
         Section 2.7         Deemed Decrease in Purchase Price...................................................2
         Section 2.8         Assignment of Shareholder Loans and Advances........................................2
         Section 2.9         Roger Kasle Consulting Agreement....................................................2
         Section 2.10        Steel Tech Guarantee of Buyer's Obligations.........................................2

ARTICLE III           REPRESENTATIONS AND WARRANTIES.............................................................2

         Section 3.1         Authority; Enforceability; No Violation; Etc........................................2
         Section 3.2         No Conflicts; Consents; Ownership...................................................2
         Section 3.3         Proceedings.........................................................................2
         Section 3.4         Organization, Standing, Qualification and Power.....................................2
         Section 3.5         Authority; Execution and Delivery; Enforceability...................................2
         Section 3.6         No Conflicts; Consents..............................................................2
         Section 3.7         Capitalization; Subsidiaries; Joint Ventures........................................2
         Section 3.8         Financial Statements................................................................2
         Section 3.9         Property............................................................................2
         Section 3.10        Intellectual Property...............................................................2
         Section 3.11        Contracts...........................................................................2
         Section 3.12        Permits.............................................................................2
         Section 3.13        Taxes...............................................................................2
         Section 3.14        Proceedings.........................................................................2
         Section 3.15        Benefit Plans.......................................................................2
         Section 3.16        Absence of Changes or Events........................................................2
         Section 3.17        Compliance with Laws................................................................2
         Section 3.18        Environmental Matters...............................................................2
         Section 3.19        Employee and Labor Matters..........................................................2
         Section 3.20        Insurance...........................................................................2
         Section 3.21        Product Warranty....................................................................2
         Section 3.22        Product Liability...................................................................2
         Section 3.23        Customers, Suppliers and Working Relationships......................................2


                                      (i)
<PAGE>

         Section 3.24        Banks, Directors and Officers, Powers of Attorney and Life Insurance................2
         Section 3.25        Brokers or Finders..................................................................2
         Section 3.26        Books and Records...................................................................2
         Section 3.27        Condition and Sufficiency of Assets.................................................2
         Section 3.28        Transactions with Certain Persons...................................................2
         Section 3.29        Questionable Payments...............................................................2
         Section 3.30        Full Disclosure.....................................................................2

ARTICLE IV            REPRESENTATIONS AND WARRANTIES OF BUYER AND STEEL TECH.....................................2

         Section 4.1         Organization and Qualification......................................................2
         Section 4.2         Authority...........................................................................2
         Section 4.3         No Conflict; Required Filings and Consents..........................................2
         Section 4.4         Brokers.............................................................................2
         Section 4.5         Investment Intent...................................................................2

ARTICLE V             COVENANTS..................................................................................2

         Section 5.1         Consents and Filings; Further Assurances............................................2
         Section 5.2         Public Announcements................................................................2
         Section 5.3         Environmental Investigation.........................................................2
         Section 5.4         Obligations to Barbara Kasle Rothstein and the Barbara Kasle Rothstein Revocable Trust
                             2
         Section 5.5         Confidentiality.....................................................................2

ARTICLE VI            TAX MATTERS................................................................................2

         Section 6.1         Sellers' Indemnification of Buyer...................................................2
         Section 6.2         Taxes for Short Taxable Year........................................................2
         Section 6.3         Adjustment to Purchase Price........................................................2
         Section 6.4         Carrybacks..........................................................................2
         Section 6.5         Returns.............................................................................2
         Section 6.6         Contest Provisions..................................................................2
         Section 6.7         Transfer Taxes......................................................................2
         Section 6.8         Assistance and Cooperation..........................................................2

ARTICLE VII           INDEMNIFICATION............................................................................2

         Section 7.1         Survival of Representations, Warranties, and Certain Covenants......................2
         Section 7.2         Indemnification by Sellers..........................................................2
         Section 7.3         Indemnification by Buyer............................................................2
         Section 7.4         Procedures..........................................................................2
         Section 7.5         Matters Relating to Indemnification; Limitations on Liability; Buyer Recovery from Escrow.
                             2
         Section 7.6         Kasle Sellers' Representative.......................................................2
         Section 7.7         No Circular Recovery................................................................2

                                      (ii)
<PAGE>


ARTICLE VIII          GENERAL PROVISIONS.........................................................................2

         Section 8.1         Fees and Expenses...................................................................2
         Section 8.2         Amendment and Modification..........................................................2
         Section 8.3         Waiver..............................................................................2
         Section 8.4         Notices.............................................................................2
         Section 8.5         Interpretation......................................................................2
         Section 8.6         Entire Agreement....................................................................2
         Section 8.7         No Third-Party Beneficiaries........................................................2
         Section 8.8         Governing Law.......................................................................2
         Section 8.9         Submission to Jurisdiction..........................................................2
         Section 8.10        Dispute Resolution..................................................................2
         Section 8.11        Assignment; Successors..............................................................2
         Section 8.12        Severability........................................................................2
         Section 8.13        Counterparts........................................................................2
         Section 8.14        Facsimile Signature.................................................................2
         Section 8.15        Time of Essence.....................................................................2
         Section 8.16        No Presumption Against Drafting Party...............................................2

         Exhibit A.........PPA Liabilities
         Exhibit B.........Owners of Shares to be Sold and Purchased
         Exhibit C.........Form of Escrow Agreement
         Exhibit D.........The Company's November 30, 2005 Balance Sheet
         Exhibit E.........Calculation of Estimated Purchase Price
         Exhibit F.........Form of Seller Release
         Exhibit G.........Form of Landlord Estoppel Certificate
         Exhibit H.........Form of Sellers' Counsel Opinion
         Exhibit I.........Form of Buyer's Counsel Opinion
         Exhibit J.........Form of Kasle Consulting Agreement
</TABLE>


                                     (iii)
<PAGE>
                            STOCK PURCHASE AGREEMENT

     This  is a  STOCK  PURCHASE  AGREEMENT,  dated  as of  May  8,  2006  (this
"Agreement"),  by and among (i) Roger  Kasle,  Matthew  Kasle,  Julie  Kasle and
Michael A. Limauro  (each a "Seller" and  collectively,  "Sellers"),  (ii) Roger
Kasle,   as   representative   of  Sellers  other  than  Michael   Limauro  (the
"Representative"),  (iii) Kasle Steel Corporation,  a Michigan  corporation (the
"Company"),  and  (iv)  Kasle  Acquisition  Company,  LLC,  a  Delaware  limited
liability company  ("Buyer"),  and joined in by (v) Steel  Technologies  Inc., a
Kentucky corporation ("Steel Tech").

                                    RECITALS

     A. Sellers own 100% of the issued and  outstanding  shares of common stock,
par value $10.00 per share of the Company (the "Shares").

     B.  Sellers  wish to sell to Buyer,  and  Buyer  wishes  to  purchase  from
Sellers, all of the Shares.

     C. Steel Tech has joined in the Agreement  for the purpose of  guaranteeing
the obligations of Buyer under this Agreement.

                                    AGREEMENT

         THE PARTIES, INTENDING TO BE LEGALLY BOUND, AGREE AS FOLLOWS:

                                    ARTICLE I
                                   DEFINITIONS

     Section 1.1 Certain  Defined  Terms.  For  purposes of this  Agreement,  in
addition to terms defined elsewhere in this Agreement:

     "Affiliate," with respect to any specified  Person,  means any other Person
that directly,  or indirectly through one or more intermediaries,  controls,  is
controlled by, or is under common control with, such specified Person.

     "Ancillary  Agreements"  means  the  Escrow  Agreement,   Kasle  Consulting
Agreement,  the Seller Releases,  the Landlord Estoppels and all other documents
or instruments  executed and delivered by the parties in order to consummate the
transactions contemplated in this Agreement.

     "Business Day" means any day that is not a Saturday,  a Sunday or other day
on which banks are  required or  authorized  by Law to be closed in  Louisville,
Kentucky.

     "Charter  Documents" means (a) with respect to a corporation,  its articles
or certificate of  incorporation  and its bylaws and all amendments  thereto and
restatements  thereof,  and (b) with respect to a limited liability company, its
articles  of  organization  and  its  operating  or  limited  liability  company
agreement and all amendment thereto and restatements thereof.

                                       2
<PAGE>


     "Code" means the Internal Revenue Code of 1986, as amended through the date
hereof.

     "Contract"  means  any loan or  credit  agreement,  note,  bond,  mortgage,
indenture,  lease, sublease or other written or unwritten agreement,  commitment
or license.

     "Control,"  "control," or "controls,"  including the terms  "controlled by"
and "under common control with," means the  possession,  directly or indirectly,
of the power to direct or cause the direction of the  management and policies of
a Person,  whether  through the  ownership of voting  securities,  as trustee or
executor, as general partner or managing member, by contract or otherwise.

     "D-K" means Delaco-Kasle LLC, a Michigan limited liability company.

     "Disclosure  Schedule"  means the  Disclosure  Schedule  prepared  by or on
behalf of Sellers and the Company and  furnished  to the Buyer prior to the date
of execution and delivery of this Agreement.

     "Encumbrance"  means any charge,  claim,  mortgage,  lien, option,  pledge,
security  interest or other  restriction  of any kind (other than those  created
under applicable securities laws).

     "Environmental Condition" means any condition with respect to soil, surface
waters,  groundwaters,  land,  stream sediments,  surface or subsurface  strata,
ambient air or any  environmental  medium on, under, in or which is emanating or
has  emanated  from (i) any of the Real  Property  or (ii) any of the Other Real
Property, whether or not yet discovered, which could or does result in any Loss,
contribution, cost recovery or other obligation of any nature whatsoever, or any
injury,  claim,  action,  suit,  proceeding or investigation of any kind, or any
judgment,  order or decree,  in each case of or against the Company,  any of the
Subsidiaries  or Joint  Ventures or Buyer to or by any other Person  (including,
without limitation, any Governmental Entity), including, without limitation, any
condition  resulting from any Violation of any  Environmental  Law, any Release,
any Hazardous  Materials,  any UST System or otherwise from the operation of the
businesses  conducted  by  any of  the  Company,  the  Subsidiaries,  the  Joint
Ventures,  Kasle Holding or Kasle  Laserfactures,  and/or any  activities of any
previous owner, tenant,  occupant,  operator or user of any of the Real Property
or any of the Other Real Property,  and/or any activities conducted by any other
person on or off any of the Real Property or any of the Other Real Property.

     "Environmental  Law" means any  federal,  state,  provincial,  municipal or
local environmental,  health, or safety law, by-law, code or ordinance,  and any
rules or regulations promulgated thereunder,  including, but not limited to, the
Comprehensive  Response,  Compensation  and Liability Act ("CERCLA"),  42 U.S.C.
Section 9601 et seq., the Resource  Conservation  and Recovery Act ("RCRA"),  42
U.S.C.  Section 6901 et seq.,  the Toxic  Substances  Control Act  ("TSCA"),  15
U.S.C. Section 2601 et seq., the Occupational Safety and Health Act ("OSHA"), 29
U. S. C.  Section 651 et seq.,  the Clean Water Act, 33 U. S. C. Section 1251 et
seq., the Clean Air Act, 42 U.S.C.  Section 7401 et seq., the Emergency Planning
and Community  Right-to-Know Act ("EPCRA"), 42 U.S.C. Section 11001 et seq., the
Hazardous  Materials   Transportation  Act,  the  Environmental  Protection  Act
(Ontario),   R.S.O.  1990,  c.E.19,  the  Environmental  Bill  of  Rights,  1993
(Ontario),  S.O. 1993, c.28, the  Occupational  Health and Safety Act (Ontario),
R.S.O.  1990,  c.O.1, and all other similar United States and Canadian  federal,
state, provincial and local laws, statutes,  ordinances, and common law, as well
as the terms and  conditions  of any  permit,  license or  authorization  issued
pursuant to any of the foregoing.

                                       3
<PAGE>


     "Environmental Matters" means,  collectively,  any Environmental Condition,
any Release or any  violation of any  Environmental  Law (a) with respect to the
operations of the businesses  conducted by any of the Company, the Subsidiaries,
the Joint Ventures, Kasle Holding or Kasle Laserfactures during any period prior
to the Closing Date; or (b) on, under,  in or about,  or with respect to, any of
the Real Property or any of the Other Real Property  arising out of or resulting
from the  operations  of the  businesses  conducted by any of the  Company,  the
Subsidiaries,  the Joint Ventures,  Kasle Holding or Kasle Laserfactures  during
any period prior to the Closing Date.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended.

     "Escrow" means the escrow established under the Escrow Agreement.

     "Escrow Agent" means LaSalle Bank N.A.

     "Escrow  Agreement" means the Escrow Agreement  contemplated in Section 2.3
substantially in the form of Exhibit C attached hereto.

     "GAAP" means United States generally accepted  accounting  principles as in
effect on the date hereof.

     "Galnas  Company"  means The Galnas  Company,  L.L.C.,  a Delaware  limited
liability company.

     "Governmental  Entity" means any (i) nation,  state,  county,  city,  town,
borough, village,  municipality,  district or other jurisdiction;  (ii) federal,
state,  provincial,   local,  municipal,  foreign  or  other  government;  (iii)
governmental  or  quasi-governmental  body of any nature  (including any agency,
branch,  department,   board,  commission,   court,  tribunal  or  other  entity
exercising  governmental  or  quasi-governmental   powers);  (iv)  multinational
organization  or  body;  (v) body  exercising,  or  entitled  or  purporting  to
exercise,  any  administrative,   executive,  judicial,   legislative,   police,
regulatory or taxing authority or power; (vi) any regulatory or  self-regulatory
authority  compliance with which is required by Law; or (vii) an official of any
of the foregoing.

     "Hazardous Materials" means any substance or material (including petroleum)
that is designated or defined  (either by inclusion on a list or by reference to
characteristics),  and/or  regulated by any Governmental  Entity,  as hazardous,
toxic  or  dangerous,  or as a  pollutant,  contaminant,  or  waste,  under  any
Environmental Law.

     "Intellectual  Property" means any of the following:  patents,  trademarks,
trade  names,  trade  secrets,  service  marks,  copyrights,  mask works and any
applications  therefor,  technology,   know-how,  video  and  audio  compression
algorithms,  computer software programs or applications (in both source code and
object code form) and tangible or intangible proprietary information or material
that are used or proposed to be used in the conduct of a Person's business.

                                       4

     "Joint Venture" or "Joint  Ventures"  includes RSDC, D-K, KMP and any other
Person in which the  Company or any of the  Subsidiaries  has an equity or other
ownership interest.

     "Kasle Holding" means Kasle Holding Company, a Michigan corporation.

     "Kasle Laserfactures" means Kasle Laserfactures, L.L.C., a Michigan limited
liability company.

     "KMP"  means  Kasle  Metal  Processing  LLC, a Delaware  limited  liability
company.

     "Knowledge,"  means (a) with respect to any individual,  the knowledge of a
particular fact or other matter if (i) such individual is actually aware of such
fact or other matter ("Actual Knowledge"); or (ii) a prudent individual could be
expected to discover or  otherwise  become aware of such fact or other matter in
the course of conducting a reasonable comprehensive investigation concerning the
existence of such fact or matter;  and (b) with respect to any Person other than
an  individual,  the  knowledge  of a  particular  fact or other  matter  if any
individual who is serving,  or has at any time served,  as a director,  officer,
manager,  supervisor,  partner,  executor  or trustee of such  Person (or in any
similar  capacity)  has,  or at any time  had,  Knowledge  of such fact or other
matter. In the case of the Sellers, "Sellers' Actual Knowledge" means the Actual
Knowledge of any of the Sellers.

     "Law" means any statute, law, ordinance,  decree, Order, injunction,  rule,
directive,  or regulation of any Governmental Entity and any principal of common
law.

     "Leased Real Property" means the real property leased by the Company or any
of its  Subsidiaries,  in each case,  as tenant,  together  with,  to the extent
leased  by the  Company  or any of its  Subsidiaries,  all  buildings  and other
structures,  facilities  or  improvements  currently  or as of the Closing  Date
located thereon, all fixtures, systems, equipment and items of personal property
of the Company or any of its  Subsidiaries  attached or appurtenant  thereto and
all easements,  licenses,  rights and appurtenances of the Company or any of its
Subsidiaries relating to the foregoing. The Leased Real Property,  together with
the Owned Real Property comprises the Real Property.

     "Lien" means any charge,  claim,  community property  interest,  condition,
equitable interest, lien, option, security interest, mortgage, pledge, easement,
encumbrance, pledge, security interest, right of first refusal, servitude, right
of way, or restriction of any kind,  including any  restriction on use,  voting,
transfer, receipt of income, or exercise of any other attribute of ownership.

                                       5
<PAGE>

     "Limited  Recourse   Environmental   Matters"  means,   collectively,   any
Environmental  Condition,  any Release or any violation of any Environmental Law
on, under,  in or about,  or with respect to, any of the Real Property or any of
the Other  Real  Property  that (i) does not  arise  out of or  result  from the
operations of the businesses  conducted by any of the Company, the Subsidiaries,
the Joint  Ventures,  Kasle Holding or Kasle  Laserfactures  with respect to any
period  prior to the Closing  Date and (ii) is required as a matter of Law to be
remediated  as a result of  Buyer's  Phase II ESAs or an  enforcement  action or
other Proceeding brought by a Governmental Entity or a unrelated third party.

     "Limauro" means Michael A. Limauro.

     "Order" means any award,  decision,  injunction,  judgment,  order, ruling,
subpoena,   or  verdict  entered,   issued,  made  or  rendered  by  any  court,
administrative agency or other governmental body or by any arbitrator.

     "Other Real Property" means any real property  formerly owned,  operated or
leased  by any of the  Company,  the  Subsidiaries,  the Joint  Ventures,  Kasle
Holding or Kasle Laserfactures.

     "Owned Real  Property"  means the real property owned by the Company or any
of its  Subsidiaries,  in each  case,  together  with all  buildings  and  other
structures,  facilities  or  improvements  currently  or as of the Closing  Date
located thereon, all fixtures, systems, equipment and items of personal property
of the Company or any of its  Subsidiaries  attached or appurtenant  thereto and
all easements,  licenses,  rights and appurtenances of the Company or any of its
Subsidiaries relating to the foregoing.  The Owned Real Property,  together with
the Leased Real Property comprises the Real Property.

     "Permitted Liens" means (a) mechanics', carriers', workers', repairers' and
other  similar  liens  arising or  incurred in the  ordinary  course of business
relating  to  obligations  as to which  there is no  default  on the part of the
Company or any of its  Subsidiaries  for a period  greater than 60 days,  or the
validity  or amount of which is being  contested  in good  faith by  appropriate
proceedings,  or pledges,  deposits or other liens  securing the  performance of
bids,  trade  contracts,  leases or statutory  obligations  (including  workers'
compensation,  unemployment insurance or other social security legislation); (b)
Liens  arising under  outstanding  original  purchase  price  conditional  sales
contracts and equipment  leases with third parties  entered into in the ordinary
course of business  including,  without  limitation,  those Liens  arising under
outstanding  original  purchase price  conditional sales contracts and equipment
leases with third parties that are  identified as such in Section  3.9(a) of the
Disclosure  Schedule;  (c) Liens for Taxes not yet due and payable;  (d) zoning,
entitlement,  conservation  restriction  and  other  land use and  environmental
regulations  by  Governmental  Entities,  none of which  impair  the  present or
anticipated use of the property subject  thereto;  and (e) any Liens in favor of
Comerica  Bank with respect to the Comerica  Bank Term Loan  referenced in items
A(1)(b) and (g) of Exhibit A and the Revolving Credit Loan owed to Comerica Bank
referenced  in item  A(1)(j)  of Exhibit A, all of which  shall be  released  in
connection with the pay-off of those  underlying loans to Commerica Bank and any
Liens in favor of Comerica Bank with respect to $200,000.00 Letter of Credit.

                                       6
<PAGE>


     "Person" means an individual,  corporation,  partnership, limited liability
company, limited liability partnership,  syndicate,  person, trust, association,
organization or other entity,  including any Governmental  Entity, and including
any successor, by merger or otherwise, of any of the foregoing.

     "Proceeding" means any action, suit, investigation or proceeding before any
Governmental Entity or arbitrator.

     "Purchase  Orders"  means  purchase  orders,  work orders,  work  releases,
authorizations  to  process or ship,  and the like which have been  issued to or
received  by any of the  Company  or the  Subsidiaries  (collectively,  "Company
Purchase  Orders")  or any of the Joint  Ventures  (collectively,  "JV  Purchase
Orders")  for the  purchase  or sale of raw  materials,  commodities,  supplies,
products,  or other personal  property,  or for the furnishing or receipt of any
products  or  services in the  ordinary  course of business of their  respective
businesses as presently conducted.

     "Release"  means  any  presence,  release,  deposit,  discharge,  emission,
leaking, spilling,  seeping, migrating,  injecting,  pumping, pouring, emptying,
escaping,  dumping, disposing or other movement of Hazardous Materials, which is
in  violation  of any  Environmental  Law or as to which any  Environmental  Law
requires any reporting or corrective action.

     "Remediation"  means (a) any  response,  remedial,  removal,  or corrective
action, any activity to clean up, detoxify, decontaminate,  contain or otherwise
remediate any Release or  Environmental  Condition,  (b) any actions to prevent,
cure or mitigate  any Release or  Environmental  Condition  that are required by
applicable  Environmental  Law, (c) any action to comply with any  Environmental
Laws or  with  any  permits  issued  pursuant  thereto,  or (d) any  inspection,
investigation,  study,  monitoring,  assessment,  audit,  sampling  and testing,
laboratory  or other  analysis,  or any  evaluation  relating  to any  Hazardous
Materials or UST Systems.

     "Real Property"  means,  collectively,  all of the Leased Real Property and
all of the Owned Real Property.

     "Return" means, collectively,  returns,  declarations of estimated Tax, Tax
reports,  information returns and statements relating to any Taxes assessed, due
or to  become  due for any  period  ending on or before  the  Closing  Date with
respect to any income, assets or operations of the Company and its Subsidiaries,
or any of them.

     "RSDC" means RSDC of Michigan L.L.C., a Delaware limited liability company.

     "Subsidiary"  or  "Subsidiaries"  means (a) Kasle Steel of Canada Ltd.  and
Kasle Steel Auto Blankers,  Inc.  (collectively,  the "Active Subsidiaries") and
(b) Kasle Steel Pickling,  Inc., Kasle Steel Dearborn  Processing Center,  Inc.,
Kasle Steel Quality Coil  Processing,  Inc. and Kasle Steel  Distribution,  Inc.
(collectively, the "Inactive Subsidiaries").

     "Tailor Steel" means Tailor Steel America LLC, a Delaware limited liability
company.

                                       7

<PAGE>


     "Tax" or "Taxes"  means,  with  respect  to any  Person,  all income  taxes
(including  any tax on or based  upon net  income,  gross  income,  or income as
specially defined, or earnings,  profits, or selected items of income,  earnings
or profits)  and all federal,  state,  provincial,  municipal,  local or foreign
gross  receipts,  sales,  use,  ad  valorem,   transfer,   franchise,   license,
withholding,   payroll,   employment  taxes  (including  employment  insurance),
employer health,  Canada Pension Plan,  severance,  property (real or personal),
alternative or add-in minimum taxes, customs duties,  import,  excise,  Canadian
goods and services tax,  provincial  sales,  penalties imposed by the IRS or the
U.S Department of Labor in connection with employee benefit plans or other taxes
of any kind whatsoever,  together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority on such Person.

     "UST Fund" means any applicable  underground  storage tank liability  trust
fund,   insurance  fund,   reimbursement   fund,  or  similar  fund  or  program
administered by or on behalf of any state or other Governmental Entity.

     "UST Systems" means all  underground  storage tanks located on or under any
of the Real Property and all associated piping,  lines, pumps, siphons and other
ancillary  equipment  and  containment  systems,  used in  connection  with  the
storage, dispensing or general use of any Hazardous Materials.

     Section 1.2 Use of Plural; Gender. For the purposes of this Agreement,  the
plural of any word used herein includes the singular,  and the singular includes
the plural, and the masculine,  feminine and neuter genders include one another.
Accounting terms used in this Agreement  without separate  definition shall have
the meanings attributed to them under GAAP.

                                   ARTICLE II
                                PURCHASE AND SALE

     Section 2.1 Purchase and Sale of the Shares.  Upon the terms and subject to
the  conditions  of this  Agreement,  at the  Closing,  each Seller  shall sell,
assign,  transfer,  convey and deliver to Buyer,  and Buyer shall  purchase from
each  Seller,  good  (legal and  beneficial)  title to the Shares  owned by such
Seller as specified in Exhibit B, free from any Liens or Encumbrances.

     Section 2.2 Purchase  Price.  The aggregate  purchase  price for the Shares
shall be the Final  Purchase  Price as defined in Section  2.4(d)  below,  being
$45,000,000.00  (the "Purchase Price") subject to adjustments as provided for in
Sections 2.4 and 2.7. All payments of the Purchase  Price by Buyer in accordance
with Section 2.4(e) below shall be paid by wire transfer to accounts  designated
by Sellers.

     Section 2.3 Escrow.  At Closing,  Buyer shall  deposit Two Million  Dollars
($2,000,000.00)  of the  Purchase  Price (the "Escrow  Amount")  with the Escrow
Agent,  which amount shall be withheld  from the  Estimated  Purchase  Price (as
defined in Section  2.4(b) below) to be paid to the Sellers at the Closing.  The
parties  acknowledge  and agree  that the  Escrow  Amount  shall be used for the
purposes of satisfying, in whole or in part, (a) the post-Closing purchase price
adjustments  pursuant to Section 2.4, if any,  and (b) Seller's  indemnification
obligations  under  Section 7.2.  The Escrow  Amount  shall be  administered  in
accordance  with the

                                       8
<PAGE>

provisions of the Escrow Agreement.  The Escrow Agreement shall provide that (i)
at the conclusion of the 18-month period immediately  following the Closing, all
of  the   uncontested   escrowed   funds  in  excess  of  One  Million   Dollars
($1,000,000.00)  shall be released from escrow and paid to Sellers;  (ii) at the
conclusion of the 24-month period immediately  following the Closing, all of the
uncontested   escrowed  funds  in  excess  of  Five  Hundred   Thousand  Dollars
($500,000.00)  shall be released from escrow and paid to Sellers;  and (iii) the
remainder of the  uncontested  escrowed  funds shall be released from escrow and
paid to Sellers at the conclusion of the 72-month period  immediately  following
the  Closing.  The Escrow  Amount shall be held as a trust fund and shall not be
subject to any lien,  attachment,  trustee process or any other judicial process
of any  creditor  of any party and shall be held and  disbursed  solely  for the
purposes and in accordance with the terms of the Escrow Agreement.

     Section 2.4 Purchase Price Adjustments. The Purchase Price shall be subject
to adjustment as follows:

     (a) The  Purchase  Price  shall  be  reduced,  dollar  for  dollar,  by the
aggregate amount of certain  liabilities  described on parts A(1), A(2) and A(3)
of Exhibit A (each a "PPA Liability" and collectively,  the "PPA  Liabilities"),
to the extent that such PPA Liabilities  remain  outstanding  obligations of the
Company or the Subsidiaries at Closing.  Buyer acknowledges that certain Company
obligations  listed in parts B(1) and B(2) on Exhibit A will remain  outstanding
at  Closing  and  be  continuing  obligations  of  the  Company  or  any  of the
Subsidiaries  after  the  Closing,  but will not  result in a  reduction  to the
Purchase  Price.  Attached  as  Exhibit  D  is a  balance  sheet  setting  forth
shareholders  equity of  $15,171,000 as of November 30, 2005. The Purchase Price
shall also be increased or decreased,  dollar-for-dollar, to the extent that the
shareholders  equity of the Company as of April 30, 2006 is greater or less than
$15,171,000 (the "Change-In-Equity  Adjustment").  The Purchase Price shall also
be reduced,  dollar-for-dollar,  by  one-half  of the cost of the  environmental
studies on the Real  Property and the real  property  owned or used by the Joint
Ventures  performed  by AMEC for Buyer and  Sellers  (the  "Environmental  Study
Expense").

     (b) Prior to the Closing, the Representative, Limauro and Buyer shall agree
upon estimated adjustments to the Purchase Price as of the Closing Date by which
the Purchase  Price shall be (i) reduced,  dollar-for-dollar,  by the  estimated
aggregate amount of the outstanding PPA Liabilities as of the Closing Date; (ii)
increased   or   decreased,   dollar-for-dollar,   to  reflect   the   estimated
Change-In-Equity Adjustment; and (iii) reduced,  dollar-for-dollar,  by one-half
of the estimated  Environmental  Study Expense (such result being referred to as
the "Estimated Purchase Price"), which shall serve as the basis for the adjusted
Purchase   Price  to  be  paid  by  Buyer  to  Sellers  at  the   Closing.   The
Representative,  Limauro  and  Buyer  shall  base  their  estimates  of the  PPA
Liabilities, the Change-In-Equity Adjustment and the Environmental Study Expense
on the most recent financial  information available from the Company at or prior
to the Closing.  Attached  hereto as Exhibit E is a summary  description  of the
calculation of the Estimated Purchase Price including a summary of the estimated
adjustments  to the  Purchase  Price  as of the  Closing  Date  upon  which  the
Representative,  Limauro and Buyer have  agreed  prior to the  Closing.  Sellers
acknowledge  and agree  that (a) any  Taxes  owed by the  Company  or any of the
Subsidiaries for the portion of the year or period prior to the Closing shall be
accrued as of April 30, 2006 and  reflected  on Exhibit E and (b) any Taxes owed
by the  Sellers  for any years,  periods or any  portions  thereof  prior to the
Closing  shall be paid by Sellers and shall not be paid by the Company on behalf
of Sellers out of the Escrow Amount or otherwise.

                                       9
<PAGE>


     (c) Within 60 days after the Closing,  Buyer shall deliver to the Sellers a
Company  balance sheet (the "Closing Date Balance  Sheet") as of April 30, 2006,
which balance  sheet shall be prepared in  accordance  with GAAP and in a manner
consistent with the Company's  November 30, 2005 balance sheet and a schedule of
the PPA  Liabilities  outstanding  as of the Closing Date and the  Environmental
Study  Expense.  The Closing  Date  Balance  Sheet shall be  accompanied  by all
relevant backup materials and schedules,  all in detail reasonably acceptable to
the Representative  and Limauro.  In addition to the Closing Date Balance Sheet,
Buyer shall provide its proposed  final Purchase Price based on the Closing Date
Balance   Sheet  in   which   (i)  the   Purchase   Price   shall  be   reduced,
dollar-for-dollar, by the aggregate amount of PPA Liabilities outstanding on the
Closing  Date;  (ii)  the  Purchase  Price  shall  be  increased  or  decreased,
dollar-for-dollar,  to reflect any  Change-In-Equity  Adjustment;  and (iii) the
Purchase Price shall be reduced by one half of the  Environmental  Study Expense
(the "Proposed Final Purchase Price").

     (d) Within 21 days after the  Representative's and Limauro's receipt of the
Closing Date Balance Sheet and Buyer's  statement of the Proposed Final Purchase
Price, Sellers will review the Closing Date Balance Sheet and the Proposed Final
Purchase Price, and the Representative and Limauro shall notify Buyer in writing
(the  "Dispute  Notice") of the amount,  nature and basis of any dispute with or
proposed  adjustments  to the Closing Date Balance  Sheet or the Proposed  Final
Purchase Price. If neither the  Representative  nor Limauro  disputes all or any
portion of the Closing Date Balance Sheet and the Proposed  Final Purchase Price
within such time period,  then the Closing  Date Balance  Sheet and the Proposed
Final  Purchase Price shall be final and  conclusive.  To the extent that either
the  Representative  or Limauro  notifies  Buyer in  writing  of any  dispute or
proposed  adjustment  to the Closing  Date Balance  Sheet or the Proposed  Final
Purchase Price,  Buyer shall have 20 days from its receipt of the Dispute Notice
to dispute  the  position  of the  Representative  or  Limauro  set forth in the
Dispute  Notice.  If Buyer  fails to dispute  any  proposed  adjustments  and/or
position  set forth in the Dispute  Notice  within such time  period,  then such
undisputed Purchase Price adjustments  proposed by the Representative or Limauro
in the  Dispute  Notice  shall be  final  and  conclusive.  Each of  Buyer,  the
Representative  and Limauro shall first use their diligent good faith efforts to
resolve any dispute  regarding the Dispute  Notice  between  themselves.  If the
parties are unable to resolve the dispute  within 30 days after  delivery of the
Dispute  Notice,  then any  remaining  items in dispute shall be submitted to an
independent  nationally recognized accounting firm selected in writing by Buyer,
the Representative and Limauro or, if Buyer, the Representative and Limauro fail
or refuse to select a firm  within 10 days after  written  request  therefor  by
Buyer, the Representative or Limauro, such an independent  nationally recognized
accounting  firm shall be selected in accordance  with the rules of the American
Arbitration Association (the "Chosen Firm"). All determinations pursuant to this
Section shall be in writing and shall be delivered to Buyer, the  Representative
and Limauro and shall  include the final  Purchase  Price after all  adjustments
(the "Final Purchase Price"). The Chosen Firm shall only resolve specific issues
in dispute between the parties as set forth in the Dispute Notice in determining
any Purchase Price  adjustments.  The determination of the Chosen Firm as to the
resolution of any dispute shall be binding and  conclusive  upon all parties.  A
judgment on the  determination  made by the Chosen Firm pursuant

                                       10
<PAGE>

to this  Section may be entered in and  enforced by any court  having  competent
jurisdiction  thereover.  The fees and expenses of the Chosen Firm in connection
with the resolution of disputes pursuant to this Section shall be shared equally
by Buyer and the Sellers; provided,  however, that if the Chosen Firm determines
that one  party  has  adopted  a  position  or  positions  with  respect  to the
determination  of applicable  Purchase  Price  adjustments  that is frivolous or
clearly without merit, the Chosen Firm may, in its discretion,  assign a greater
portion of any such fees and expenses to such party.

     (e) If the  process  described  in  Sections  2.4(c)  and (d)  results in a
determination  that the Final Purchase Price is less than the Estimated Purchase
Price, then the Escrow Agent shall pay an amount equal to such decrease to Buyer
from the Escrow  Amount in  accordance  with the terms of the Escrow  Agreement.
Sellers  acknowledge and agree that if the Final Purchase Price is less than the
Estimated Purchase Price by more than $200,000.00, then within ten Business Days
after the Escrow  Agent pays such  decrease  out of the Escrow  Amount to Buyer,
Sellers  shall pay to the  Escrow  Agent  cash  equal to the amount by which the
decrease from the Estimated  Purchase Price to the Final Purchase Price exceeded
$200,000.00  in order to restore  the  depleted  Escrow  Amount.  If the process
described in Sections  2.4(c) and(d) results in a  determination  that the Final
Purchase Price is greater than the Estimated  Purchase  Price,  then Buyer shall
immediately pay such additional amount in cash to Sellers.

     Section  2.5  Taxes.  Sellers  shall  pay all  Taxes  and fees  imposed  by
Governmental  Authorities  and required to be paid in connection with or arising
from the sale, transfer, or assignment of the Shares.

     Section 2.6 Closing.

     (a) The closing  ("Closing")  of the sale and  purchase of the Shares shall
take place at the offices of Frost Brown Todd LLC, 400 West Market Street,  32nd
Floor, Louisville, Kentucky 40202, at 9:00 A.M. local time on May 8, 2006, or at
such  other  place  or at  such  other  time  or  on  such  other  date  as  the
Representative,  Limauro  and Buyer may agree in  writing.  The day on which the
Closing takes place is referred to as the "Closing Date."

     (b) At the Closing:

          (i) Buyer shall  deliver,  by wire transfer of  immediately  available
     funds to a bank account  designated in writing by Sellers to Buyer at least
     two  Business  Days  prior to the  Closing  Date,  an amount  equal to each
     Seller's  pro-rata  share of the Estimated  Purchase  Price less the Escrow
     Amount;

          (ii) Buyer shall  deliver by wire  transfer of  immediately  available
     funds to the Escrow Agent the Escrow  Amount,  to be held and  disbursed by
     the Escrow Agent pursuant to the Escrow Agreement;

          (iii)  each of  Sellers  will  execute  an  assignment  separate  from
     certificate  assigning  its Shares to Buyer and will  deliver to Buyer such
     assignment and the applicable share  certificates  evidencing such Seller's
     Shares;

                                       11
<PAGE>


          (iv)  Sellers will  execute and deliver to Buyer  general  releases in
     favor of the  Company,  its  Subsidiaries,  the  Joint  Ventures  and their
     respective   affiliates,   officers,   directors,   employees  and  agents,
     substantially  in the form of  Exhibit F  attached  hereto  (the  "Sellers'
     Releases");

          (v)  Sellers  will  deliver to Buyer  resignations  of all  directors,
     officers,  managers  and any other  representative  of the  Company and the
     Subsidiaries;

          (vi) Sellers and Buyer will execute and deliver the Escrow Agreement;

          (vii) Roger Kasle,  the Company and Buyer will execute and deliver the
     Kasle Consulting Agreement (as defined in Section 2.9 below);

          (viii)  Sellers  shall  deliver to Buyer a lease  consent and estoppel
     form executed by the landlord or subtenant  under each Real Property  Lease
     substantially  in the form of  Exhibit G  attached  hereto  (the  "Landlord
     Estoppel");

          (ix) Sellers shall deliver to the Buyer a counsel opinion  rendered by
     the  counsel  for  Sellers  and the  Company  substantially  in the form of
     Exhibit H attached hereto (the "Sellers' Counsel Opinion");

          (x) Buyer  shall  deliver to  Sellers a counsel  opinion  rendered  by
     Buyer's  General  Counsel  substantially  in the form of Exhibit I attached
     hereto (the "Buyer's Counsel Opinion"); and

          (xi) Buyer and Sellers  shall have  received all Third Party  Consents
     and any other consents or approvals required by any Governmental  Entity or
     Person in connection with the consummation of the transactions contemplated
     by this Agreement.

     Section 2.7 Deemed  Decrease in Purchase  Price.  Any portion of the Escrow
Amount  disbursed  under the Escrow  Agreement to Buyer  (except a  disbursement
under Section 2.4(e)) shall be deemed a decrease to the Final Purchase Price.

     Section 2.8 Assignment of Shareholder Loans and Advances. Immediately prior
to the  Closing,  the  Company  shall  assign to  Sellers,  pro rata with  their
ownership of Shares, all of the Company's interest in the receivables, loans and
advances  identified  in part A(2) of Exhibit A to this  Agreement  that  remain
outstanding  at the Closing Date,  except for the advances and  receivables  due
from David Yates and  Reginald  Campbell  identified  as items (c) and (f) under
part A(2) of Exhibit A to this Agreement.

     Section 2.9 Roger Kasle Consulting  Agreement.  At the Closing, the Company
and  Roger   Kasle  shall  enter  into  a   Consulting,   Non-solicitation   and
Non-competition  Agreement,  the form of which is  attached  as  Exhibit  J (the
"Kasle  Consulting  Agreement"),  providing  for the payment of an  aggregate of
$1,500,000 in equal monthly installments over a 60-month period.

                                       12
<PAGE>


     Section 2.10 Steel Tech Guarantee of Buyer's Obligations. Steel Tech hereby
guarantees  the  payment  and  performance  of  Buyer's  obligations  under this
Agreement and each of the Ancillary  Agreements,  and Steel Tech's liability for
such  payment  and  performance  shall be a  primary  obligation.  Steel  Tech's
guaranty pursuant to this Section is absolute and Steel Tech waives the defenses
available  under the  principles of suretyship or guaranty;  provided,  however,
that Steel Tech does not waive any  defenses  that would have been  available to
Buyer if Buyer were sued directly on Buyer's  obligation under this Agreement or
any of the  Ancillary  Agreements  provided  that such  defense  would have been
available to Steel Tech if it had been the Buyer contemplated in this Agreement,
except  that the  defenses of  insolvency  or  bankruptcy  of Buyer shall not be
available to Steel Tech.

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES
                             OF SELLERS AND COMPANY

     A. To induce  Buyer to enter into and  perform its  obligations  under this
Agreement,  each  Seller  severally  (as to such  Seller  only and not  jointly)
represents and warrants to Buyer as set forth in Section 3.1 through Section 3.3
and Section 3.30 below as of the date of this Agreement:

     Section 3.1 Authority;  Enforceability;  No Violation; Etc. Such Seller has
all power and  authority  or, with  respect to  individuals,  the  capacity,  to
execute this Agreement and each of the Ancillary Agreements to which such Seller
is,  or is  specified  to  be,  a  party  and  to  consummate  the  transactions
contemplated  hereby and thereby.  Such Seller has duly  executed and  delivered
this  Agreement  and, at or prior to the  Closing,  will have duly  executed and
delivered  each  Ancillary  Agreement  to which it is, or is  specified to be, a
party, and this Agreement constitutes,  and each Ancillary Agreement to which it
is, or is specified to be, a party will after the Closing  constitute,  a legal,
valid and binding obligation of such Seller,  enforceable against such Seller in
accordance  with its terms,  except as enforcement  may be limited by applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors' rights generally and by general  principles of equity  (regardless of
whether considered in a proceeding in equity or at law).

     Section 3.2 No Conflicts; Consents; Ownership.

     (a) The execution and delivery by such Seller of this  Agreement  does not,
the execution and delivery by such Seller of each  Ancillary  Agreement to which
it is, or is  specified  to be, a party will not,  and the  consummation  of the
transactions  contemplated hereby and thereby and compliance by such Seller with
the terms hereof and thereof will not, conflict with, or result in any violation
of or default under,  or give rise to a right of  termination,  cancellation  or
acceleration  of any obligation or a loss of a benefit  under,  or result in the
creation of any Lien or Encumbrance,  upon any of the properties or assets owned
or used by such Seller under,  any  provision of any Order or Law  applicable to
such Seller or its properties or assets.

     (b) Such Seller is the record and beneficial  owner of the number of Shares
specified in Exhibit B attached  hereto and has,  and will  transfer to Buyer at
Closing, good (legal

                                       13
<PAGE>

and  beneficial)  title to such Shares,  free and clear of any and all Liens and
Encumbrances.  Except  for this  Agreement,  such  Seller  is not a party to any
agreement  with  respect to such  Shares and has not granted any option or other
rights to such Shares and has not entered into any  agreement  restricting  such
Shares.

     Section 3.3 Proceedings.  There are not any (a) outstanding  Orders against
such Seller,  (b) Proceedings  or claims pending or, to the Actual  Knowledge of
such  Seller,  threatened  against  such Seller,  or  (c) investigations  by any
Governmental Entity that are pending or, to the Actual Knowledge of such Seller,
threatened  against  such  Seller  that,  in any  case,  individually  or in the
aggregate, would reasonably be expected to prevent such Seller from consummating
the transactions  contemplated by this Agreement and the Ancillary Agreements to
which such Seller is a party.

     B. To induce  Buyer to enter into and  perform its  obligations  under this
Agreement,  the Company hereby  represents and warrants to Buyer as set forth in
Section 3.4 through Section 3.30 below as of the date of this Agreement:

     Section 3.4 Organization, Standing, Qualification and Power.

          (a)  Each of the  Company,  the  Active  Subsidiaries  and  the  Joint
     Ventures is duly organized, validly existing and in good standing under the
     laws of the  jurisdiction  in which it is  organized  and has the power and
     authority (corporate or otherwise) to own, lease and operate its properties
     and to carry on its business as presently  conducted.  Each of the Company,
     the Active  Subsidiaries  and the Joint  Ventures is duly  qualified and in
     good  standing  to  do  business  in  each   jurisdiction   in  which  such
     qualification is necessary because of the nature of the business  conducted
     by it.

          (b) Each of the Inactive  Subsidiaries was duly organized and prior to
     its voluntary dissolution,  was validly existing and in good standing under
     the  laws  of the  jurisdiction  in  which  it was  organized.  Each of the
     Inactive  Subsidiaries had the power and authority (corporate or otherwise)
     to own,  lease and operate its  properties  and to carry on its business as
     conducted  prior  to  its  voluntary  dissolution.  Each  of  the  Inactive
     Subsidiaries was duly qualified and prior to its  dissolution,  was in good
     standing to do business in each  jurisdiction  in which such  qualification
     was  necessary  because of the nature of the business  conducted by it. Set
     forth in Section 3.4(b) of the Disclosure  Schedule is a description of the
     approximate  dates with  respect to each of the  Inactive  Subsidiaries  on
     which  (A) such  Inactive  Subsidiary  ceased  conducting  active  business
     operations;  (B) such Inactive Subsidiary ceased having any employees;  and
     (C) such Inactive Subsidiary ceased owning,  leasing or otherwise using any
     real property.  Each of the Inactive  Subsidiaries  has been duly dissolved
     under  the laws of the  jurisdiction  in which  it was  organized  and each
     jurisdiction  in which it was  qualified to transact  business as a foreign
     corporation.  Upon the  dissolution  of each of the Inactive  Subsidiaries,
     each of the Inactive  Subsidiaries  transferred all of its remaining assets
     to the Company and the Company  assumed all of their  respective  remaining
     liabilities.  Set forth in Section 3.4(b) of the  Disclosure  Schedule is a
     true and complete list and  description  of the assets and  liabilities  of
     each of the Inactive  Subsidiaries that were transferred and assumed by the
     Company  by  operation  of Law or  otherwise  upon the  dissolution  of the
     Inactive Subsidiaries.

                                       14

<PAGE>


     Section 3.5 Authority; Execution and Delivery;  Enforceability. The Company
has  the  corporate  power  and  authority  to  execute  this  Agreement  and to
consummate the transactions  contemplated hereby, and the execution and delivery
by the  Company  of this  Agreement  and the  consummation  of the  transactions
contemplated hereby have been duly authorized by all necessary corporate action.
The Company has duly executed and delivered this  Agreement,  and this Agreement
constitutes a legal,  valid and binding  obligation  of the Company  enforceable
against the Company in accordance  with its terms,  except as enforcement may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
similar laws affecting  creditors' rights generally and by general principles of
equity (regardless of whether considered in a proceeding in equity or at law).

     Section 3.6 No Conflicts; Consents.

          (a) Except as set forth in Section 3.6(a) of the Disclosure  Schedule,
     the  execution  and  delivery  by the  Company of this  Agreement  does not
     conflict with, or result in any violation of or default under, or give rise
     to a right of  termination,  cancellation or acceleration of any obligation
     or a loss of any beneficial  right under,  any provision of (i) the Charter
     Documents  of the  Company or any of the Active  Subsidiaries  or the Joint
     Ventures,  (ii) any  Contract  to which the  Company  or any of the  Active
     Subsidiaries or, to the Knowledge of the Company and the Subsidiaries,  the
     Joint  Ventures,  is a  party  or by  which  any of  them  or any of  their
     respective  properties  or  assets  is  bound,  or  (iii) any  Order or Law
     applicable  to the Company,  or any of the Active  Subsidiaries  or, to the
     Knowledge of the Company and the Subsidiaries, the Joint Ventures or any of
     their respective properties or assets.

          (b) No Permit of, or  registration,  declaration  or filing with,  any
     Governmental  Entity is required to be obtained or made by or with  respect
     to, the Company or any of the Active  Subsidiaries  or, to the Knowledge of
     the Company and the Subsidiaries, the Joint Ventures in connection with the
     execution, delivery and performance by the Company of this Agreement or the
     consummation of the transactions contemplated hereby, other than those that
     may  be  required  solely  by  reason  of  Buyer's   participation  in  the
     transactions contemplated hereby.

          (c)  No  consents  or  notifications   under  the  applicable  Charter
     Documents,  or any other  agreement with another member of any of the Joint
     Ventures,  is  required  to  enter  into  or  consummate  the  transactions
     contemplated by this Agreement.

     Section 3.7 Capitalization; Subsidiaries; Joint Ventures.

          (a) As of the date hereof and as of the Closing Date,  the  authorized
     capital  stock of the Company  consists  solely of 50,000  shares of common
     stock,  of which  8,656.66  shares are,  and shall be on the Closing  Date,
     issued  and  entitled  to vote and  there  are no  unissued  shares  of the
     authorized  capital  stock of the Company  held in  treasury;  in addition,
     there are 943 shares and 120 shares of the Company's  common stock that are
     issued  respectively  to (i) Barbara Kasle Rothstein and (ii) David S. Band
     as trustee of the Barbara  Kasle  Rothstein  Irrevocable  Trust u/t/a dated
     November 23, 1993,  which were redeemed by the Company  pursuant to a Stock
     Option  Agreement  dated January 13, 1995 among the Company,  Barbara Kasle
     Rothstein and David S. Band,  as trustee of the

                                       15
<PAGE>


     Barbara Kasle Irrevocable  Trust, u/t/a dated November 23, 1993, as amended
     by an Amendment  to Stock  Option  Agreement  dated  January 1, 2003,  (the
     "Stock  Option  Agreement")  that are held in  escrow as  security  for the
     Company's payment of the redemption price owed for such escrowed shares and
     in  accordance  with  applicable  Law have not  been  cancelled  and do not
     constitute  authorized  but  unissued  shares  (the  "Escrow  Shares").  In
     accordance  with  applicable  corporate  Law,  since the Escrow  Shares are
     pledged as security for the payment of the redemption price for such Escrow
     Shares,  (i) the Escrow Shares are issued, but are not entitled to be voted
     at any meeting of the Company's shareholders or otherwise,  (ii) the Escrow
     Shares are not to be counted in  determining  the total number of shares of
     the Company's  capital stock entitled to vote at any given time,  (iii) the
     holders of the Escrow  Shares are not  entitled to any  distributions  with
     respect to the Escrow  Shares,  and (iv) upon the payment of the redemption
     price for such  Escrow  Shares,  shall be  canceled  and  shall  constitute
     authorized,  but  unissued  shares.  All  of  the  Shares  have  been  duly
     authorized and validly issued and are fully paid and nonassessable. None of
     the Shares was issued in violation of the  Securities Act or any other Law.
     No legend or other  reference to any purported Lien or Encumbrance  appears
     upon any certificate representing the Shares. Except for the Escrow Shares,
     the issued and  outstanding  shares of capital  stock are held of record by
     Sellers, and in the amounts,  specified in Exhibit B attached hereto. There
     are no  outstanding  or  authorized  options,  warrants,  purchase  rights,
     subscription  rights,  conversion rights,  exchange rights or other rights,
     calls,  agreements or other  commitments  issued by the Company or to which
     the Company is a party to purchase or acquire any  unissued  stock or other
     securities  from the Company and no other  capital  stock of the Company is
     reserved for any purpose.  There are no Contracts to which the Company is a
     party that relate to the Shares.  Upon  Buyer's  acquisition  of the Shares
     specified on Exhibit B at the Closing, Buyer shall have acquired all of the
     issued  and  outstanding  capital  stock  of  the  Company.  There  are  no
     outstanding or authorized stock appreciation,  stock option, phantom stock,
     profit  participation or similar rights with respect to the Company, any of
     the  Subsidiaries  or the Shares.  Except as set forth in Section 3.7(a) of
     the Disclosure Schedule,  there are no voting trust agreements,  proxies or
     other agreements or understandings  with respect to the vote of the capital
     stock of the Company.

          (b) The Company holds good title (legal and beneficial) to 100% of the
     issued and outstanding capital stock of the Active  Subsidiaries.  Prior to
     their  dissolution,  the Company held good title (legal and  beneficial) to
     100%  of  the  issued  and  outstanding   capital  stock  of  the  Inactive
     Subsidiaries.  True and  correct  copies of the Charter  Documents  of each
     Subsidiary as identified in Section 3.7(b) of the Disclosure  Schedule have
     been  delivered  to Buyer.  There  are no  outstanding  options,  warrants,
     rights,  calls,  agreements or other  commitments or rights with respect to
     any issued or  unissued  equity  interest in any of the  Subsidiaries.  The
     Company  holds good title (legal and  beneficial)  to (i) a 50%  membership
     interest in RSDC,  (ii) a 49%  membership  interest in D-K, and (iii) a 50%
     membership  interest  in  KMP.  True  and  correct  copies  of the  Charter
     Documents of each Joint  Venture,  as identified  in Section  3.7(b) of the
     Disclosure Schedule (the "Joint Venture Documents"), have been delivered to
     Buyer.  Each of the Joint Venture Documents is in full force and effect and
     is valid and enforceable in accordance with its terms.  The Company has not
     received  any notice that it is in default  under any of the Joint  Venture
     Documents  and, to the  Knowledge of the Company and the  Subsidiaries,  no
     other party to any of the Joint  Venture  Documents is in breach or default
     thereunder,  and (iii) except for the Joint Venture Documents as to which a
     waiver or consent has been given by the other parties thereto, all of which
     are listed in Section 3.7(b) of the Disclosure  Schedule,  the consummation
     or performance of the transactions  contemplated by this Agreement will not
     contravene,  conflict  with,  or  result  in a  violation  or breach of any
     provision of, or give any Person the right to declare a default or exercise
     any remedy  under,  or  accelerate  the maturity or  performance  of, or to
     cancel, terminate or modify, any of the Joint Venture Documents.  Except as
     set forth in the Joint Venture Documents, there are no outstanding options,
     warrants,  rights,  calls,  agreements or other  commitments or rights with
     respect to any issued or unissued membership or other interest in any Joint
     Venture.

                                       16
<PAGE>


          (c)  Except  for  the  Joint  Ventures  and  the  Subsidiaries  or  as
     identified in Section 3.7(c) of the Disclosure  Schedule,  the Company does
     not own, and has not ever owned, directly or indirectly, any capital stock,
     membership interest,  partnership interest, joint venture interest or other
     equity interest in any Person.  None of the Subsidiaries  owns, or has ever
     owned,  directly or  indirectly,  any capital stock,  membership  interest,
     partnership  interest,  joint venture  interest or other equity interest in
     any Person.

          (d) The  Settlement  Agreement  and  Release among  the Company,  T.S.
     Investment,   Inc.,  Marubeni-Itochu  Steel  America,  Inc.,  successor  in
     interest to ITOCHU  International  Inc.,  ISG America Inc. and Tailor Steel
     America LLC dated August 25, 2003 sets forth the complete terms of the sale
     of the Company's membership interest in Tailor Steel.

          (e) The  Company is party to (i) the Stock  Option  Agreement,  (ii) a
     Security Agreement dated January 9, 1996 among the Company,  Miro, Weiner &
     Kramer and Barbara Kasle Rothstein,  as amended by an Amendment to Security
     Agreement  dated January 1, 2003,  (the "BR Security  Agreement"),  (iii) a
     Security Agreement dated January 9, 1996 among the Company,  Miro, Weiner &
     Kramer and David S.  Band,  as trustee  of the  Barbara  Kasle  Irrevocable
     Trust,  u/t/a  dated  November  23,  1993,  as amended by an  Amendment  to
     Security Agreement dated January 1, 2003, (the "Trust Security Agreement"),
     (iv) a Secured  Promissory  Note dated  January 9, 1996 between the Company
     and Barbara Kasle Rothstein in the principal  amount of  $1,865,695.60,  as
     amended by an  Amendment to  $1,865,695.60  Secured  Promissory  Note dated
     January 1, 2003,  (the "BR Note") and (v) a Secured  Promissory  Note dated
     January 9, 1996  between the  Company and David S. Band,  as trustee of the
     Barbara  Kasle  Irrevocable  Trust,  u/t/a dated  November  23, 1993 in the
     principal  amount of  $238,000.00,  as amended by an  Amendment to $238,000
     Secured  Promissory  Note dated  January 1, 2003,  (the  "Trust  Note" and,
     together with the Stock Option Agreement,  the BR Security  Agreement,  the
     Trust Security Agreement and the BR Note, the "BR Option Documents").  Each
     of the BR Option  Documents  is in full  force and  effect and is valid and
     enforceable  in  accordance  with its  terms.  No  party  to any BR  Option
     Document is in breach or default of any  provision or term of any BR Option
     Document. The consummation or performance of the transactions  contemplated
     by this  Agreement  will not  contravene,  conflict  with,  or  result in a
     violation or breach of any provision of or, or give any Person the right to
     declare a default or exercise a remedy under or accelerate  the maturity or
     performance of any obligations  under any BR Option  Document.  The Company
     has timely paid to the designated  recipient all amounts then due and owing
     pursuant  to the BR Note and the Trust  Note.  Upon  payment in full of all
     amounts  due and  owing  pursuant  to the BR Note and the Trust  Note,  all
     shares of common stock of the Company  pledged as security  pursuant to the
     BR Option  Documents  shall be released  from escrow to the  Company;  such
     shares shall no longer be subject to any lien or claim  arising from the BR
     Option Documents;  and in accordance with applicable Law, such shares shall
     be canceled and shall  constitute  authorized  but  unissued  shares of the
     Company.

                                       17
<PAGE>


     Section 3.8 Financial Statements.

          (a) Section 3.8 of the Disclosure  Schedule includes true and complete
     copies of (i) the audited consolidated balance sheet of the Company and its
     Subsidiaries as at December 31, 2005, and the related audited  consolidated
     statements of income,  retained earnings,  stockholders' equity and changes
     in financial  position of the Company and its  Subsidiaries,  together with
     all related notes and schedules thereto, accompanied by the reports thereon
     of the  Company's  independent  auditors  (collectively  referred to as the
     "Kasle Financial Statements");  (ii) the audited balance sheets for each of
     RSDC and D-K as of December 31, 2005 and KMP as of September 30, 2005,  and
     the related  audited  statements  of income,  retained  earnings,  members'
     equity and changes in financial  position of such Joint  Venture,  together
     with all related notes and schedules  thereto,  accompanied  by the reports
     thereon of such Joint Venture's independent auditors (collectively referred
     to as the  "Joint  Venture  Financial  Statements");  (iii)  the  unaudited
     consolidated  balance sheet of the Company and its Subsidiaries as at March
     31, 2006 (the "Kasle Interim Balance Sheet"),  and the related consolidated
     statements of income, together with all related notes and schedules thereto
     (such  statements  are  collectively  referred  to as  the  "Kasle  Interim
     Financial Statements," and such date is referred to as the "Interim Balance
     Sheet Date");  and (iv) the  unaudited  balance sheet for each of the Joint
     Ventures as of the Interim  Balance Sheet Date (the "Joint Venture  Interim
     Balance Sheets"),  and the related statements of income,  together with all
     related  notes and  schedules  thereto (such  statements  are  collectively
     referred to as the "Joint Venture Interim Financial Statements").

          (b) Each of the  Kasle  Financial  Statements  and the  Kasle  Interim
     Financial  Statements  (i) has been prepared based on the books and records
     of the  Company and its  Subsidiaries  (except as may be  indicated  in the
     notes thereto), (ii) has been prepared in accordance with GAAP applied on a
     consistent  basis  throughout  the  periods  indicated  (except  as  may be
     indicated in the notes thereto), and (iii) fairly presents, in all material
     respects,  the consolidated  financial position,  results of operations and
     cash flows of the Company and its  Subsidiaries as at the respective  dates
     thereof  and  for the  respective  periods  indicated  therein,  except  as
     otherwise  noted  therein  and  subject,  in the case of the Kasle  Interim
     Financial  Statements,  to normal and recurring  year-end  adjustments (the
     effect of which will not,  individually or in the aggregate,  be materially
     adverse)  and the  absence of notes  (that if  presented,  would not differ
     materially  from those  included in the balance sheet included in the Kasle
     Financial Statements).

          (c) Each of the  Joint  Venture  Financial  Statements  and the  Joint
     Venture  Interim  Financial  Statements  (i) has been prepared based on the
     books  and  records  of the  applicable  Joint  Venture  (except  as may be
     indicated in the notes thereto),  (ii) has been prepared in accordance with
     GAAP applied on a consistent basis throughout the periods indicated (except
     as may be indicated in the notes thereto),  and (iii) fairly  presents,  in
     all material respects,  the financial  position,  results of operations and
     cash  flows of the  applicable  Joint  Venture as at the  respective  dates
     thereof  and  for the  respective  periods  indicated  therein,  except  as
     otherwise  noted  therein  and  subject,  in the case of the Joint  Venture
     Interim Financial Statements,  to normal and recurring year-end adjustments
     (the  effect  of which  will  not,  individually  or in the  aggregate,  be
     materially adverse) and the absence of notes (that if presented,  would not
     differ  materially from those included in the balance sheet included in the
     Joint Venture Financial Statements).

                                       18
<PAGE>


          (d)  There  are no  debts,  liabilities  or  obligations  of any kind,
     character or description,  whether known or unknown,  accrued or unaccrued,
     absolute or contingent, disputed or undisputed, liquidated or unliquidated,
     secured or  unsecured,  joint or several,  due or to become due,  vested or
     unvested,  executory,  determined,  determinable or otherwise or matured or
     unmatured,  of  the  Company  or of  any of  the  Subsidiaries  or,  to the
     Knowledge  of the Company and the  Subsidiaries,  the Joint  Ventures,  and
     whether  or not  the  same  is  required  to be  accrued  on the  financial
     statements  of such  Person,  other than any such  debts,  liabilities  and
     obligations  (i)  reflected  or reserved  against in (A) the Kasle  Interim
     Financial  Statements  and the  Kasle  Financial  Statements  or the  notes
     thereto  with  respect to the Company and the  Subsidiaries,  and (B),  the
     Joint Venture Interim Financial  Statements and the Joint Venture Financial
     Statements or the notes thereto with respect to the Joint Ventures, or (ii)
     incurred  since the Interim  Balance  Sheet Date in the ordinary  course of
     business  of the  Company,  the  Subsidiaries  and the Joint  Ventures,  as
     applicable  (none of which results from,  arises out of or relates to or is
     in the nature of, or was  caused by any breach of a  Contract,  breach of a
     warranty,  tort, infringement or violation of Law). No financial statements
     of any Person other than the Company and its  Subsidiaries  are required by
     GAAP  to be  included  in  the  consolidated  financial  statements  of the
     Company.

          (e) All notes and accounts receivable of the Company, the Subsidiaries
     and,  to the  Knowledge  of the  Company  and the  Subsidiaries,  the Joint
     Ventures are reflected  properly on their  respective  books and records in
     accordance  with  GAAP,  are valid  receivables  subject  to no  setoffs or
     counterclaims,  except for  matters  for which a reserve  has been taken as
     reflected in the Kasle  Interim  Financial  Statements or the Joint Venture
     Interim  Financial  Statements,  as  applicable  (rather  than in any notes
     thereto),  are current and  collectible  in accordance  with their terms at
     their recorded amounts, subject only to the reserve for bad debts set forth
     on the face of the Kasle Interim Financial  Statements or the Joint Venture
     Interim  Financial  Statements,  as  applicable  (rather  than in any notes
     thereto) as adjusted  for the passage of time  through the Closing  Date in
     accordance  with the past custom and  practice of the Company and the Joint
     Ventures, as applicable.  Each of the Company, the Subsidiaries and, to the
     Knowledge of the Company and the Subsidiaries,  the Joint Ventures has paid
     all accounts  payable in  accordance  with their terms,  and no interest is
     payable with respect to any portion of such accounts  payable.  Section 3.8
     of  the  Disclosure   Schedule  accurately  lists  and  ages  the  accounts
     receivable and accounts  payable of the Company and the  Subsidiaries as of
     the date of the Interim  Balance  Sheet Date and  specifically  denotes any
     accounts  receivable  owing from and accounts  payable  owing to any of the
     Company's  Affiliates.  Section 3.8 of the Disclosure Schedule specifically
     denotes  all notes or  accounts  receivable  of any of the  Company and the
     Subsidiaries  which bear interest,  together with a summary  description of
     the  debtor  party and the  financing  terms  applicable  to such  notes or
     accounts receivable.

          (f) Neither the  Company  nor any of the  Subsidiaries  have taken any
     action,  and nothing has  occurred,  other than in the  ordinary  course of
     business   consistent   with  past   practices   of  the  Company  and  the
     Subsidiaries,  after April 30, 2006 that would  result in any change in the
     Company's  shareholder  equity from the Company's  shareholder equity as it
     existed on April 30, 2006.

                                       19

<PAGE>


          Section 3.9 Property.

          (a) Section 3.9(a) of the Disclosure Schedule (i) accurately describes
     all buildings,  machinery,  equipment and other tangible  personal property
     owned,  leased or used by each of the Company and the Active  Subsidiaries;
     (ii) indicates whether such property is owned, leased or used; and (iii) to
     the extent  that such  assets are used by the  Company or any of the Active
     Subsidiaries,  but  is  not  owned  by the  Company  or  any of the  Active
     Subsidiaries,  sets  forth  an  accurate  list  of  the  leases  and  other
     arrangements  pursuant to which the Company or the Active Subsidiaries,  as
     applicable,  have the right to use such  tangible  personal  property  (the
     "Personal  Property  Leases") except for any dies,  cutting tools and other
     similar  articles of tangible  personal  property owned by customers and in
     the  possession  of the  Company  or any of the  Active  Subsidiaries  (the
     "Customer  Dies").  Except for  properties  and assets  disposed  of in the
     ordinary course of business since the Interim Balance Sheet Date,  Customer
     Dies and customer  inventories of steel and other goods or as otherwise set
     forth in Section  3.9(a) of the Disclosure  Schedule,  each of the Company,
     the Active  Subsidiaries  and,  to the  Knowledge  of the  Company  and the
     Subsidiaries,  the Joint Ventures has good and  marketable  title (free and
     clear of all Liens and Encumbrances  except for any Permitted Liens) to, or
     a valid leasehold interest in, the personal property and assets (i) used by
     the Company, the Active Subsidiaries or the Joint Ventures,  as applicable;
     (ii)  located  on its  respective  premises;  or (iii)  shown on the  Kasle
     Interim  Balance  Sheet or the Joint Venture  Interim  Balance  Sheets,  as
     applicable,  or  acquired  after the date  thereof.  Except as set forth in
     Section 3.9(a) of the  Disclosure  Schedule,  all of the Personal  Property
     Leases are in full force and effect in the form  disclosed to Buyer and are
     enforceable  in accordance  with their  respective  terms,  and each of the
     Company,  the  Subsidiaries  and, to the  Knowledge  of the Company and the
     Subsidiaries,  the  Joint  Ventures  has  complied  with  the  terms of all
     Personal  Property  Leases.  Except as disclosed  in Section  3.9(a) of the
     Disclosure  Schedule,  none of the  Company,  the  Subsidiaries  or, to the
     Knowledge of the Company and the  Subsidiaries,  the Joint Ventures (i) has
     assigned,  pledged or otherwise  transferred any Personal Property Lease or
     leased or subleased  all or any portion of the tangible  personal  property
     owned or used by the Company or any  Subsidiary  or the Joint  Venture,  as
     applicable,  except  as  disclosed  in  Section  3.9(a)  of the  Disclosure
     Schedule or (ii) received any notice of default under any Personal Property
     Lease and no event has occurred or failed to occur  which,  with the giving
     of notice or the passage of time,  or both,  would  constitute a default by
     any of the Company,  the  Subsidiaries  or, to the Knowledge of the Company
     and the  Subsidiaries,  the Joint  Ventures or any other  Person  under any
     Personal Property Lease.

          (b)  Section  3.9(b) of the  Disclosure  Schedule  contains a true and
     correct legal  description  and street  address of all of the real property
     owned or used by any of the  Company,  the Active  Subsidiaries  or, to the
     Knowledge of the Company and the Subsidiaries,  the Joint Ventures.  Except
     as set forth in  Section  3.9(b) of the  Disclosure  Schedule,  none of the
     Company,  the  Subsidiaries  or, to the  Knowledge  of the  Company and the
     Subsidiaries,  the Joint  Ventures,  holds or has ever held,  any ownership
     interest,  any leasehold interest,  or any other right, title,  interest or
     liability  with respect to any real  property.  Neither  Kasle  Holding nor
     Kasle  Laserfactures have ever held any ownership  interest,  any leasehold
     interest,  or any other right, title, interest or liability with respect to
     any real  property.  Except for a leasehold  interest  in the office  space
     located  at 17515  West Nine Mile Road,  Suite  445,  Southfield,  Michigan
     48075, to the Knowledge of the Company and the Subsidiaries, Galnas Company
     does not hold and never has held,  any  ownership  interest,  any leasehold
     interest,  or any other right, title, interest or liability with respect to
     any real property.

                                       20

<PAGE>


          (c)  Each of the  Company  and the  Active  Subsidiaries  has good and
     marketable fee simple title to the Owned Real Property owned by the Company
     or such  Active  Subsidiary,  free and clear of all Liens and  Encumbrances
     other than the Liens set forth in Section 3.9(c) of the Disclosure Schedule
     and Permitted Liens. To the Knowledge of the Company and the  Subsidiaries,
     each of the Joint  Ventures has good and marketable fee simple title to the
     real property owned by such Joint Venture,  free and clear of all Liens and
     Encumbrances  other  than the  Liens  set  forth in  Section  3.9(c) of the
     Disclosure  Schedule and Permitted Liens. To the Knowledge of Sellers,  the
     Company  and  the   Subsidiaries,   there  are  no  pending  or  threatened
     condemnation or other  proceeding  that could adversely  affect the current
     use, occupancy, or value of the Real Property.

          (d) Section  3.9(d) of the  Disclosure  Schedule lists all of the real
     property  leases  and  subleases  to which any of the  Company,  the Active
     Subsidiaries or, to the Knowledge of the Company and the Subsidiaries,  the
     Joint  Ventures  is a party or by which it is  bound  (the  "Real  Property
     Leases"). Except as set forth in Section 3.9(d) of the Disclosure Schedule,
     all of the Real  Property  Leases  are in full force and effect in the form
     disclosed to Buyer and are enforceable in accordance with their  respective
     terms, and each of the Company,  the Subsidiaries  and, to the Knowledge of
     the Company and the Subsidiaries,  the Joint Ventures,  as applicable,  has
     complied with the terms of the Real Property Leases to which such entity is
     a party or by which it is bound,  whether as landlord or as tenant.  Except
     as set forth in  Section  3.9(c) of the  Disclosure  Schedule,  none of the
     Company,  the  Subsidiaries  or, to the  Knowledge  of the  Company and the
     Subsidiaries,  the Joint  Ventures (i) has  assigned,  pledged,  mortgaged,
     hypothecated or otherwise  transferred any Real Property Lease or leased or
     subleased  all or any  portion of any Real  Property or (ii)  received  any
     notice of default under any Real  Property  Lease and no event has occurred
     or failed to occur which, with the giving of notice or the passage of time,
     or both, would constitute a default under any Real Property Lease.

          (e) Except as set forth in Section 3.9(e) of the Disclosure  Schedule,
     the use of each of the Real  Properties for the various  purposes for which
     it is presently  being used is  permitted as of right under all  applicable
     zoning legal  requirements and is not subject to "permitted  nonconforming"
     use or structure  classifications.  All  improvements  on the Real Property
     ("Improvements") are in compliance with all applicable Law, including those
     pertaining to zoning,  building and the disabled, are adequate and suitable
     for the conduct of the  businesses  as currently  conducted by the Company,
     the Active Subsidiaries or the Joint Ventures,  as applicable,  are in good
     repair and in good condition, ordinary wear and tear excepted, and are free
     from latent and patent  defects.  Except as set forth in Section  3.9(e) of
     the Disclosure Schedule, no part of any Improvement  encroaches on any real
     property not  included in the Real  Property,  and there are no  buildings,
     structures,  fixtures or other Improvements primarily situated on adjoining
     property which encroach on any part of the Real Property.

                                       21
<PAGE>


          (f) All of the assets and rights  owned or used by any of the Company,
     the Subsidiaries and, to the Knowledge of the Company and the Subsidiaries,
     the  Joint  Ventures  immediately  prior  to the  Closing  will be owned or
     available  for use by the Company,  the Active  Subsidiaries  and the Joint
     Ventures,  as applicable,  on identical  terms and  conditions  immediately
     subsequent to the Closing.

     Section 3.10 Intellectual Property.

          (a) Except as set forth in Section 3.10(a) of the Disclosure Schedule,
     none of the Company,  the Subsidiaries and, to the Knowledge of the Company
     and the Subsidiaries, the Joint Ventures owns, or has licensed or otherwise
     possesses  legally  sufficient  rights to use, any  Intellectual  Property.
     Section  3.10(a)  of the  Disclosure  Schedule  includes  and  specifically
     identifies  all  Intellectual  Property  owned by or  licensed  from  third
     parties  ("Third  Party  Intellectual  Property")  and  used  by any of the
     Company, the Subsidiaries or the Joint Ventures or that is incorporated in,
     is, or forms a part of, any product or service of any of the  Company,  the
     Subsidiaries  or  the  Joint  Ventures,  excluding  any  such  intellectual
     property  rights that are  available on a commodity  basis (such as "shrink
     wrap" licenses) and that are  non-exclusive,  terminable and available at a
     standard fee. None of the Company, the Subsidiaries or, to the Knowledge of
     the  Company  and the  Subsidiaries,  the Joint  Ventures  has  licensed or
     entered into  agreements with third parties  regarding the license,  use or
     restriction on use of any Intellectual Property or Third Party Intellectual
     Property.

          (b) None of the Company,  the Active Subsidiaries or, to the Knowledge
     of the Company and the Subsidiaries,  the Joint Ventures are, or will be as
     a result of the execution and delivery of this Agreement or the performance
     of its respective  obligations  hereunder,  in violation of any rights of a
     third  party in any Third  Party  Intellectual  Property.  No  claims  with
     respect to the Intellectual Property or use of any Third Party Intellectual
     Property by any of the Company,  the  Subsidiaries  or, to the Knowledge of
     the Company and the Subsidiaries, the Joint Ventures are pending, or to the
     Knowledge of the Company and the Subsidiaries,  threatened,  by any Person,
     nor does any of the Company or the  Subsidiaries  know of any valid grounds
     for any bona fide claims in regard to such  Intellectual  Property or Third
     Party Intellectual  Property.  All of the Intellectual Property held by the
     Company,  the Active  Subsidiaries and, to the Knowledge of the Company and
     the  Subsidiaries,  the Joint  Ventures  and all rights  therein are valid,
     subsisting and enforceable and there is no unauthorized  use,  infringement
     or misappropriation  of any Intellectual  Property by any third party. None
     of the Company,  the  Subsidiaries  or, to the Knowledge of the Company and
     the  Subsidiaries,  the Joint  Ventures  (i) have been sued or  charged  in
     writing  as a  defendant  in any claim,  suit,  action or  proceeding  that
     involves a claim of infringement of any trade secrets, patents, trademarks,
     service marks, maskworks or copyrights, (ii) have been informed or notified
     by any third party that any of the Company,  the  Subsidiaries or the Joint
     Ventures may be engaged in such  infringement,  or (iii) have any Knowledge
     of any  infringement  liability with respect to, or infringement by, any of
     the Company,  the  Subsidiaries  or the Joint Ventures of any trade secret,
     patent, trademark, service mark, maskwork or copyright of another.


                                       22
<PAGE>

          (c) Set forth in  Section  3.10(c)  of the  Disclosure  Schedule  is a
     description   of  all  actions  taken  by  the  Company  and  each  of  the
     Subsidiaries and, to the Knowledge of the Company and the Subsidiaries, the
     Joint Ventures to maintain and protect each item of  Intellectual  Property
     owned or  purported  to be owned by the Company,  the  Subsidiaries  or the
     Joint Ventures,  as applicable,  which except as otherwise noted in Section
     3.10(c) of the  Disclosure  Schedule,  such  actions  were  reasonable  and
     prudent for the maintenance and protection of such  Intellectual  Property.
     After the consummation of the transactions  contemplated by this Agreement,
     the Company,  the Active  Subsidiaries and, to the Knowledge of the Company
     and the  Subsidiaries,  the Joint  Ventures will continue to own all right,
     title and  interest  in all  Intellectual  Property  and to or have a valid
     written license to use all Third Party Intellectual Property currently used
     in their respective business operations.

          (d) None of the Company,  the Active Subsidiaries or, to the Knowledge
     of  the  Company  and  the   Subsidiaries,   the  Joint  Ventures  use  any
     Intellectual  Property  owned by any  present  or past  director,  officer,
     employee or consultant of any of the Sellers, the Company, the Subsidiaries
     or the Joint Ventures.

          (e) As of the Closing,  the  Intellectual  Property of the Company and
     the Active Subsidiaries shall be free from Liens and Encumbrances.

          (f) None of the software used by any of the Company,  the Subsidiaries
     or,  to the  Knowledge  of the  Company  and the  Subsidiaries,  the  Joint
     Ventures  was  developed  in  whole or in part by any of the  Company,  the
     Subsidiaries or the Joint Ventures.

     Section 3.11 Contracts.

          (a) Section  3.11 of the  Disclosure  Schedule  lists or  specifically
     cross-references  to another  Section of the Disclosure  Schedules in which
     such  Contract is identified  the  following  Contracts to which any of the
     Company,  the  Subsidiaries  or, to the  Knowledge  of the  Company and the
     Subsidiaries,  the Joint  Ventures  is a party and in effect on the Closing
     Date or by which any of the Company,  the Active  Subsidiaries or the Joint
     Ventures is currently  bound (with the exception of Purchase  Orders or the
     contracts  and  agreements   listed  on  Section  3.15  of  the  Disclosure
     Schedule), including:

          (i) any  Contract  (or group of  related  Contracts)  for the lease of
     personal  property to or from any Person  providing  for lease  payments in
     excess of $50,000.00 per annum;

          (ii) any Contract (or group of related  Contracts) for the purchase or
     sale of raw materials,  commodities,  supplies, products, or other personal
     property, or for the furnishing or receipt of services,  the performance of
     which  will  extend  over a  period  of  more  than  6  months  or  involve
     consideration in excess of $50,000.00, including in the case of the Company
     and the Active Subsidiaries, active jobs subject to Purchase Orders;

          (iii) any Contract  concerning a  partnership  or joint venture or any
     other  Contract   involving  a  sharing  of  profits,   losses,   costs  or
     liabilities;

                                       23
<PAGE>


          (iv) any  Contract  concerning  confidentiality,  non-solicitation  or
     non-competition or containing covenants that in any way purport to restrict
     the  business  activities  of the  Company,  any  Subsidiary  or any  Joint
     Venture;

          (v) any  Contract  with any of the Sellers or any of their  respective
     Affiliates (other than the Company and the Subsidiaries);

          (vi) any collective bargaining agreement;

          (vii) any Contract for the  employment of any  individual  (other than
     any arrangement that constitutes "employment at will" under applicable law)
     on a full-time,  part-time,  consulting,  or other basis  providing  annual
     compensation in excess of $10,000.00 or providing  pre-determined severance
     benefits, termination pay and/or pay in lieu of notice of termination;

          (viii) any  Contract  under which it has advanced or loaned any amount
     to any of its directors, officers, or employees outside the ordinary course
     of business;

          (ix) any  Contract  under  which  the  consequences  of a  default  or
     termination  could  have  an  adverse  change  in the  business,  financial
     condition,  future prospects,  operations,  or results of operations of the
     Company or any of the Subsidiaries or the Joint Ventures;

          (x) any  Contract  under  which  the  Company  or any  Subsidiary  has
     directly or indirectly guaranteed indebtedness,  liabilities or obligations
     of any other Person (other than  endorsements for the purpose of collection
     in the  ordinary  course of  business)  with a principal  amount that is in
     excess of $25,000.00;

          (xi) any Contract granting a Lien (other than any Permitted Lien) upon
     any of the assets of the Company, a Subsidiary or a Joint Venture;

          (xii) any Contract  (excluding a purchase order) involving  payment by
     the Company or any Subsidiary or any Joint Venture of more than  $25,000.00
     annually;

          (xiii) any Contract not  identified  in any other part of Section 3.11
     of the  Disclosure  Schedule  that  involves  performance  of  services  or
     delivery of goods by one or more of the Company,  the  Subsidiaries  or the
     Joint Ventures of an amount or value in excess of $50,000.00;

          (xiv) any Contract not identified in any other part of Section 3.11 of
     the Disclosure  Schedule that involves  performance of services or delivery
     of goods or materials to one or more of the Company,  the  Subsidiaries  or
     the Joint Ventures of an amount or value in excess of $50,000.00;

          (xv) any Contract not  identified in any other part of Section 3.11 of
     the Disclosure Schedule that was not entered into in the ordinary course of
     business and that involves  expenditures  or receipts of one or more of the
     Company,  the  Subsidiaries  or the Joint Ventures of an amount or value in
     excess of $100,000.00;

                                       24
<PAGE>


          (xvi) any Contract providing for payments to or by any Person based on
     sales, purchases or profits, other than direct payments for goods purchased
     or services rendered;

          (xvii) any Contract not  identified  in any other part of Section 3.11
     of  the  Disclosure   Schedule  for  capital   expenditures  in  excess  of
     $50,000.00;

          (xviii)  a  services  Contract  with  an  independent   contractor  or
     consultant, including without limitation, tax-related services;

          (xix)  each  power  of  attorney  that  is  currently   effective  and
     outstanding; or

          (xx) any other Contract (or group of related Contracts) not identified
     in  any  other  part  of  Section  3.11  of  the  Disclosure  Schedule  the
     performance of which involves consideration in excess of $50,000.00.

     (b) Except as set forth in Section 3.11(b) of the Disclosure Schedule,  (i)
each  Contract  that is  listed or  specifically  cross-referenced  in  Sections
3.11(a) and 3.15 of the  Disclosure  Schedule to which the Company or any of the
Subsidiaries  is a party or otherwise bound and, to the Knowledge of the Company
and the Subsidiaries, to which any of the Joint Ventures is a party or otherwise
bound,  and each of the Company  Purchase  Orders and, to the  Knowledge  of the
Company and the  Subsidiaries,  each of the JV Purchase Orders, is in full force
and effect and is valid and enforceable in accordance with its terms,  (ii) none
of the Company,  the  Subsidiaries  or, to the  Knowledge of the Company and the
Subsidiaries,  Joint  Ventures have received  notice that it is in default under
any Contract that is listed or specifically cross-referenced in Sections 3.11(a)
and 3.15 of the Disclosure Schedule or any Purchase Order to which it is a party
or otherwise bound and, to the Knowledge of the Company and the Subsidiaries, no
other party to any such Contract is in breach or default  thereunder,  and (iii)
except for Contracts as to which a waiver or consent has been given by the other
parties  thereto,  all of which are listed in Section  3.11(c) of the Disclosure
Schedule,  the consummation or performance of the  transactions  contemplated by
this Agreement will not  contravene,  conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under,  or accelerate the maturity or performance  of, or to
cancel,  terminate  or  modify,  any of the  Contracts  listed  or  specifically
cross-referenced  in Sections 3.11(a) and 3.15 of the Disclosure Schedule or any
of the Company  Purchase  Orders and,  to the  Knowledge  if the Company and the
Subsidiaries,  any  of  the  JV  Purchase  Orders.  None  of  the  Company,  the
Subsidiaries or, to the Knowledge of the Company and the Subsidiaries, the Joint
Ventures,  except as disclosed in Section  3.11(b) of the  Disclosure  Schedule,
received any notice of the  intention  of any Person to  terminate  any Contract
listed or  specifically  cross-referenced  in  Sections  3.11(a) and 3.15 of the
Disclosure Schedule.

     (c) Except as set forth in Section 3.11(c) of the Disclosure  Schedule,  no
consents are required under any of the Contracts that is listed or  specifically
cross-referenced in Sections 3.11(a) and 3.15 of the Disclosure Schedule, any of
the  Company  Purchase  Orders  or,  to the  Knowledge  of the  Company  and the
Subsidiaries,  any of the JV Purchase Orders in connection with the consummation
of the transactions contemplated by this Agreement ("Third Party Consents").

                                       25
<PAGE>


     Section 3.12 Permits.  Section 3.12 of the  Disclosure  Schedule  lists all
permits and authorizations  (collectively  "Permits") required under Law for the
conduct of the  businesses of the Company and each of the  Subsidiaries  and, to
the  Knowledge  of the  Company  and the  Subsidiaries,  the Joint  Ventures  as
presently conducted. Each of the Company, the Subsidiaries and, to the Knowledge
of the  Company  and  the  Subsidiaries,  the  Joint  Ventures  holds  and is in
compliance with all of its respective Permits.  Since December 31, 2004, none of
the  Company,  the  Subsidiaries  and, to the  Knowledge  of the Company and the
Subsidiaries,  the  Joint  Ventures  have  received  notice  of any  Proceedings
relating to the revocation or modification of any such Permits.

     Section 3.13 Taxes.

          (a) Except as set forth in Section  3.13 of the  Disclosure  Schedule,
     (i) each of the  Company,  the  Subsidiaries  and, to the  Knowledge of the
     Company  and the  Subsidiaries,  the Joint  Ventures  has filed all Returns
     required to be filed by it prior to the Closing  Date;  (ii) as of the time
     of  filing,  the  Returns  were  complete  and  correct;  (iii) each of the
     Company,  the  Subsidiaries  and, to the  Knowledge  of the Company and the
     Subsidiaries,  the Joint  Ventures has paid all Taxes that have or may have
     become due  pursuant  to those  Returns or  otherwise,  or  pursuant to any
     assessment received by the Company, the Subsidiaries or the Joint Ventures,
     as  applicable;  (iv)  none of the  Company,  the  Subsidiaries  or, to the
     Knowledge  of the  Company and the  Subsidiaries,  the Joint  Ventures  are
     currently the beneficiary of any extension of time within which to file any
     Return;  (v) none of the Company,  the Subsidiaries or, to the Knowledge of
     the  Company  and the  Subsidiaries,  the Joint  Ventures  have  waived any
     statute  of  limitations  affecting  any Tax  liability  or  agreed  to any
     extension of time during which a Tax  assessment or  deficiency  assessment
     may be made, which waiver or extension is still outstanding; (vi) there are
     no  threatened  or pending Tax audits of any Returns of any of the Company,
     the Subsidiaries or, to the Knowledge of the Company and the  Subsidiaries,
     the Joint Ventures,  and none of the Company,  the  Subsidiaries or, to the
     Knowledge  of the Company and the  Subsidiaries,  the Joint  Ventures  have
     received notice of any unresolved claims concerning their Tax liability and
     the Company, the Subsidiaries and the Joint Ventures have no Knowledge that
     any such claim exists;  (vii) each of the Company, the Subsidiaries and, to
     the Knowledge of the Company and the  Subsidiaries,  the Joint Ventures has
     complied  with all Laws relating to the payment and  withholding  of Taxes;
     and (viii) none of the Company,  the  Subsidiaries  or, to the Knowledge of
     the Company and the  Subsidiaries,  the Joint  Ventures  are or have been a
     party to any Tax sharing or similar  agreement;  and (ix) no claim has ever
     been made by any authority in a jurisdiction where any of the Company,  the
     Subsidiaries or, to the Knowledge of the Company and the Subsidiaries,  the
     Joint Ventures does not file Returns that the Company, the Subsidiaries, or
     the Joint Ventures is or may be subject to taxation by that jurisdiction.

                                       26
<PAGE>


          (b) None of the Company,  the  Subsidiaries or the Joint Ventures have
     engaged  in  a  "reportable  transaction"  with  the  meaning  of  Treasury
     Regulation Section 1.6011-4T(b).

          (c) The Company has not  executed  any closing  agreement  pursuant to
     Section 7121 of the Code, or any corresponding  provision of state or local
     law.

          (d) None of the Company,  the  Subsidiaries or the Joint Ventures have
     agreed or are required to make any material adjustments pursuant to section
     481(a) of the Code or any corresponding  provision of state or local law by
     reason  of a change  in  accounting  method  initiated  by it or any  other
     relevant party; none of the Company, the Subsidiaries or the Joint Ventures
     have received any notice from the IRS or other relevant authority proposing
     any  such  adjustment  or  change  in  accounting  method;  and none of the
     Company,  the  Subsidiaries  or the  Joint  Ventures  have any  application
     pending with any governmental or regulatory authority requesting permission
     for any  changes in  accounting  methods  that  relate to their  respective
     business or assets.

          (e) As of the date  hereof,  there  are no  Encumbrances,  other  than
     Permitted  Liens,  with  respect  to  Taxes  upon  any  of the  assets  and
     properties of the Company, the Subsidiaries or the Joint Ventures.

          (f) The charges,  accruals  and reserves  with respect to Taxes on the
     respective  books of the Company,  the  Subsidiaries and the Joint Ventures
     are adequate (determined in accordance with GAAP) and are at least equal to
     that entity's  liability for Taxes. All Taxes that any of the Company,  the
     Subsidiaries or the Joint Ventures is or was required by Law to withhold or
     collect have been duly withheld or collected  and, to the extent  required,
     have been paid to the proper  Governmental  Entity or taxing  authority  or
     other Person.

          (g) Section 3.13 of the Disclosure Schedule lists all federal,  state,
     provincial,  local,  and foreign  income  Returns filed with respect to the
     Company,  the  Subsidiaries,  and the Joint Ventures for any taxable period
     ended on or after December 31, 2001, indicates those Returns that have been
     audited,  and  indicates  those  Returns that  currently are the subject of
     audit.  Sellers have delivered to Buyer correct and complete  copies of all
     federal and provincial income Returns,  examination reports, and statements
     of  deficiencies  assessed  against  or  agreed  to  by  the  Company,  the
     Subsidiaries,  or the Joint  Ventures  filed or received since December 31,
     2001.

          (h) None of the Company,  the  Subsidiaries or the Joint Ventures is a
     party to any agreement,  contract, arrangement or plan that has resulted or
     could  result,  separately or in the  aggregate,  in the payment of (i) any
     "excess parachute  payment" within the meaning of Code Section 280G (or any
     corresponding  provision  of state,  local or foreign Tax law) and (ii) any
     amount that will not be fully deductible as a result of Code Section 162(m)
     (or any  corresponding  provision  of  state,  local or  foreign  Tax law).
     Neither the Company nor any of the  Subsidiaries  has been a United  States
     real  property  holding  corporation  within the  meaning  of Code  Section
     897(c)(2)   during  the  applicable   period   specified  in  Code  Section
     897(c)(1)(A)(ii).  Each of the  Company,  the  Subsidiaries  and the  Joint
     Ventures have  disclosed on their federal  income Tax Returns

                                       27
<PAGE>



     all  positions  taken  therein  that  could  give  rise  to  a  substantial
     understatement  of federal  income within the meaning of Code Section 6662.
     Neither the Company nor any of the Subsidiaries (A) has been a member of an
     Affiliated Group filing a consolidated  federal income Return (other than a
     group the common  parent of which was the Company) or (B) has any liability
     for  the  Taxes  of  any  Person  (other  than  the  Company  or any of the
     Subsidiaries)  under Reg.  Section  1.1502-6  (or any similar  provision of
     state local, or foreign law), as a transferee or successor, by contract, or
     otherwise.

          (i) Neither the Company nor any of the  Subsidiaries  will be required
     to include  any item of income in, or exclude any item of  deduction  from,
     taxable income for any taxable period (or portion thereof) ending after the
     Closing Date as a result of any:

               (A) change in method of accounting for a taxable period ending on
          or prior to the Closing Date;

               (B) "closing agreement" as described in Code Section 7121 (or any
          corresponding or similar  provision of state,  local or foreign income
          Tax law) executed on or prior to the Closing Date;

               (C) intercompany  transaction or excess loss account described in
          Treasury  Regulations under Code Section 1502 (or any corresponding or
          similar provision of state, local or foreign income Tax law);

               (D) installment sale or open  transaction  disposition made on or
          prior to the Closing Date; or

               (E) prepaid amount received on or prior to the Closing Date.

          (j) Neither the Company nor any of the  Subsidiaries  has  distributed
     stock of  another  Person,  or has had its  stock  distributed  by  another
     Person,  in a transaction  that was purported or intended to be governed in
     whole or in part by Code Sectio 355 or Code Section 361.

          (k) Each Joint Venture is and qualifies to be treated as a partnership
     for federal income tax purposes and for state and local income Tax purposes
     in all  jurisdiction  in which such Joint Venture is required to pay income
     Taxes.

          (l) Form 2553 (Election by a Small Business  Corporation),  was timely
     filed  by  the  Company  and  the  election  or  separate  consents  of the
     shareholders were signed by all of the then-current shareholders.

          (m) The Company has  remained a valid,  existing S  Corporation  since
     January 1, 1997 through the  Closing.  Immediately  prior to the  effective
     date of the S election and continuing through the Closing,  the Company has
     had only one class of stock outstanding; all S-Corporation distributions to
     stockholders have been made pro rata, based upon the relative percentage of
     stock held by each individual shareholder,  and the Company has not, by any
     other written or oral agreement, provided any stockholder with preferential
     rights or returns in


                                       28
<PAGE>


     connection with their stock ownership,  that have not been extended to each
     of the other  stockholders.  The  Company has not  otherwise  inadvertently
     terminated  the  S  Election  nor  has  it or  any  of  its  S  Corporation
     shareholders   received  notice  from  the  IRS  denying  the  continued  S
     Corporation  election.  As  of  the  date  hereof,  there  are  no  pending
     assertions by the IRS which challenge the continued S Corporation status of
     the Company.

          (n) The Company has timely  filed  qualified  subchapter  S subsidiary
     elections (each a "Q-Sub  Election")  under Code Section  1361(b)(3)(B)(ii)
     for all corporations  included in the S Corporation Income Returns filed by
     the Company. Each of the Subsidiaries so included,  constitute a "qualified
     subchapter S subsidiary" under Code Section 1361(b)(3)(B) and each included
     subsidiary  has  continued  to qualify  under the  Internal  Revenue  Code,
     without  revocation or  termination  of its Q-Sub Election from the date of
     the Q-Sub  Election  through the earlier of: the Closing Date;  the date of
     the dissolution of the included subsidiary, or; the date of the sale of the
     included subsidiary.  The qualified subchapter S subsidiaries  include, but
     are not limited to the  Subsidiaries  for the period during the period from
     January 1, 1997 to Closing.

          (o) Section 3.13 of the  Disclosure  Schedule sets forth the following
     information  with respect to the Company as of the most recent  practicable
     date:  (A) the basis of the Company in its assets,  including  its basis in
     all Subsidiaries;  (B) the basis of the Subsidiaries and the Joint Ventures
     in each of their individual assets; (C) the tax basis and the book basis of
     the Company's  liabilities,  where the tax basis amounts are different from
     the  amounts  presented  on  financial  statements  which are  prepared  in
     accordance  with GAAP;  (D) the tax basis in the  liabilities  of the Joint
     Ventures,  and "Qualified subchapter S subsidiaries," where the amounts are
     different  from the amounts  presented  on financial  statements  which are
     prepared in accordance  with GAAP, and; (E) the amount of any net operating
     loss, net capital loss, unused  investment or other credit,  including both
     state and  Federal  credits,  unused  foreign  tax,  or  excess  charitable
     contribution allocable to the Company or its Subsidiaries.

          (p) The unpaid  Taxes of the  Company  (A) did not,  as of the Interim
     Balance Sheet Date,  exceed the  accrual/reserve  for Tax liability (rather
     than  any  reserve  for  deferred  Taxes   established  to  reflect  timing
     differences between book and Tax income) set forth on the face of the Kasle
     Interim Financial  Statements (rather than in any notes thereto) and (B) do
     not exceed that reserve as adjusted for operations and transactions through
     the Closing  Date in  accordance  with the past custom and  practice of the
     Company in filing its Tax returns.

          (q) Since the  effective  date of the S Election,  the Company has not
     exceeded the passive income limitations imposed on the S Corporation.

          (r) All tax  planning  issues  and  memoranda  issued in the past four
     years have been  provided to the Buyer.  All IRS Ruling  Requests and their
     disposition, have been provided to Buyer.

          (s) The  Company  has no  potential  liability  for any Tax under Code
     Section 1374. Neither the Company nor any qualified subchapter S subsidiary
     of the Company,  has, in the past 10 years (A) acquired assets from another
     corporation  in a  transaction  in which  the  Company's  Tax basis for the
     acquired  assets was  determined,  in whole or in part, by reference to the
     Tax basis of the  acquired  assets (or any other  property) in the hands of
     the  transferor  or (B)  acquired  the stock of any  corporation  that is a
     qualified subchapter S Subsidiary.

                                       29
<PAGE>


     Section 3.14 Proceedings.

          (a) Except as set forth in Section 3.14(a) of the Disclosure Schedule,
     there is no pending Proceeding:

               (i) that has been commenced by or against any of the Company, the
          Subsidiaries or, to the Knowledge of the Company and the Subsidiaries,
          the Joint  Ventures  or that  otherwise  relates  to or may affect the
          business  of,  or any of the  assets  owned  or  used  by,  any of the
          Company, the Active Subsidiaries or the Joint Ventures; or

               (ii) that challenges,  or that may have the effect of preventing,
          delaying,  making illegal,  or otherwise  interfering with, any of the
          transactions contemplated hereby.

          To the Knowledge of Sellers, the Company and the Subsidiaries,  (1) no
     such  Proceeding  has been  Threatened,  and (2) no event has  occurred  or
     circumstance  exists  that  may give  rise to or  serve as a basis  for the
     commencement  of any such  Proceeding.  The Company has  delivered to Buyer
     copies of all pleadings,  correspondence,  and other documents  relating to
     each  Proceeding  listed in Section 3.14 of the  Disclosure  Schedule.  The
     Proceedings  listed in Schedule  3.14 of the  Disclosure  Schedule will not
     have a  material  adverse  effect  on  the  business,  operations,  assets,
     condition,  or prospects of any of the Company,  the Active Subsidiaries or
     the Joint Ventures.

          (b) Except as set forth in Section 3.14(b) of the Disclosure Schedule:

               (i)  there  is  no  Order  to  which  any  of  the  Company,  the
          Subsidiaries or, to the Knowledge of the Company and the Subsidiaries,
          the Joint  Ventures,  or any of the assets owned or used by any of the
          Company, the Subsidiaries or the Joint Ventures, is subject;

               (ii) no  Seller  is  subject  to any Order  that  relates  to the
          business  of,  or any of the  assets  owned  or  used  by,  any of the
          Company, the Subsidiaries or the Joint Ventures; and

               (iii) to the  Knowledge of the Company and the  Subsidiaries,  no
          officer,  director,  agent,  or  employee of any of the  Company,  the
          Subsidiaries  or the Joint  Ventures  is  subject  to any  Order  that
          prohibits such officer,  director, agent, or employee from engaging in
          or  continuing  any  conduct,  activity,  or practice  relating to the
          business of any of the Company,  the Active  Subsidiaries or the Joint
          Ventures.

     (c) Except as set forth in Section 3.14(c) of the Disclosure Schedule:

          (i) each of the Company, the Subsidiaries and, to the Knowledge of the
     Company and the Subsidiaries, the Joint Ventures is, and at all times since
     January  1, 1996 has  been,  in full  compliance  with all of the terms and
     requirements  of each Order to which it, or any of the assets owned or used
     by it, is or has been subject;

                                       30
<PAGE>


          (ii) no event has occurred or circumstance  exists that may constitute
     or result in (with or without  notice or lapse of time) a  violation  of or
     failure to comply with any term or requirement of any Order to which any of
     the Company,  the Subsidiaries or the Joint Ventures,  or any of the assets
     owned  or  used  by any of  the  Company,  the  Subsidiaries  or the  Joint
     Ventures, is subject; and

          (iii) none of the Company,  the  Subsidiaries  or, to the Knowledge of
     the Company and the Subsidiaries,  the Joint Ventures has received,  at any
     time since January 1, 1996, any notice or other communication (whether oral
     or written) from any Governmental  Entity or any other Person regarding any
     actual, alleged,  possible, or potential violation of, or failure to comply
     with, any term or requirement of any Order to which any of the Company, the
     Subsidiaries or the Joint  Ventures,  or any of the assets owned or used by
     any of the Company, the Subsidiaries or the Joint Ventures,  is or has been
     subject.

     Section 3.15 Benefit Plans.

     (a) Section 3.15(a) of the Disclosure Schedule contains a true and complete
list of each plan,  program,  policy,  practice,  contract,  agreement  or other
arrangement  (written or unwritten)  providing for severance,  termination  pay,
stock  or  stock-related  awards,  bonus,   deferred   compensation,   incentive
compensation, savings, profit sharing, fringe benefits, medical, other insurance
(whether  insured or  self-insured),  surgical  or  hospital  care or  benefits,
benefits  in the event of  sickness,  accident,  disability  or death,  extended
health  benefits,   vacation  benefits,   supplementary  unemployment  benefits,
retirement income, pension,  supplementary retirement plans, income deferral for
periods  extending to the  termination of covered  employment or beyond or other
employee  benefits of any kind,  whether formal or informal,  proposed or final,
funded or  unfunded  and  whether or not  legally  binding,  including,  without
limitation,  each "employee  benefit plan" within the meaning of Section 3(3) of
the  Employee  Retirement  Income  Security  Act of 1974,  as amended  ("ERISA")
("Employee  Plan") which is now or since January 1, 2000,  has been  maintained,
contributed to by any of the Company,  the  Subsidiaries or, to the Knowledge of
the  Company  and the  Subsidiaries,  the  Joint  Ventures,  or  required  to be
contributed  to, for the  benefit of any  current or former  employee,  and each
management,  employment,  severance or consulting  agreement or contract between
any of the Company, the Subsidiaries or, to the Knowledge of the Company and the
Subsidiaries,   the  Joint  Ventures  and  any  employee,   including,   without
limitation,   summaries  of  all  oral   employment  or  consulting  or  similar
arrangements  between any of the Company, the Subsidiaries or the Joint Ventures
and any person which are not terminable  without  liability on thirty (30) days'
or less prior notice (each, an "Employee Agreement").

     (b) Except as described in Section 3.15(b) of the Disclosure Schedule, none
of the Company,  the  Subsidiaries  or the Joint Ventures  maintain or have ever
maintained,  contribute  or  have  ever  contributed,  have  the  obligation  to
contribute,  or have ever had the  obligation to contribute to any Employee Plan
which  provides,  or has any  liability  to provide,  life  insurance,  extended
health,  medical or other  employee  welfare  benefits to any employee  upon

                                       31
<PAGE>

his  retirement  or  termination  of  employment,  except as may be  required by
statute,  and none of the Company,  the  Subsidiaries  or the Joint Ventures has
ever  promised,  represented  to, or contracted  with (orally or in writing) any
employee  (individually  or as a group) that life  insurance,  extended  health,
medical  or other  employee  welfare  benefits  would  be  provided  upon  their
retirement  or  termination  of  employment,  except to the extent  required  by
statute.

     (c) The  Company  will  provide  to  Buyer  prior to the  Closing  true and
complete  copies  of (i) the plan  document  and/or  all  written  policies  and
agreements  comprising each Employee Plan or Employment  Agreement,  and related
trust agreements; (ii) summary plan descriptions;  (iii) allocation or actuarial
reports  prepared  for each  employee  pension  benefit plan for the most recent
three years and evidence of any  registration in respect of any employee pension
benefit plan;  (v) insurance  policies;  (vi)  communications  in the last three
years to or from the Internal  Revenue  Service (the "IRS")  (including the last
three Form 5500s  filed with the IRS and the most  recent  determination  letter
received from the IRS), the Pension Benefit Guaranty Corporation (the "PBGC") or
the United States  Department of Labor,  Canada Revenue Agency or any provincial
pension commission and other governmental  filings; and (vii) all other material
communications relating to Employee Plans and Employee Agreements.

     (d) Except as set forth in Section 3.15(d) of the Disclosure Schedule,  (i)
each  Employee Plan has been operated and  administered  in material  compliance
with its terms, ERISA and the Code and the regulations  promulgated  thereunder,
and all other applicable laws, (ii) none of the Company, the Subsidiaries or the
Joint Ventures nor any of their respective  Affiliates,  nor to the Knowledge of
the Company or the Subsidiaries,  any other  "disqualified  person" or "party in
interest"  (as defined in Section  4975 of the Code and Section  3(14) of ERISA,
respectively)  with respect to a Employee Plan has breached the fiduciary  rules
of ERISA or engaged in a prohibited  transaction  which could subject any of the
Company,  the  Subsidiaries  or the Joint  Ventures to a Tax or penalty  imposed
under  Section  4975 of the Code or Sections  502(i),  (j) or (l) of ERISA;  and
(iii) none of the Company,  the Subsidiaries or the Joint Ventures nor any ERISA
Affiliate has incurred any material  liability under Title IV of ERISA for which
any of the Company, the Subsidiaries or the Joint Ventures could be liable.

     (e) All  employee  pension  benefit  plans  maintained  by or covering  any
employees of the Company,  a Subsidiary or a Joint Venture which are intended to
be qualified  under Section 401(a) or 403(a) of the Code, and the related trusts
which are intended to be exempt under Section 501(a) of the Code,  are, and have
been since adoption, so qualified.  All Employee Plans are duly registered where
required  by  applicable  law  (including  registration  with the  relevant  tax
authorities  where such registration is required to qualify for tax exemption or
other beneficial tax status). None of the Company, the Subsidiaries or the Joint
Ventures have Knowledge of any fact which would  adversely  affect the qualified
or  registered  status of any of the Employee  Plans,  or of any  threatened  or
pending  claim  against any of the Employee  Plans or their  fiduciaries  by any
participant, beneficiary or government agency.

     (f) Except as set forth in Section 3.15(f) of the Disclosure Schedule, none
of the employee  pension  benefit  plans nor any of the related  trusts has been
terminated,  and no Employee Plan is subject to the funding rules in Section 302
of ERISA and 412 of the Code,  whether  or not  waived.  All  required  employer
contributions  under  any  such  plans  have  been

                                       32
<PAGE>


made as and when due and the  applicable  funds have been  funded in  accordance
with the  terms of the  plans  and no past  service  funding  liabilities  exist
thereunder.  Except as set forth in Section 3.15(f) of the Disclosure  Schedule,
none of the employee  pension  benefit  plans is, and none of the  Company,  the
Subsidiaries  or the Joint Ventures has ever  contributed  to, a  "multiemployer
plan," as that  term is  defined  in  Section  3(37) of ERISA  (as  particularly
amended by The Multiemployer Pension Plan Amendments Act of 1980).

     (g) Neither the Company nor any related  person (within the meaning of Code
Section  9701(c)(2))  has any  liability  under  Subtitle  J of the  Code  (Coal
Industry Health Benefits).

     (h) Except as described in Section 3.15(h) of the Disclosure Schedule,  the
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby will not (either alone or when taken together
with any additional or subsequent events) constitute an event under any Employee
Plan or  Employment  Agreement  with any employee that will or may result in any
payment,  upon a change in control or otherwise,  whether of severance,  accrued
vacation,  or otherwise,  or cause an acceleration,  vesting,  distribution,  or
increase in benefits or in  obligations  to fund  benefits  with  respect to any
employee.

     (i) Each of the  Company,  the  Subsidiaries  and, to the  Knowledge of the
Company and the  Subsidiaries,  the Joint Ventures (i) is in compliance with all
applicable federal,  state and provincial laws, rules and regulations respecting
employment,  employment  practices,  pay equity,  employment equity,  employment
standards, human rights, terms and conditions of employment and wages and hours,
in each case, with respect to employees;  (ii) has withheld all amounts required
by law or by  agreement  to be  withheld  from the  wages,  salaries  and  other
payments to employees; (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing;  and (iv) (other
than routine  payments not yet due which are to be made in the normal  course of
business and consistent  with past practice and  applicable  laws) is not liable
for  any  payment  to  any  trust  or  other  fund  or to  any  governmental  or
administrative  authority,  with respect to unemployment  compensation benefits,
employment insurance,  Social Security, Canada Pension Plan, employer health tax
or other benefits for employees.

     Section 3.16 Absence of Changes or Events.

     (a) Except as set forth in Section 3.16 of the Disclosure  Schedule,  since
December 31, 2005,  there has not been any material  adverse  change or event or
circumstance  reasonably  likely to result in a material  adverse  change in the
business or financial  condition of any of the Company,  the Subsidiaries or the
Joint Ventures, individually or taken as a whole, other than changes relating to
domestic or foreign  economic,  political or  regulatory  conditions  or changes
affecting  generally the industries in which the Company,  the  Subsidiaries and
the Joint Ventures, as applicable, operate.

                                       33
<PAGE>


     (b) Since December 31, 2005,  except as set forth on Section 3.16(b) of the
Disclosure Schedule,  none of the Company, the Subsidiaries or, to the Knowledge
of the Company and the Subsidiaries, the Joint Ventures have:

          (i) become  legally  committed  to make any equity  investment  in any
     Person that has not been satisfied in full;

          (ii) transferred or sold any of its assets, properties or rights other
     than in the ordinary course of business,  except for payments  specifically
     provided for in item A(3) on Exhibit A;

          (iii) changed its accounting policies;

          (iv) amended or  authorized  an amendment in its Charter  Documents or
     similar applicable organizational document;

          (v)  declared,  set aside or paid any  non-cash  dividend  or made any
     non-cash  distribution  with  respect  to its  capital  stock,  except  for
     distributions paid by RSDC in the aggregate amount of $1,450,000.00 and DKP
     in the aggregate amount of $134,000.00;

          (vi)  except  as  required  by law,  (x)  granted  any  salary or wage
     increases,   other  than  in  the  ordinary  course  of  business,  or  (y)
     terminated,  modified,  amended,  entered  into,  established,  adopted  or
     assumed an obligation  to contribute to any existing or new Employee  Plans
     in any manner that  increased the amount of liability  attributable  to the
     Company,  the Joint  Ventures  or any  Subsidiary  in  respect  of any such
     Employee Plan other than to an immaterial extent; or

          (vii)  authorized or entered into a Contract or transaction that would
     have been in contravention of any of the foregoing.

     Section 3.17 Compliance  with Laws.  Except as set forth in Section 3.17 of
the Disclosure Schedule,

     (a) Each of the Company,  the  Subsidiaries,  Kasle Holding,  Laserfactures
and, to the Knowledge of the Company and the  Subsidiaries,  the Joint  Ventures
is, and at all times since  January 1, 1996 has been,  in full  compliance  with
each Law that is or was  applicable  to it or to the conduct or operation of its
business or the ownership or use of any of its assets;

     (b) no event has  occurred  or  circumstance  exists  that (with or without
notice or lapse of time) (i) may  constitute  or result in a violation by any of
the Company, the Subsidiaries, Kasle Holding, Laserfactures or, to the Knowledge
of the Company and the  Subsidiaries,  the Joint  Ventures,  or a failure on the
part of any of the Company, the Subsidiaries,  Kasle Holding,  Laserfactures or,
to the  Knowledge  of the Company and the  Subsidiaries,  the Joint  Ventures to
comply with, any Law, or (ii) may give rise to any obligation on the part of any
of the  Company,  the  Subsidiaries,  to the  Knowledge  of the  Company and the
Subsidiaries,  the Joint Ventures to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature; and

                                       34
<PAGE>


     (c) None of the Company, the Subsidiaries, Kasle Holding, Laserfactures or,
to the  Knowledge of the Company and the  Subsidiaries,  the Joint  Ventures has
received,  at any time since January 1, 1996, any notice or other  communication
(whether  oral or  written)  from any  Governmental  Entity or any other  Person
regarding  (i) any actual,  alleged,  possible,  or potential  violation  of, or
failure to comply  with,  any Law, or (ii) any  actual,  alleged,  possible,  or
potential  obligation  on the  part  of any of the  Company,  the  Subsidiaries,
Company, Kasle Holding,  Laserfactures or the Joint Ventures to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.

     Section 3.18 Environmental Matters.

     (a) Except as set forth in Section 3.18(a) of the Disclosure Schedule,  (i)
each of the Company,  the Subsidiaries  and, to the Knowledge of the Company and
the  Subsidiaries,  the Joint  Ventures has complied  with, and is in compliance
with,  all  applicable  Environmental  Laws;  (ii)  each  of  the  Company,  the
Subsidiaries  and, to the  Knowledge  of the Company and the  Subsidiaries,  the
Joint Ventures has obtained and is in compliance with all Permits required under
Environmental  Laws to conduct its  business  as  presently  conducted,  a true,
accurate,  and  complete  list of which is set forth in  Section  3.18(a) of the
Disclosure  Schedule;  (iii) during the past two years, none of the Company, the
Subsidiaries or, to the Knowledge of the Company and the Subsidiaries, the Joint
Ventures have received any written  communication from a Governmental  Entity or
any other  Person  that  alleges the  recipient  is not in  compliance  with any
Environmental  Laws or has any liability or  corrective  or remedial  obligation
under  Environmental  Laws, in each case in  connection  with the conduct of its
respective   businesses;   (iv)  there  are  no   administrative   or   judicial
investigations, proceedings, or actions pending or threatened against any of the
Company,  the  Subsidiaries  or,  to  the  Knowledge  of  the  Company  and  the
Subsidiaries,  the Joint Ventures relating to any alleged noncompliance with, or
any  liability  or  corrective  or  remedial   obligation   arising  under,  any
Environmental  Laws; and (v) none of the Company,  the Subsidiaries  and, to the
Knowledge of the Company and the  Subsidiaries,  the Joint Ventures have entered
into or are subject to any court decree or are subject to any Order  relating to
compliance  with any  Environmental  Law or liability or  corrective or remedial
obligation under any Environmental Law.

     (b) Except as set forth in Section 3.18(b) of the Disclosure Schedule,  (i)
each of Kasle  Holding  and Kasle  Laserfactures  complied  with all  applicable
Environmental Laws; (ii) each of Kasle Holding and Kasle Laserfactures  obtained
and was in compliance  with all Permits  required  under  Environmental  Laws to
conduct its business as  conducted by it; (iii) during the past two years,  none
of the Company,  the  Subsidiaries  or, to the  Knowledge of the Company and the
Subsidiaries,  the Joint Ventures have received any written communication from a
Governmental  Entity or any other  Person that  alleges any of Kasle  Holding or
Kasle Laserfactures was not in compliance with any Environmental Laws or has any
liability or corrective or remedial obligation under Environmental Laws, in each
case in connection with the conduct of its respective businesses; (iv) there are
no administrative or judicial investigations, proceedings, or actions pending or


                                       35
<PAGE>


threatened against any of Kasle Holding,  Kasle Laserfactures or, if applicable,
the   Company  as  their   successors-in-interest   relating   to  any   alleged
noncompliance  with,  or any  liability  or  corrective  or remedial  obligation
arising under,  any  Environmental  Laws; and (v) none of Kasle Holding or Kasle
Laserfactures  entered into or are subject to any court decree or are subject to
any Order  relating to  compliance  with any  Environmental  Law or liability or
corrective or remedial obligation under any Environmental Law.

     (c) Except as set forth in Section 3.18(c) of the Disclosure Schedule,  (i)
none of the Company, the Subsidiaries, Kasle Holding, Kasle Laserfactures or, to
the  Knowledge  of the Company and the  Subsidiaries,  the Joint  Ventures  have
released,  and  to the  Knowledge  of  the  Company  and  the  Subsidiaries,  no
predecessor-in-interest or other Person has released, any Hazardous Materials in
violation  of  Environmental  Laws  at,  on,  from or under  any  real  property
currently or at any time owned,  operated or leased by any of the  Company,  the
Subsidiaries, the Joint Ventures, Kasle Holding or Kasle Laserfactures; (ii) all
of the  Real  Property  is free of all  Hazardous  Materials,  except  for  such
Hazardous  Materials that are present in the ordinary  course of business and in
compliance  with  Environmental  Laws;  and  (iii)  none  of  the  Company,  the
Subsidiaries, the Joint Ventures, Kasle Holding or Kasle Laserfactures have ever
owned or  operated  any UST  Systems,  and the Real  Property is free of all UST
Systems.

     (d) Except as set forth in  Section  3.18(d)  of the  Disclosure  Schedule,
there are no environmental  reports,  studies,  assessments or investigations or
any other material  correspondence,  documents,  or other written information in
the  possession,  custody  or  control  of  any of  Sellers,  the  Company,  the
Subsidiaries or, to the Knowledge of the Company and the Subsidiaries, the Joint
Ventures, if any, regarding any Environmental Condition at any of the current or
former  owned,  operated or leased  real  property  of any of the  Company,  the
Subsidiaries,  Kasle Holding,  Kasle  Laserfactures  or, to the Knowledge of the
Company and the  Subsidiaries,  the Joint Ventures,  and to the Knowledge of the
Company or the Subsidiaries, no such environmental reports, studies, assessments
or  investigations  or any other material  correspondence,  documents,  or other
written  information  exists or has  existed.  The Company has provided to Buyer
true and  complete  copies  of all  written  reports,  studies,  assessments  or
investigations  or any other  material  correspondence,  documents,  or  similar
written  information in the possession,  custody or control of the Company,  any
Subsidiary or, to the Knowledge of the Company and the  Subsidiaries,  any Joint
Venture evaluating the compliance of the Company or any of the Subsidiaries, the
Joint Ventures,  Kasle Holding or, Kasle  Laserfactures with the requirements of
any Environmental Law.

                                       36
<PAGE>


     Section 3.19 Employee and Labor Matters.

     (a) A list of the  salaried and  non-salaried  employees of the Company and
the Active Subsidiaries (the "Employees") is set forth in Section 3.19(a) of the
Disclosure  Schedule and such list is true,  accurate,  and  complete.  Included
within  such list is each such  Employee's  (a) current  rate of pay;  (b) gross
compensation  paid to such  Employee  during the last full  calendar  year;  (c)
tenure with the Company or any of the Subsidiaries,  as applicable;  and (d) job
title or description.  Except for those Employees that are subject to employment
contracts  described  in  Section  3.11 of the  Disclosure  Schedule  and  those
Employees of Kasle Steel of Canada Ltd.,  all of the Employees are terminable at
will.

     (b) Except as set forth in Section 3.19(a) of the Disclosure Schedule,  (i)
none of the Company,  the  Subsidiaries  or the Joint Ventures is a party to any
collective bargaining agreement or similar Contract with any labor organization,
union or  association;  (ii) no trade union,  council of trade unions,  employee
bargaining  agency or affiliated  bargaining agent holds bargaining  rights with
respect  to any of the  Company's  or  any  of the  Subsidiaries'  or the  Joint
Ventures' employees by way of certification,  interim  certification,  voluntary
recognition,  designation or successor  rights or has applied to be certified as
the bargaining agent of any such employees; (iii) neither the Company nor any of
the Subsidiaries has committed any unfair labor practice and there are no unfair
labor  practice   complaints  pending  against  the  Company,   or  any  of  the
Subsidiaries, or to the Knowledge of the Company or the Subsidiaries, threatened
against the Company,  or any  Subsidiary,  before the National  Labor  Relations
Board,  the Ontario Labour Relations Board or the Canada Labour Relations or the
Canada Labour Relations Board and no arbitration or grievance proceeding arising
out of or under any  collective  bargaining  agreement  is pending  against  the
Company, or any of the Subsidiaries; and (iv) no strike, labor dispute, boycott,
picketing, lock-out, slowdown or stoppage is pending, or to the Knowledge of the
Company  or the  Subsidiaries,  threatened,  against  any of  the  Company,  the
Subsidiaries or, to the Knowledge of the Company and the Subsidiaries, the Joint
Ventures.

     (c) Except as set forth in Section 3.19(c) of the Disclosure Schedule, each
of the Company,  the  Subsidiaries  and, to the Knowledge of the Company and the
Subsidiaries,  the Joint Ventures is in compliance with all Laws relating to the
hiring and retention of employees relating to wages,  hours,  labor,  employment
and  employment  practices,   employment  standards,  terms  and  conditions  of
employment, equal employment opportunity,  collective bargaining agreements, pay
equity and human rights.

     (d) Except as set forth in Section 3.19(c) of the Disclosure Schedule,  (i)
none of the Company,  the  Subsidiaries  or, to the Knowledge of the Company and
the  Subsidiaries,  the Joint Ventures have received any notice of any violation
or alleged  violation of OSHA, the Occupational  Health and Safety Act (Ontario)
or the Workplace Safety Insurance Act (Ontario) with respect to their respective
operations;  (ii) no material  claims have been made against any of the Company,
the Subsidiaries or, to the Knowledge of the Company and the  Subsidiaries,  the
Joint Ventures for benefits under any workers  compensation or workplace  safety
Law; and (iii) there have been no  job-related  fatalities  involving any of the
Company,  the  Subsidiaries  or the Joint  Ventures  or any of their  respective
employees.


                                       37
<PAGE>


     (e) Except as set forth in  Section  3.19(d)  of the  Disclosure  Schedule,
there is no compensation, bonuses or other fees payable to any current or former
employee or other Person  affiliated with the Company,  the Active  Subsidiaries
or, to the  Knowledge of the Company and the  Subsidiaries,  the Joint  Ventures
arising  out  of or  with  respect  to the  transactions  contemplated  by  this
Agreement or any employee bonus arrangements.

     (f) None of the  Company,  the  Subsidiaries  or, to the  Knowledge  of the
Company and the  Subsidiaries,  the Joint Ventures has any obligations to employ
or  re-employ  any  person  serving  on  military  duty  of  any  kind,   either
contractually or under USERRA (20 CFR sections 1002.35 and 1002.36) or any other
statute,  except  those  persons  listed on Section  3.21(e)  of the  Disclosure
Schedule.

     (g) Each of the  Company,  the  Subsidiaries  and, to the  Knowledge of the
Company and the Subsidiaries,  the Joint Ventures has complied with all relevant
provisions of Section 274A of the Immigration  and  Nationality  Act, as amended
(the "Immigration Act"). Without limiting the foregoing: (a) each "employee" (as
that term is defined in the Act) of each of the Company and the  Subsidiaries is
permitted to be so employed in the United States under the Immigration  Act; (b)
the Company and each of the  Subsidiaries  has examined  (and made copies of, if
applicable)  the documents  presented by said employee to establish  appropriate
employment  eligibility  under the Immigration  Act; (c) each of the Company and
the  Subsidiaries  has completed  and required  each employee  hired on or since
November 11, 1986 to complete a Form I-9 verifying employment  eligibility under
the Immigration  Act; (d) each of the Company and the  Subsidiaries has retained
each  such  completed  Form  I-9  for the  length  of time  required  under  the
Immigration Act; and (e) no monetary penalties have been assessed against any of
the  Company,  the  Subsidiaries  or, to the  Knowledge  of the  Company and the
Subsidiaries,  the Joint Ventures for violation of Section 274A of the Act. None
of the Company,  the  Subsidiaries  or, to the  Knowledge of the Company and the
Subsidiaries,  the Joint  Ventures  has made any  representations  to any person
concerning any sponsorship for temporary or permanent  immigration  status. None
of the Company,  the  Subsidiaries  or, to the  Knowledge of the Company and the
Subsidiaries,  the Joint  Ventures has any  employees  for whom it currently has
petitions or applications for immigration benefits pending with any Governmental
Entity.

     (h) Each of the  Company,  the  Subsidiaries  and, to the  Knowledge of the
Company and the  Subsidiaries,  the Joint Ventures has, to the extent  required,
prepared  and  posted  a pay  equity  plan  for all  employees  and has made all
necessary  adjustments  pursuant to such pay equity plan in full compliance with
the Pay Equity  Act  (Ontario)  and a  complete  copy of each such plan has been
provided to Buyer.

     Section 3.20 Insurance.

     (a) The tangible  real and personal  property and assets,  whether owned or
leased, of the Company, the Subsidiaries or, to the Knowledge of the Company and
the Subsidiaries,  the Joint Ventures are insured against the hazards and in the
amounts  stated in the  policies  of  insurance  listed in  Section  3.20 of the
Disclosure  Schedule.  Except as  otherwise  provided in Section  3.20(a) of the
Disclosure Schedule, with respect to the six-year period prior to the respective
policy periods for the existing  policies of insurance listed in Section 3.20(a)
of the Disclosure Schedule, the

                                       38
<PAGE>

tangible real and personal property and assets,  whether owned or leased, of the
Company and the  Subsidiaries  have been insured  against the hazards and in the
amounts  consistent  with those  covered by the  existing  policies of insurance
listed in Section 3.20 of the Disclosure Schedule. The Company, the Subsidiaries
and, to the Knowledge of the Company and the  Subsidiaries,  the Joint  Ventures
carry insurance against personal injury and property damage to third persons and
in respect of its services and operations and such other  insurance as is stated
in the policies of insurance listed in Section 3.20 of the Disclosure  Schedule.
Except as otherwise provided in Section 3.20(a) of the Disclosure Schedule, with
respect to the six-year  period prior to the  respective  policy periods for the
existing  policies  of  insurance  listed in Section  3.20(a) of the  Disclosure
Schedule,  the Company  and the  Subsidiaries  have  carried  insurance  against
personal  injury  and  property  damage to third  persons  and in respect of its
services and operations and such other insurance as is stated in the policies of
insurance  listed in Section 3.20 of the  Disclosure  Schedule  consistent  with
those  covered by the existing  policies of insurance  listed in Section 3.20 of
the  Disclosure  Schedule.  All such  insurance is in full force and effect,  is
carried with the insurers  identified in Section 3.20 of the Disclosure Schedule
or otherwise with reputable insurers and, in any event, the insurance carried by
each of the Company,  the Subsidiaries  and, to the Knowledge of the Company and
the  Subsidiaries,  the Joint Ventures in respect of their  respective  physical
properties  is of an amount and  character  such as to prevent the Company,  the
Subsidiary  or the Joint  Venture,  as  applicable,  from being a co-insurer  in
respect of any loss thereto.  Section 3.20 of the Disclosure Schedule sets forth
a true and complete  list of all claims in excess of  $5,000.00  made by each of
the  Company,  the  Subsidiaries  or, to the  Knowledge  of the  Company and the
Subsidiaries,  the Joint  Ventures  during the past three  years  under any such
policy.

     (b) All premiums due under the policies of insurance listed in Section 3.20
of the  Disclosure  Schedule  have been paid and no  notice of  cancellation  or
termination  or intent to cancel has been  received by any of the  Company,  the
Subsidiaries or, to the Knowledge of the Company and the Subsidiaries, the Joint
Venture with respect to any insurance policy  currently in effect,  and which is
presently  owned or held by such  entity,  insuring  the  products,  properties,
assets,  business and  operations  of the Company,  any  Subsidiary or any Joint
Venture and its respective  potential  liabilities to third parties,  except any
such insurance policies that the Company, any Subsidiary or, to the Knowledge of
the  Company  and the  Subsidiaries,  any Joint  Venture  is in the  process  of
extending,  replacing  or renewing in the ordinary  course of  business.  To the
Knowledge  of the  Company  and  the  Subsidiaries,  none  of the  Company,  the
Subsidiaries  or the Joint  Ventures  are in  default  under any such  insurance
policies.

     Section 3.21 Product Warranty. Each product manufactured,  sold, leased, or
delivered by each of the Company,  the Subsidiaries and, to the Knowledge of the
Company  and the  Subsidiaries,  the  Joint  Ventures  has  conformed  with  all
applicable contractual  commitments and all express and implied warranties,  and
none of the Company,  the  Subsidiaries  or, to the Knowledge of the Company and
the Subsidiaries, the Joint Ventures have any liability, and to the Knowledge of
the  Company and the  Subsidiaries,  there is no basis for any present or future
Proceeding  against any of the Company,  the  Subsidiaries or the Joint Ventures
giving rise to any liability, for replacement or repair thereof or other damages
in  connection  therewith  except in all cases to the extent  that a reserve for
product  warranty claims is reflected on the Kasle Financial  Statements and the
Kasle Interim Financial Statements or the Joint Venture Financial Statements and
the Joint Venture Interim Financial  Statements,  as applicable  (rather than in
any notes

                                       39
<PAGE>

thereto)  as  adjusted  for the  passage of time  through  the  Closing  Date in
accordance  with the past custom and practice of the Company,  the  Subsidiaries
and the Joint Ventures, as applicable. No product manufactured, sold, leased, or
delivered by any of the Company,  the  Subsidiaries  or, to the Knowledge of the
Company and the  Subsidiaries,  the Joint  Ventures is subject to any  guaranty,
warranty, or other indemnity beyond the applicable standard terms and conditions
of sale or lease. Except for the terms and conditions of any applicable Purchase
Orders  issued by customers  and accepted in the ordinary  course of business by
the Company,  the  Subsidiaries and the Joint Ventures,  as applicable,  Section
3.21 of the  Disclosure  Schedule  includes  copies  of the  standard  terms and
conditions  of sale or  lease  for  each of the  Company,  and the  Subsidiaries
(containing applicable guaranty, warranty, and indemnity provisions).

     Section 3.22 Product Liability.  None of the Company,  the Subsidiaries or,
to the Knowledge of the Company and the  Subsidiaries,  the Joint  Ventures have
any liability,  and to the Knowledge of the Company and the Subsidiaries,  there
is no basis for any present or future Proceeding against any of the Company, the
Subsidiaries or the Joint Ventures giving rise to any liability,  arising out of
any injury to individuals or property as a result of the ownership,  possession,
or use of any product  manufactured,  sold,  leased,  or delivered by any of the
Company, the Subsidiaries or the Joint Ventures.

     Section 3.23 Customers, Suppliers and Working Relationships.

     (a) Section  3.23(a) of the Disclosure  Schedule  contains a list of all of
the ten largest  customers  of the Company and the Active  Subsidiaries  for the
calendar  year ended  December  31, 2005  (determined  on the basis of the total
dollar amount of revenues by the Company or the  applicable  Active  Subsidiary)
showing the total dollar  amount of revenue  with respect to each such  customer
during each such year.

     (b) Section 3.23(b) of the Disclosure  Schedule  contains a list of the ten
(10)  largest  suppliers  or  vendors  to the  Company  and  each of the  Active
Subsidiaries  for the calendar year ended  December 31, 2005  (determined on the
basis of the total  dollar  amount of payments by the Company or the  applicable
Subsidiary)  showing the total dollar  amount of payments to each such vendor or
supplier during such year.

     (c) There has been no material adverse change in the business  relationship
of the Company or any of the Active  Subsidiaries  with any of their  respective
customers or vendors and there has been no event,  circumstance or communication
indicating  that  such  a  material   adverse  change  may  occur  in  any  such
relationship  whether  or  not  due  to the  consummation  of  the  transactions
contemplated hereby.

     (d) Each of the Company  and the Active  Subsidiaries  enjoys good  working
relationships under all of its joint venture, dealer, sales representative,  and
similar  agreements or arrangements  necessary to the normal  operation of their
respective businesses and those of the Joint Ventures.

                                       40
<PAGE>


     Section 3.24 Banks,  Directors  and  Officers,  Powers of Attorney and Life
Insurance.  Section 3.24 of the Disclosure Schedule sets forth (a) a list of all
banks  with  which  the  Company  or any  Subsidiary  has an  account,  deposit,
certificate of deposit,  or safe deposit box along with identifying  numbers and
the names of all persons authorized to draw thereon or have access thereto;  (b)
the names of all incumbent directors and officers of the Company and each of the
Subsidiaries,  and of all incumbent  trustees and committee members under any of
the Employee Plans (as that term is defined in Section 3.15) or related  trusts;
(c)  the  names  of  all  incumbent  directors,   officers,  managers  or  other
representatives of the Joint Ventures held by any director, officer, employee or
other  representative  of the  Company  or any of the  Subsidiaries,  and of all
incumbent  trustees and committee  members  under any of the Employee  Plans (as
that term is defined in Section  3.15) or related  trusts;  (c) the names of all
Persons  having powers of attorney  from the Company or any of the  Subsidiaries
and a  summary  statement  of the  terms  thereof;  and  (d) a  description  and
identification of any insurance  policies held or paid for by the Company or any
of the  Subsidiaries  on the  lives of any of their  respective  key  employees,
officers, directors or shareholders.

     Section 3.25 Brokers or Finders.  None of the Company,  the Subsidiaries or
the Joint  Ventures have incurred,  and will not incur,  directly or indirectly,
any  liability  for  brokerage,  investment  banker or finders'  fees or agents'
commissions  or any similar  charges in  connection  with this  Agreement or the
Ancillary Agreements or any transaction contemplated hereby or thereby, and none
of Buyer, the Company,  the Joint Ventures or any of the Subsidiaries shall have
any liability for such fees and expenses.

     Section 3.26 Books and Records.  The books of account,  minute books, stock
record books and other  records of the  Company,  the  Subsidiaries  and, to the
Knowledge  of  the  Company  and  the  Subsidiaries,   the  Joint  Ventures,  as
applicable, are complete and correct and have been maintained in accordance with
sound business  practices,  including the  maintenance of an adequate  system of
internal  controls.  The minute  books of the Company and the  Subsidiaries,  as
applicable,  contain  accurate and complete records of all meetings held of, and
all  actions  taken by,  the  stockholders,  the  boards of  directors,  and any
committees of the Company and the Subsidiaries, as applicable, and no meeting of
any such stockholders,  boards of directors or committee has been held for which
minutes have not been prepared and are not  contained in such minute  books.  At
the Closing,  all of those books and records of the Company and the Subsidiaries
will be in the possession of the Company or the Active Subsidiaries, as the case
may be.

     Section 3.27 Condition and Sufficiency of Assets.

     (a) Except as set forth in Section  3.27 of the  Disclosure  Schedule,  the
buildings,  plants,  structures,  and  equipment  owned,  leased  or used by the
Company  and  the  Active  Subsidiaries  are  structurally  sound,  are in  good
operating  condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings,  plants,  structures,  or equipment is in
need of  maintenance  or repairs except for ordinary,  routine  maintenance  and
repairs  that are not  material  in  nature  or  cost.  The  buildings,  plants,
structures and equipment owned, leased or used by the Company,  the Subsidiaries
and the  Joint  Ventures  are  sufficient  for the  continued  conduct  of their
respective  businesses  after the  Closing in  substantially  the same manner as
conducted prior to the Closing.

                                       41
<PAGE>

     (b) The  inventory  of the  Company  and  the  Subsidiaries  are  reflected
properly  on their  respective  books and  records in  accordance  with GAAP and
consists of supplies, raw materials, work-in-process, and finished goods, all of
which is  merchantable  and fit for the  purpose  for which it was  procured  or
manufactured, and none of which is obsolete, damaged, or defective, subject only
to the  reserve  for  inventory  write-down  set  forth on the face of the Kasle
Financial  Statements and the Kasle Interim Financial Statements (rather than in
any notes  thereto) as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company.  Section 3.27 of
the Disclosure  Schedule lists all raw materials,  work-in-process  and finished
goods  inventories  of the  Company  and  the  Subsidiaries,  and  sets  forth a
sufficient  identifying  description  for such  inventory,  including  inventory
location,  type and weight or units.  To the  Knowledge  of the  Company and the
Subsidiaries, the inventory of each of the Joint Ventures are reflected properly
on their  respective  books and records in accordance  with GAAP and consists of
supplies,  raw materials,  work-in-process,  and finished goods, all of which is
merchantable  and fit for the purpose for which it was procured or manufactured,
and  none of which is  obsolete,  damaged,  or  defective,  subject  only to the
reserve  for  inventory  write-down  set forth on the face of the Joint  Venture
Financial  Statements and the Joint Venture Interim Financial Statements (rather
than in any notes  thereto)  as  adjusted  for the  passage of time  through the
Closing  Date in  accordance  with the past  custom  and  practice  of the Joint
Ventures, as applicable.

     Section  3.28  Transactions  with Certain  Persons.  Except as set forth in
Section 3.28 of the Disclosure Schedule, at and as a result of the Closing, none
of the Company,  the Active Subsidiaries or, to the Knowledge of the Company and
the  Subsidiaries,  the Joint Ventures shall have any obligation or liability to
any current or former shareholder,  director, officer or employee of the Company
or any Subsidiary or any member of any of such Person's  immediate family or any
entity in which such Person has a direct or indirect ownership interest.

     Section 3.29  Questionable  Payments.  None of Sellers,  the  Company,  the
Subsidiaries, or the current or former officers,  directors,  employees, agents,
or  representatives  of the  Company  or any of the  Subsidiaries,  and,  to the
Knowledge of the Company and the Subsidiaries, none of the Joint Ventures or the
current  or  former  officers,   directors,   managers,   employees,  agents  or
representatives of the Joint Ventures,  have in connection with their respective
businesses or operations,  (i) used any corporate  funds for any  contributions,
gifts,  entertainment or other expenses relating to political activity,  or used
any   corporate   funds  to  reimburse  any  person  for  any  such  payment  in
contravention  of any laws;  (ii)  used any  corporate  funds for any  direct or
indirect payments to any foreign or domestic government  officials or employees;
(iii) violated any provision of the Foreign Corrupt Practices Act of 1977 or the
Competition Act (Canada);  (iv) established or maintained any unrecorded fund of
corporate  monies or other assets;  (v) made any false or fictitious  entries on
the books and  records  of any of the  Company,  the  Subsidiaries  or the Joint
Ventures;  (vi) made any bribe, rebate, payoff,  influence payment,  kickback or
other  payment  of any  nature;  or (vii)  made any  favor or gift  which is not
deductible for federal income tax purposes.

     Section  3.30 Full  Disclosure.  No  representation  or  warranty  or other
statement  made by the  Company  or the  Sellers in this  Agreement,  any of the
Disclosure  Schedule  to  this  Agreement  or any of the  Ancillary  Agreements,
contains any untrue  statement of a material fact

                                       42

<PAGE>

or omits,  to state a material  fact  required to be stated herein or therein or
necessary  to make any of them,  in light of the  circumstances  in which it was
made,  not  misleading.  True and complete  copies of all Contracts  (other than
Purchase  Orders) and other documents or agreement  identified in this Agreement
or the Disclosure Schedule have been delivered to Buyer prior to the Closing.

                                   ARTICLE IV
             REPRESENTATIONS AND WARRANTIES OF BUYER AND STEEL TECH

     Buyer and Steel Tech hereby  represent and warrant to Sellers as follows as
of the date of this Agreement:

Section 4.1       Organization and Qualification.

     (a) Buyer is a limited liability  company duly organized,  validly existing
and in good  standing  under  the  laws of the  State  of  Delaware  and has all
necessary  power and authority to own,  lease and operate its  properties and to
carry on its business as it is now being  conducted.  Buyer is duly qualified or
licensed as a foreign limited liability  company to do business,  and is in good
standing,  in each  jurisdiction  where the character of the  properties  owned,
leased or operated by it or the nature of its business makes such  qualification
or licensing necessary.

     (b) Steel Tech is a corporation  duly  organized,  validly  existing and in
good  standing  under  the  laws of the  Commonwealth  of  Kentucky  and has all
necessary corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted.

     Section 4.2 Authority.

     (a)  Buyer  has full  power and  authority  to  execute  and  deliver  this
Agreement and each of the Ancillary  Agreements to which it will be a party,  to
perform  its  obligations   hereunder  and  thereunder  and  to  consummate  the
transactions  contemplated  hereby and thereby.  The  execution  and delivery by
Buyer of this Agreement and each of the Ancillary Agreements to which it will be
a party and the  consummation by Buyer of the transactions  contemplated  hereby
and thereby have been duly and validly  authorized  by all  necessary  action of
Buyer.  This Agreement has been, and upon their  execution each of the Ancillary
Agreements  to which  Buyer  will be a party will have  been,  duly and  validly
executed and delivered by Buyer.  This  Agreement  constitutes,  and, upon their
execution,  each of the Ancillary Agreements to which Buyer will be a party will
constitute,  the legal,  valid and  binding  obligations  of Buyer,  enforceable
against Buyer in accordance with their respective  terms,  except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,  moratorium
or similar laws affecting  creditors' rights generally and by general principles
of equity  (regardless  of whether  considered  in a proceeding  in equity or at
law).

     (b) Steel  Tech has full  corporate  power and  authority  to  execute  and
deliver this Agreement and each of the Ancillary  Agreements to which it will be
a party, to perform its  obligations  hereunder and thereunder and to consummate
the transactions  contemplated hereby

                                       43
<PAGE>


and thereby. The execution and delivery by Steel Tech of this Agreement and each
of the Ancillary  Agreements to which it will be a party and the consummation by
Steel Tech of the  transactions  contemplated  hereby and thereby have been duly
and validly  authorized by all necessary  corporate  action of Steel Tech.  This
Agreement has been, and upon their execution each of the Ancillary Agreements to
which Steel Tech will be a party will have been,  duly and validly  executed and
delivered by Steel Tech. This Agreement constitutes,  and, upon their execution,
each of the  Ancillary  Agreements  to which  Steel  Tech  will be a party  will
constitute,  the legal, valid and binding obligations of Steel Tech, enforceable
against  Steel  Tech in  accordance  with  their  respective  terms,  except  as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting  creditors' rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).

     Section 4.3 No Conflict; Required Filings and Consents.

     (a) The execution, delivery and performance by Buyer and Steel Tech of this
Agreement and each of the Ancillary Agreements to which Buyer or Steel Tech will
be a party,  and the consummation of the  transactions  contemplated  hereby and
thereby, do not and will not:

          (i) conflict  with or violate the Charter  Documents of Buyer or Steel
     Tech;

          (ii)  conflict  with or violate any Law  applicable  to Buyer or Steel
     Tech or by which any  property  or asset of Buyer or Steel Tech is bound or
     affected; or

          (iii) conflict with, result in any breach of, constitute a default (or
     an event  that,  with  notice  or lapse  of time or  both,  would  become a
     default)  under,  require any consent of any Person pursuant to, or give to
     others any rights of  termination,  acceleration  or  cancellation  of, any
     contract or agreement to which Buyer or Steel Tech is a party.

     (b) Neither  Buyer nor Steel Tech is  required to file,  seek or obtain any
notice,  authorization,  approval,  order,  permit  or  consent  of or with  any
Governmental  Entity in connection with the execution,  delivery and performance
by Buyer or Steel Tech of this Agreement and each of the Ancillary Agreements to
which it will be  party or the  consummation  of the  transactions  contemplated
hereby  or  thereby  or in  order  to  prevent  the  termination  of any  right,
privilege, license or qualification of Buyer or Steel Tech.

     Section 4.4 Brokers. No broker,  finder or investment banker is entitled to
any  brokerage,  finder's  or other fee or  commission  in  connection  with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Buyer or Steel Tech and none of Sellers  shall have any  liability for such fees
and commissions.

     Section 4.5  Investment  Intent.  Buyer is acquiring the Shares for its own
account  for  investment  purposes  only  and  not  with  a view  to any  public
distribution thereof or with any intention of selling, distributing or otherwise
disposing  of the  Shares  in a  manner  that  would  violate  the  registration
requirements of the Securities Act of 1933, as amended (the  "Securities  Act"),


                                       44
<PAGE>


or any state  securities  laws.  Buyer  agrees  that the Shares may not be sold,
transferred,  offered for sale,  pledged,  hypothecated or otherwise disposed of
without   registration  under  the  Securities  Act  and  any  applicable  state
securities laws,  except pursuant to an exemption from such  registration  under
the  Securities  Act and such laws.  Buyer is able to bear the economic  risk of
holding  the  Shares  for an  indefinite  period  (including  total  loss of its
investment),  and has  sufficient  knowledge  and  experience  in financial  and
business  matters so as to be capable of  evaluating  the merits and risk of its
investment in the Shares.

                                    ARTICLE V
                                    COVENANTS

     Section 5.1 Consents and Filings; Further Assurances.

     (a)  To  the  extent  that  such   consents,   approvals,   authorizations,
qualifications or orders are not obtained or such filings or submissions are not
made  prior to the  Closing,  each of the  parties  shall  use all  commercially
reasonable  efforts to take, or cause to be taken, all appropriate action to do,
or cause to be done, all things necessary,  proper or advisable under applicable
Law or otherwise to consummate and make effective the transactions  contemplated
by this  Agreement  and the  Ancillary  Agreements  as promptly as  practicable,
including  to (i)  obtain  from  Governmental  Entities  and other  Persons  all
consents, approvals, authorizations,  qualifications and orders as are necessary
for the consummation of the transactions  contemplated by this Agreement and the
Ancillary  Agreements,  and  (ii)  promptly  make  all  necessary  filings,  and
thereafter make any other required submissions, under any applicable Law.

     (b) Each of the Representative, Limauro and Buyer shall promptly notify the
other of any  communication  it, the Company,  any of the Subsidiaries or any of
their respective  Affiliates  receives from any Governmental  Entity relating to
the  matters  that are the  subject  of this  Agreement  and permit the other to
review in advance any proposed  communication by such party or its Affiliates to
any Governmental  Entity.  Neither Buyer, the  Representative  nor Limauro shall
agree to participate,  or allow the Company or any of the  Subsidiaries or Joint
Ventures or any of their  respective  Affiliates to participate,  in any meeting
with any Governmental  Entity in respect of any filings,  investigation or other
inquiry  unless  it  consults  with the  other in  advance  and,  to the  extent
permitted  by such  Governmental  Entity,  gives the other or its  designee  the
opportunity  to attend and  participate  at such  meeting.  The  Representative,
Limauro  and Buyer  will  coordinate  and  cooperate  fully  with each  other in
exchanging  such  information  and  providing  such  assistance as the other may
reasonably request in connection with the foregoing. Each of the Representative,
Limauro and Buyer will  provide  each other with  copies of all  correspondence,
filings or communications  between it or any of their agents or representatives,
on the one hand,  and any  Governmental  Entity or members of its staff,  on the
other hand,  with respect to this  Agreement and the  transactions  contemplated
hereby.

     Section 5.2 Public  Announcements.  The  Representative,  Limauro and Buyer
shall  consult  with each  other  before  issuing,  and  provide  each other the
opportunity  to review and  comment  upon,  any press  release  or other  public
statement with respect to the transactions  contemplated  hereby,  and shall not
issue any such press  release or make any such  public

                                       45
<PAGE>


statement  prior to such  consultation,  except  as any  party  hereto  has been
advised by counsel or as may be required by applicable Law;  provided,  however,
that prior to such  disclosure,  such party shall provide not less than 24 hours
prior written notice to the other parties of such proposed disclosure.

     Section 5.3 Environmental  Investigation.  Within a commercially reasonable
period following the Closing,  Buyer shall retain AMEC Earth and  Environmental,
Inc.  ("AMEC"),  or another  reputable  environmental  consulting  firm mutually
agreeable  to the Buyer and  Sellers,  to conduct  Phase II  environmental  site
assessments with respect to the conditions listed below:

     (a) Phase II  Environmental  Site  Assessment,  Kasle Steel Auto  Blankers,
Inc., 1301 Alabama, Flint, Michigan,  prepared by Clayton Group Services,  dated
July 13, 2001: Detection of tetrachloroethene in groundwater at concentration in
excess of applicable criteria; and

     (b) Phase II Environmental Site Assessment, Kasle Steel of Canada Ltd., 715
Sprucewood Avenue, Windsor,  Ontario,  prepared by Clayton Group Services, dated
September 24, 2001:  Detections of benzo(a)pyrene,  arsenic,  copper and zinc in
soils at  concentrations  in excess of  applicable  criteria;  and  proximity of
upgradient,  off-site  aboveground  storage  tanks and a railway line to on-site
locations at which polynuclear aromatic hydrocarbons were detected.

     The cost of Buyer's  Phase II  environmental  Site  Assessments  referenced
above shall be shared  equally by Sellers and Buyer and  Sellers'  share of such
expense shall be paid from the Escrow  Account upon Buyer's  presentation  of an
appropriate statement for such services from the environmental consulting firm.

     Section 5.4  Obligations  to Barbara Kasle  Rothstein and the Barbara Kasle
Rothstein  Revocable  Trust.  Sellers  shall  cooperate  and assist Buyer in any
manner  reasonably  requested to accomplish  the release of the Escrowed  Shares
from escrow promptly following the Closing; provided,  however, that, except for
the  adjustments  to the Purchase  Price pursuant to Section 2.4 with respect to
the Company's notes owed to Barbara Kasle Rothstein and David Band as Trustee of
the Barbara  Rothstein  Irrevocable  Trust,  Sellers shall have no obligation to
make  any  payments,  individually  or on  behalf  of the  Company,  in order to
accomplish the release of the Escrowed Shares.

     Section 5.5  Confidentiality.  Each of Sellers  shall,  and each of Sellers
shall cause its respective  agents and  representatives  to,  maintain in strict
confidence all of the confidential or proprietary information of the Company and
all of the  Subsidiaries  and Joint  Ventures  known to it or in its  possession
(collectively,  the "Confidential  Information"),  except as otherwise permitted
herein.  Confidential  Information shall not include any information which is or
becomes publicly  available through lawful means and other than through a breach
by any  Seller or a third  party  under a written or common  law  obligation  of
confidentiality to the Company or any of the Subsidiaries or the Joint Ventures.
Each of Sellers has delivered to the Company all documents, memoranda, notes and
other writings  whatsoever  (and all copies  thereof) which contain or relate to
any  Confidential  Information  and which  were in its  possession  or  control,
whether prepared by such Seller or otherwise.  Without the prior written consent
of Buyer, none of Sellers or any of their respective agents and  representatives
will disclose to any person or

                                       46

<PAGE>

entity any of the Confidential Information or any of the terms,  conditions,  or
other  facts  with  respect  to any of the  transactions  contemplated  in  this
Agreement.  If any Seller or any of its agents or representatives is required by
legal process or by operation of applicable law to disclose any of the foregoing
or any Confidential Information,  such Seller will provide prompt notice of such
requirement(s)  to Buyer and allow the Company or Buyer a  reasonable  amount of
time to seek a protective or similar order prior to any such disclosure.

                                   ARTICLE VI
                                   TAX MATTERS

     Section 6.1 Sellers' Indemnification of Buyer. Sellers shall be liable for,
and shall jointly and severally  indemnify,  defend and hold harmless Buyer from
and against,  all Taxes  attributable  to, imposed on, or for which the Company,
any of its  Subsidiaries  or any of the Joint  Ventures may  otherwise be liable
(including, without limitation, Income Taxes for which the Company or any of its
Subsidiaries may be liable under Treasury  Regulation 1.1502-6 or the Income Tax
Act  (Canada)  or Taxes of  another  person  for  whom the  Company,  any of its
Subsidiaries  or any of the  Joint  Ventures  may be  liable  as  transferor  or
successor,  by contract or otherwise) (i) for events occurring or periods ending
on or before  the  Closing,  (ii) with  respect  to any  taxable  year or period
beginning before and ending after the Closing,  the portion of such taxable year
ending on and  including  the  Closing,  (iii)  with  respect to any Tax that is
assessed  as of a  particular  date but  relates to any  taxable  year or period
beginning before and ending after the Closing, the portion of such Tax allocable
to the  period  ending  on  and  including  the  Closing,  and  (iv)  all  Taxes
attributable  to, imposed on, or for which the Company,  any of its Subsidiaries
or any of the Joint Ventures may otherwise be liable related to the tax position
taken with respect to the Michigan  MEGA Tax Credit  related to, but not limited
to,  the  exclusion  of such  credits  from  taxable  income as  non-shareholder
contributions to capital pursuant to Section 118 of the Internal Revenue Code.

     Section 6.2 Taxes for Short  Taxable  Year.  For purposes of Sections  6.1,
whenever it is necessary to determine  the  liability  for Taxes of the Company,
any of its Subsidiaries, or any of the Joint Ventures for a portion of a taxable
year or period that begins before and ends after the Closing,  the determination
of the  Taxes  of the  Company,  any of its  Subsidiaries,  or any of the  Joint
Ventures for the portion of the year or period ending on, and the portion of the
year or period  beginning  after, the Closing Date generally shall be determined
by  assuming  that the  Company,  any of its  Subsidiaries,  or any of the Joint
Ventures  had a taxable  year or period  which ended at the close of the Closing
Date, except that: (a) exemptions,  allowances or deductions that are calculated
on an annual basis, (such as the deduction for depreciation),  and Taxes imposed
on a periodic  basis (such as real property  taxes),  shall be  apportioned on a
time basis;  and (b) Sellers'  share of income Tax  allocable  to the  Company's
distributive  share of any  partnership  income from each of the Joint  Ventures
shall be calculated based upon a factor for each Joint Venture, the numerator of
which  is  income  recorded  on the  Company's  books  for GAAP  reflecting  its
distributive  share of such Joint  Venture's  income  during the portion of such
Joint Venture's current taxable year ending on and including the Closing and the
denominator of which is the Company's entire  distributive  share of such income
recorded  on its books  for such  entire  taxable  year of such  Joint  Venture,
multiplied by the Company's  distributive  share of such Joint Venture's taxable
income for its entire  taxable  year that  includes the Closing Date and further
multiplied by thirty-five percent (35%).  Sellers acknowledge and agree that any
Taxes owed by Sellers for the portion of the year or period prior to the Closing
shall be paid by  Sellers  and  shall  not be paid by the  Company  on behalf of
Sellers out of the Escrow Amount or otherwise.

     Section 6.3 Adjustment to Purchase  Price.  Any payment by Buyer or Sellers
under this  Article VI will be treated as an  adjustment  to the Final  Purchase
Price.

     Section 6.4 Carrybacks. Following the Closing, Buyer and the Company shall,
to the extent  permissible,  waive the right to carryback any income tax losses,
credits or similar items  attributable to the Company and from a taxable year or
period that begins  after the Closing Date to a taxable year or period that ends
on or before the Closing Date.

                                       47
<PAGE>


     Section  6.5  Returns.  Buyer  shall file or cause to be filed when due all
Returns  that are  required to be filed after the Closing by or with  respect to
the Company,  any of its  Subsidiaries,  or any of the Joint Ventures and shall,
subject to the terms of this Agreement regarding Sellers'  responsibilities with
respect to  pre-Closing  Taxes,  remit any Taxes due in respect of such Returns.
Such Returns  shall be prepared on a basis  consistent  with those  prepared for
prior taxable periods unless a different  treatment of an item is required by an
intervening  change in law.  Buyer shall permit  Seller to review and comment on
each Return for which Seller may be liable under Article VI, and shall make such
revisions to such Returns as are reasonably requested by Sellers,  provided such
revisions do not adversely  affect Buyer in any  post-Closing  period.  Buyer or
Sellers, as applicable,  shall pay to the other an amount equal to the Taxes for
which the payor is liable  pursuant to Section  6.1 but which are  payable  with
Returns  to be  filed  by the  payee  at  lease  10 days  prior  to the due date
(including any extensions) for the filing of such Returns.

     Section 6.6 Contest  Provisions.  Buyer shall  promptly  notify  Sellers in
writing upon receipt by Buyer, any of its Affiliates or the Company,  any of its
Subsidiaries,  or any  of the  Joint  Ventures  of  notice  of  any  pending  or
threatened federal, state, provincial, municipal, local or foreign Tax audits or
assessments  which may affect the tax  liabilities  of the Company or any of its
Subsidiaries  for which Sellers would be required to indemnify Buyer pursuant to
Section  6.1, but no failure to give such notice  shall  relieve  Sellers of any
liability hereunder except to the extent, if any, that the rights of Seller with
respect to such claim are actually  prejudiced.  Sellers shall have the right to
represent the Company or any of its Subsidiaries' (and upon assuming such right,
no  other  Person  will  have  the  right  to  represent  the  Company  and  its
Subsidiaries)  interests in and manage any Income Tax audit or administrative or
court  proceeding  relating to taxable years or periods  ending on or before the
Closing Date,  and to employ  counsel of its choice at its expense.  Sellers may
not agree to settle any Income Tax claim which would adversely affect Buyer, the
Company  any of its  Subsidiaries,  or any of the Joint  Ventures in any taxable
period  ending after the Closing Date without  Buyer's  prior  written  consent,
which consent shall not be unreasonably  withheld.  Sellers shall be entitled to
participate  at its expense in the  defense of any claim for Income  Taxes for a
year or period  ending  after the  Closing  Date  which  may be the  subject  of
indemnification by Sellers pursuant to Section 6.1 and, with the written consent
of Buyer, and at Sellers' expense,  may assume the entire defense of such Income
Tax claim. Neither Buyer nor the Company, any of its Subsidiaries, or any of the
Joint  Ventures  may agree to settle any Income Tax claim for the portion of the
year  or  period  ending  on the  Closing  Date  which  may be  the  subject  of
indemnification  by Sellers under Section 6.1 without the prior written  consent
of Seller, which consent shall not be unreasonably withheld.

     Section 6.7 Transfer Taxes. All excise, sales, use, transfer,  documentary,
filing and other  similar  taxes which may be imposed or assessed as a result of
Buyer's acquisition of the Shares shall be borne by Sellers.

     Section 6.8 Assistance  and  Cooperation.  After the Closing Date,  each of
Sellers shall:

     (a) assist (and cause such Seller's respective Affiliates,  accountants and
tax advisors to assist) the other party in preparing Returns;

                                       48
<PAGE>


     (b) cooperate fully in preparing for any audits of, or disputes with taxing
authorities  regarding,  any Returns of the Company,  its  Subsidiaries,  or the
Joint Ventures;

     (c) make  available  to Buyer and to any taxing  authority,  as  reasonably
requested,  all  information,   records,  and  documents  within  such  Seller's
possession or control relating to Taxes of the Company, its Subsidiaries, or the
Joint  Ventures  (including  information  necessary to file  extensions and make
estimated Tax payments);

     (d) provide  timely notice in writing to Buyer of any pending or threatened
tax  audits  or  assessments  of the  Company,  its  Subsidiaries,  or the Joint
Ventures,  of which such Seller receives  notice,  for taxable periods for which
Buyer may have a liability under this Article VI; and

     (e)  furnish  Buyer with  copies of all  correspondence  received  from any
taxing  authority in connection  with any Tax audit or information  request with
respect to any such taxable period.

                                   ARTICLE VII
                                 INDEMNIFICATION

     Section 7.1 Survival of Representations, Warranties, and Certain Covenants.
The representations and warranties of Sellers, the Company, Buyer and Steel Tech
contained in this  Agreement and the Ancillary  Agreements  and any  certificate
delivered  pursuant  hereto shall  survive the Closing for a period of 24 months
after the Closing Date,  except that (i) the  representations  and warranties of
Sellers in Sections 3.1 (Authority),  3.2 (Title),  3.5 (Company  Authority) and
3.7(a) and (e)  (Capitalization)  shall  survive the  Closing for an  indefinite
period,  and (ii) the  representations  and warranties in Sections 3.13 (Taxes),
3.15 (Benefit Plans) and 3.18 (Environmental Matters) shall survive for a period
equal to the applicable  statute of  limitations  with respect to claims arising
out of the subject matter of such  representations and warranties,  but not more
than six (6) years after the Closing  Date.  The  covenants  and  agreements  of
Sellers and Buyer contained in this Agreement and the Ancillary Agreements to be
performed  on or after the  Closing  Date shall  survive the  Closing.  Sellers'
indemnification obligations under Sections 7.2(c) through (g) (Environmental and
Tax matters) shall survive for the applicable statute of limitations relating to
claims arising out of the subject matter of such express  indemnity  provisions.
Sellers'   indemnification   obligation   under  Sections  7.2(h)   (pre-Closing
operations),  and  Buyer's  indemnification  obligation  under  Sections  7.3(c)
(post-Closing  operations),  shall  survive for a period of 24 months  after the
Closing Date.

     Section 7.2 Indemnification by Sellers.  Subject to the other provisions of
this Article VII, Sellers shall save, defend, indemnify and hold harmless Buyer,
the Company and the  Subsidiaries  and their  respective  successors and assigns
(collectively,  the "Buyer  Indemnified  Parties")  from and against any and all
realized  diminution  in  value,  losses,  damages,  liabilities,  deficiencies,
claims, interest,  awards, judgments,  penalties,  costs and expenses (including
reasonable  attorneys' fees, costs and other out-of-pocket  expenses incurred in
investigating,  preparing or defending the foregoing) (hereinafter collectively,
"Losses") to the extent arising

                                       49
<PAGE>


out of or  resulting  from the  following,  provided  that such Losses  shall be
reduced by the amount of (i) any reserves maintained on the books and records of
the Company or any of the  Subsidiaries  or the Joint Ventures as of the Closing
Date with respect to the potential for such loss, (ii) any tax benefit  received
by Buyer in  connection  with  such  Loss,  and (iii)  any  insurance  proceeds,
indemnification  payments,  contribution payments or reimbursements  received by
Buyer in connection with such Loss:

     (a) any breach of any  representation  or warranty  made by or on behalf of
Sellers or the Company  contained in this Agreement or any Ancillary  Agreements
provided  that  with  respect  to  any  particular  Seller,  he or  she  or  the
Representative  on behalf  of  Sellers  other  than  Limauro  is a party to such
Ancillary  Agreement,  or any certificate  delivered  pursuant hereto and in the
case of any breach of any  representation  or  warranty  in Section  3.18,  such
Losses  do not arise out of or  result  from a  Limited  Recourse  Environmental
Matter;

     (b) any breach of any  covenant  or  agreement  by  Sellers or the  Company
contained  in this  Agreement  or any  Ancillary  Agreement  provided  that with
respect to any particular  Seller, he or she or the  Representative on behalf of
Sellers other than Limauro is a party to such Ancillary Agreement which survives
the Closing;

     (c) any Environmental Matters including any Environmental Matters disclosed
in this  Agreement or in the  Disclosure  Schedule  hereto,  including,  but not
limited to: (i) any of the  Environmental  Matters listed in Section 5.4 of this
Agreement,  and (ii) any  Environmental  Matter  arising  from or related to the
property located at 4343 Wyoming Avenue,  Dearborn,  Michigan  formerly owned by
the Company;

     (d) any Remediation with respect to any Environmental Matters arising prior
to Closing;

     (e) any breach by the Company or any Subsidiary of any  Environmental  Laws
prior to Closing;

     (f) any Limited Recourse Environmental Matter;

     (g) any failure by Sellers to perform their  obligations to indemnify Buyer
under Section 6.1 with respect to Taxes;

     (h) any claim  arising out of the  operation of the Company's or any of the
Subsidiaries'  businesses  prior to Closing,  or the  ownership  or operation of
their respective assets and properties prior to Closing; or

     (i)  any  liability  or  other  obligations  of the  Company  or any of the
Subsidiaries to the Central States  Southeast and Southwest Area Pension Fund in
excess of the amount of the applicable adjustment to the Purchase Price for such
PPA Liability pursuant to Section A(1)(e) of Exhibit A.

                                       50

<PAGE>


     Section 7.3  Indemnification by Buyer. Buyer shall save, defend,  indemnify
and hold harmless Sellers and their respective heirs, executors, administrators,
representatives,  successors and assigns (collectively,  the "Seller Indemnified
Parties")  from and against  any and all Losses to the extent  arising out of or
resulting from:

     (a) any breach of any  representation  or  warranty  made by Buyer or Steel
Tech contained in this Agreement or any Ancillary  Agreement or any  certificate
delivered pursuant hereto;

     (b) any  breach  of any  covenant  or  agreement  by Buyer  or  Steel  Tech
contained  in this  Agreement  or any  Ancillary  Agreement  which  survives the
Closing;

     (c) any  claim  or  cause  of  action  by any  Person  against  any  Seller
Indemnified  Party with respect to the  operations  of the Company or any of its
Subsidiaries  on or after the Closing  Date,  including  with respect to (i) any
Environmental Condition, any Release, or any violation of any Environmental Law,
on,  under,  in or about,  or with  respect to, any of the Real  Property or the
operation of the business of the Company or any of the Subsidiaries or the Joint
Ventures with respect to any period after the Closing Date or (ii) the ownership
or operation of their  respective  assets and properties  after the Closing Date
except  for  claims  or  causes  of action  with  respect  to which  any  Seller
Indemnified Party is obligated to indemnify Buyer  Indemnified  Parties pursuant
to Section 7.2; and

     (d) any failure by Buyer to perform its  obligations  to indemnify  Sellers
under Section 6.2 with respect to Taxes.

     Section 7.4 Procedures.

     (a) In order for a Buyer Indemnified Party or Seller Indemnified Party (the
"Indemnified  Party") to be entitled to any  indemnification  provided for under
this  Agreement in respect of,  arising out of or involving a Loss or a claim or
demand made or effected by any Person  against the  Indemnified  Party (a "Third
Party Claim"),  such Indemnified Party shall deliver notice thereof to the party
against  whom  indemnity is sought (the  "Indemnifying  Party")  promptly  after
receipt by such  Indemnified  Party of written  notice of the Third Party Claim,
describing  in  reasonable  detail  the  facts  giving  rise  to any  claim  for
indemnification  hereunder, the amount or method of computation of the amount of
such claim (if known) and such other  information  with  respect  thereto as the
Indemnifying Party may reasonably  request.  The failure to provide such notice,
however,  shall not release the  Indemnifying  Party from any of its obligations
under  this  Article  VII except to the extent  that the  Indemnifying  Party is
prejudiced by such failure.

     (b) The Indemnifying Party shall have the right, upon written notice to the
Indemnified Party within 30 days of receipt of notice from the Indemnified Party
of the  commencement of such Third Party Claim, to assume the defense thereof at
the expense of the Indemnifying  Party with counsel selected by the Indemnifying
Party and reasonably  satisfactory to the Indemnified Party. If the Indemnifying
Party assumes the defense of such Third Party Claim, the Indemnified Party shall
have the right to employ  separate  counsel  and to  participate  in the defense
thereof,  but the fees and expenses of such  counsel  shall be at the expense of

                                       51
<PAGE>


the  Indemnified  Party.  If the  Indemnifying  Party assumes the defense of any
Third Party Claim,  the Indemnified  Party shall cooperate with the Indemnifying
Party  in  such  defense  and  make  available  to the  Indemnifying  Party  all
witnesses,  pertinent  records,  materials and  information  in the  Indemnified
Party's possession or under the Indemnified  Party's control relating thereto as
is  reasonably  required  by  the  Indemnifying   Party.   Whether  or  not  the
Indemnifying  Party assumes the defense of a Third Party Claim,  the Indemnified
Party shall not admit any  liability  with respect to, or settle,  compromise or
discharge, or offer to settle,  compromise or discharge,  such Third Party Claim
without the Indemnifying Party's prior written consent.

     (c) In the event any  Indemnified  Party  should  have a claim  against any
Indemnifying  Party  hereunder due to a loss that does not involve a Third Party
Claim being  asserted  against or sought to be collected  from such  Indemnified
Party, the Indemnified  Party shall deliver notice of such claim promptly to the
Indemnifying Party, describing in reasonable detail the facts giving rise to any
claim for indemnification  hereunder, the amount or method of computation of the
amount of such  claim and such other  information  with  respect  thereto as the
Indemnifying Party may reasonably  request.  The failure to provide such notice,
however,  shall not release the  Indemnifying  Party from any of its obligations
under  this  Article  VII except to the extent  that the  Indemnifying  Party is
prejudiced by such failure. The Indemnified Party shall reasonably cooperate and
assist the  Indemnifying  Party in  determining  the  validity  of any claim for
indemnity by the Indemnified Party and in otherwise resolving such matters. Such
assistance and  cooperation  shall include  providing  reasonable  access to and
copies  of  information,   records  and  documents  relating  to  such  matters,
furnishing  employees to assist in the investigation,  defense and resolution of
such matters and providing  legal and business  assistance  with respect to such
matters.

     (d) Anything in this Section 7.4 to the  contrary  notwithstanding,  except
for claims that may only be asserted  against Julie Kasle or Matthew Kasle,  the
Representative  shall act for and on behalf of Sellers  (other than Limauro) and
the  Seller  Indemnified  Parties  (other  than the Seller  Indemnified  Parties
related to Limauro) with respect to any notices to and from,  and any decisions,
determinations  or directives to be made by, any one or more Seller  Indemnified
Parties under this Section 7.4, and all such notices, decisions,  determinations
and directives shall be given to and made by the Representative acting on behalf
of Sellers (other than Limauro) and the Seller  Indemnified  Parties (other than
the Seller Indemnified Parties related to Limauro).

     Section 7.5 Matters Relating to Indemnification;  Limitations on Liability;
Buyer Recovery from Escrow.

     (a)  No  claim  may  be  asserted  against  any  party  for  breach  of any
representation,  warranty or covenant contained herein, unless written notice of
such claim is received by such party,  describing in reasonable detail the facts
and  circumstances  with respect to the subject matter of such claim on or prior
to the date on which the  representation,  warranty  or  covenant  on which such
claim is based ceases to survive as set forth in Section 7.1, in which case such
representation,  warranty or covenant  shall survive as to such claim until such
claim has been finally resolved.

                                       52
<PAGE>


     (b) Upon notice to the  Representative and Limauro specifying in reasonable
detail the basis for such  claim,  Buyer may give  notice of an  indemnification
claim under this Article VII to the Escrow  Agent.  The failure to give a notice
of claim under the Escrow Agreement shall not constitute an election of remedies
or limit Buyer in any manner in the  enforcement  of any other remedies that may
be available to it. Sellers' indemnification  obligation shall not be limited to
the funds held by the Escrow Agent pursuant to the Escrow Agreement.

     (c)  Anything in this  Section  7.5 to the  contrary  notwithstanding,  the
Representative  shall act for and on behalf of Seller Indemnified  Parties other
than  Limauro  with  respect  to any  notices  to and from,  and any  decisions,
determinations  or directives to be made by, any one or more Seller  Indemnified
Parties  other  than  Limauro  under this  Section  7.5,  and all such  notices,
decisions,  determinations  and  directives  shall  be  given to and made by the
Representative  acting  on  behalf  of Seller  Indemnified  Parties  other  than
Limauro.

     (d) Sellers'  indemnity  liability  with respect to claims for Losses under
subsections  7.2(a),  (c), (d), (e) and (f) shall be limited to Losses which are
individually  in an amount of at least  $10,000.00 (a "Material  Loss") and when
aggregated  with other  Material  Losses  pursuant  to claims  for Losses  under
subsections 7.2(a) (c), (d), (e) and (f), exceed $75,000.00;  provided, however,
that upon Buyer's  successful  assertion of a claim against Sellers for at least
$75,000.00 in aggregated Material Losses with respect to claims for Losses under
subsections  7.2(a),  (c), (d), (e) and (f),  Buyer shall be entitled to recover
the full amount of its claim for such aggregated Material Losses,  including the
$75,000.00 base amount. A Seller's  indemnification  obligations with respect to
any breach of such Seller's  representations  and  warranties in Section 3.2 and
the Company's  representations and warranties in Section 3.7 shall be limited to
such Seller's pro-rata share of the Final Purchase Price received by such Seller
(for which such Seller shall be severally liable). The Sellers'  indemnification
liability  with  respect  to any  claims for  Losses  under  subsections  7.2(a)
(excluding  any claims for Losses arising out of or resulting from any breach of
such Seller's  representations  and  warranties in Section 3.2 and the Company's
representations and warranties in Section 3.7), (c), (d), (e), (f), (g), (h) and
(i) shall be limited to:

          (i) aggregate  Material  Losses of up to  $26,500,000.00  arising from
     claims  for  indemnification  made by  Buyer  during  the  18-month  period
     immediately  following the Closing, as to which (A) Limauro shall be liable
     up to an amount  equal to 20.92% of such  $26,500,000.00  and (B) the other
     Sellers  shall be jointly  and  severally  liable up to an amount  equal to
     79.08% of such $26,500,000.00;

          (ii) with  respect to claims for  indemnification  made by Buyer after
     the conclusion of the 18-month  period  immediately  following the Closing,
     aggregate  Material  Losses of up to  $6,500,000.00  less the amount of all
     claims  for  Losses  made and  successfully  asserted  during  the  initial
     18-month  period  following  the Closing,  as to which (A) Limauro shall be
     liable up to an amount equal to 20.92% of such  $6,500,000.00 or applicable
     lesser  amount,  and (B) the other  Sellers  shall be jointly and severally
     liable  up to an  amount  equal  to  79.08%  of such  $6,500,000.00  or the
     applicable lesser amount;

                                       53
<PAGE>


          (iii) with respect to claims for  indemnification  made by Buyer after
     the conclusion of the 24-month period immediately following the Closing but
     not later than the  six-year  anniversary  of the Closing  with  respect to
     claims for Losses  under  Section  7.2(a)  with  respect to  Sections  3.13
     (Taxes),  3.15  (Employee  Benefits) and 3.18  (Environmental  Matters) and
     claims for Losses under  subsections  7.2(c),  (d), (e) and (f),  aggregate
     Material  Losses of up to  $6,500,000.00  less the amount of all claims for
     Losses made and  successfully  asserted during the initial  24-month period
     following the Closing up to $4,500,000.00, as to which (A) Limauro shall be
     liable up to an amount equal to 20.92% of such  $6,500,000.00 or applicable
     lesser  amount,  and (B) the other  Sellers  shall be jointly and severally
     liable  up to an  amount  equal  to  79.08%  of such  $6,500,000.00  or the
     applicable lesser amount; and

          (iv) with  respect  to claims  for  Losses  under  subsection  7.2(f),
     aggregate  Material  Losses of up to  $500,000.00,  as to which (A) Limauro
     shall be liable up to an amount  equal to 20.92% of such  $500,000.00,  and
     (B) the other Sellers shall be jointly and severally liable up to an amount
     equal to 79.08% of such $500,000.00;  provided,  however, that with respect
     to Losses  under  subsection  7.2(f),  Sellers'  indemnity  exposure  under
     subsection  7.2(f)  shall be limited to 80% of such Losses with  respect to
     claims made under  subsection  7.2(f) during the first 24 months  following
     the  Closing  and 50% of such  Losses  with  respect  to claims  made under
     subsection  7.2(f)  after the  conclusion  of the initial  24-month  period
     following the Closing and prior to the sixth anniversary of the Closing.

     (e) the indemnity  liability of Buyer and Steel Tech with respect to claims
for Losses under subsections 7.3(a) and (c) shall be limited to Losses which are
individually  in an amount of at least  $10,000  (a  "Material  Loss")  and when
aggregated   with  other   Material   Losses   with   respect  to   breaches  of
representations  and  warranties  of Buyer and Steel  Tech,  exceed  $75,000.00;
provided,  however,  that upon Sellers' successful  assertion of a claim against
Buyer and Steel Tech for at least $75,000.00 in aggregated  Material Losses with
respect to breaches of  representations  and  warranties by Buyer and Steel Tech
and claims for Losses under subsection  7.3(c), the Sellers shall be entitled to
recover  the full  amount  of its  claim for such  aggregated  Material  Losses,
including the $75,000.00 base amount. The  indemnification  obligations of Buyer
and Steel Tech with  respect to claims for Losses under  subsections  7.3(a) and
(c) shall be limited to (i) aggregate  Material  Losses of up to  $26,500,000.00
arising from claims for indemnification  made by the Sellers during the 18-month
period  immediately  following the Closing;  and (ii) with respect to claims for
indemnification  made by the Sellers after the conclusion of the 18-month period
immediately   following  the  Closing,   aggregate  Material  Losses  of  up  to
$6,500,000.00  less the amount of all claims  for Losses  made and  successfully
asserted during the initial 18-month period following the Closing.

     Section 7.6 Kasle Sellers' Representative.

     (a) Each of Sellers other than Limauro hereby  appoints the  Representative
as agent  and  attorney-in-fact  for  each  such  Seller  and its  other  Seller
Indemnified  Parties (other than any of Limauro's Seller  Indemnified  Parties),
for and on behalf of each such Seller and its other Seller Indemnified  Parties,
with full power and  authority  to  represent  each Seller and its other  Seller
Indemnified  Parties,  and the  successors and assigns of each of the foregoing,
with  respect to all matters  arising  under this  Agreement  and the  Ancillary
Agreements,  and all actions taken by the Representative under this Agreement or
such  Ancillary  Agreements  will be binding upon each such Seller and its other
Seller Indemnified Parties and the successors and assigns of the foregoing as if
expressly  ratified and confirmed in writing by each of them.  Without  limiting
the generality of the foregoing,  the  Representative  shall have full power and
authority,  on  behalf  of  each of  Sellers  (other  than  Limauro)  and  their
respective other Seller Indemnified  Parties (other than any of Limauro's Seller
Indemnified  Parties)  and the  successors  and  assigns  of the  foregoing,  to
interpret  the  terms  and  provisions  of  this  Agreement  and  any  Ancillary
Agreements, to dispute or fail to dispute any claim under this Agreement or such
Ancillary  Agreements,  to negotiate and  compromise  any dispute that may arise
under this Agreement or such Ancillary Agreements,  to sign any release or other
documents  with respect to any such  dispute,  and to give and receive  notices,
except in each case for claims which may only be asserted against Julie Kasle or
Matthew  Kasle.  A Seller (other than  Limauro) or its other Seller  Indemnified
Party (other than any of Limauro's Seller  Indemnified  Parties)will be deemed a
party or a signatory to any agreement,  document,  instrument or certificate for
which  the  Representative  signs on  behalf  of such  Seller  or  other  Seller
Indemnified Parties.

     (b) The  Representative,  in its  capacity  as such,  will not be liable to
Buyer for any act or failure to act under or in connection  with this  Agreement
or any  Ancillary  Agreements,  regardless of whether any such act or failure to
act by  the  Representative  constitutes  negligence  or is in  breach  of  this
Agreement or any Ancillary Agreements.

     (c) The  Representative  shall have no liability to any Seller  Indemnified
Parties under or in connection with this Agreement or any Ancillary  Agreements.
The  Representative  shall be entitled to  reimbursement  by Sellers (other than
Limauro)  for all  costs  and  expenses  incurred  by it  while  acting  in such
capacity.  Seller  Indemnified  Parties  (other  than  any of  Limauro's  Seller
Indemnified  Parties) shall indemnify and hold harmless the  Representative  for
all  Losses  suffered  by the  Representative  acting in its  capacity  as such,
regardless  of whether  such Losses  arise from or are related to actions of the
Representative  that constitute  negligence or a breach of this Agreement or any
Ancillary Agreements.

     (d) The limitation of liability provisions of Sections 7.6(b) and (c) shall
survive  the   termination  of  this  Agreement  and  the   resignation  of  the
Representative.

     Section 7.7 No Circular Recovery. Sellers hereby agree that to the extent a
Buyer  Indemnified Party brings a claim against Sellers for which it is entitled
to indemnification pursuant to Section 7.2 of this Agreement,  Sellers shall not
make any claim for  indemnification  against the Company,  any Subsidiary or any
Joint  Venture with respect  thereto.  Buyer hereby  agrees that to the extent a
Seller  Indemnified  Party brings a claim against Buyer for which it is entitled
to  indemnification  pursuant to Section 7.3 of this Agreement,  Buyer shall not
make any claim for indemnification against Sellers with respect thereto.

                                       55
<PAGE>


                                  ARTICLE VIII
                               GENERAL PROVISIONS

     Section 8.1 Fees and Expenses.  Except as otherwise  provided  herein,  all
fees and expenses  incurred in connection  with or related to this Agreement and
the Ancillary  Agreements and the transactions  contemplated  hereby and thereby
shall be paid by the party or parties  incurring such fees or expenses,  whether
or not such  transactions are  consummated.  In the event of termination of this
Agreement,  the obligation of each party to pay its own expenses will be subject
to any  rights of such  party  arising  from a breach of this  Agreement  by any
others.

     Section 8.2 Amendment and Modification.  This Agreement may not be amended,
modified  or  supplemented  in any  manner,  whether  by  course of  conduct  or
otherwise,  except by an  instrument  in writing  signed on behalf of each party
hereto and otherwise as expressly set forth herein.

     Section  8.3  Waiver.  No  failure  or  delay of any  party or  beneficiary
hereunder in exercising any right or remedy  hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any  abandonment or  discontinuance  of steps to enforce such right or power, or
any course of conduct,  preclude  any other or further  exercise  thereof or the
exercise of any other right or power. The rights and remedies of the parties and
beneficiaries  hereunder are  cumulative  and are not exclusive of any rights or
remedies which they would otherwise have hereunder. Any agreement on the part of
any party or  beneficiary to any such waiver shall be valid only if set forth in
a written instrument  executed and delivered by such party or beneficiary in the
case of an individual,  or otherwise by a duly authorized  officer or manager on
behalf of such party or beneficiary.

     Section 8.4 Notices. All notices and other  communications  hereunder shall
be in  writing  and shall be deemed  duly given (a) on the date of  delivery  if
delivered personally,  or if by facsimile,  upon written confirmation of receipt
by facsimile,  e-mail or otherwise,  (b) on the first Business Day following the
date of  dispatch if  delivered  utilizing  a next-day  service by a  recognized
next-day  courier,  or (c) on the  earlier  of  confirmed  receipt  or the fifth
Business  Day  following  the date of  mailing if  delivered  by  registered  or
certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered to the addresses  set forth below,  or pursuant to such other
instructions  as may be  designated  in  writing  by the party to  receive  such
notice:

     (a) if to any Seller  (other  than  Limauro)  or Seller  Indemnified  Party
(other  than  any  of  Limauro's  Seller  Indemnified  Parties),   then  to  the
Representative on behalf of such Seller or such Seller Indemnified Party to:

                                       56

<PAGE>

                          Roger Kasle:
                          555 Stanley Boulevard
                          Birmingham, Michigan 48009

               with a copy (which shall not constitute notice) to:

                          Miller, Canfield, Paddock and Stone, P.L.C.
                          150 West Jefferson, Suite 2500
                          Detroit, MI 48226-4415
                          Attention: Douglas M. Kilbourne, Esq.
                          Facsimile: 313-496-8451

     (b) if to Limauro or any Seller Indemnified Party related to Limauro,  then
to:

                          Michael A. Limauro:
                          820 Pemberton
                          Grosse Pointe Park, Michigan  48230

               with a copy (which shall not constitute notice) to:

                          Miller, Canfield, Paddock and Stone, P.L.C.
                          150 West Jefferson, Suite 2500
                          Detroit, MI  48226-4415
                          Attention:  Douglas M. Kilbourne, Esq.
                          Facsimile:  313-496-8451

     (c) if to the  Representative,  to the same  addressees  as set forth under
Section 8.4(a) immediately above

     (d) if to the Company, to:

                          Kasle Steel Corporation
                          4343 Wyoming
                          Dearborn, Michigan  48126
                          Attention:  President
                          Facsimile:  313-943-2506

               with a copy (which shall not constitute notice) to:

                          Kasle Acquisition Company, LLC
                          c/o Steel Technologies Inc.
                          15415 Shelbyville Road
                          Louisville, Kentucky  40245
                          Attn:  John Baumann, Esq., General Counsel
                          Facsimile:  (502) 245-0542

               with an additional copy (which shall not constitute notice) to:

                                       57
<PAGE>


                           Frost Brown Todd LLC
                           400 West Market Street
                           32nd Floor
                           Louisville, Kentucky  40202-3363
                           Attention:  C. Edward Glasscock, Esq.
                           Facsimile:  (502) 581-1087

     (e) if to Buyer, to:

                           Kasle Acquisition Company, LLC
                           c/o Steel Technologies Inc.
                           15415 Shelbyville Road
                           Louisville, Kentucky  40245
                           Attn:  Michael J. Carroll, President
                           Facsimile:  (502) 245-0542

               with a copy (which shall not constitute notice) to:

                           Kasle Acquisition Company, LLC
                           c/o Steel Technologies Inc.
                           15415 Shelbyville Road
                           Louisville, Kentucky  40245
                           Attn:  John Baumann, Esq., General Counsel
                           Facsimile:  (502) 245-0542

               with an additional copy (which shall not constitute notice) to:

                           Frost Brown Todd LLC
                           400 West Market Street
                           32nd Floor
                           Louisville, Kentucky  40202-3363
                           Attention:  C. Edward Glasscock, Esq.
                           Facsimile:  (502) 581-1087

     (f) if to Steel Tech, to:

                           Steel Technologies Inc.
                           15415 Shelbyville Road
                           Louisville, Kentucky  40245
                           Attn:  Michael J. Carroll, President & COO
                           Facsimile:  (502) 245-0542

               with a copy (which shall not constitute notice) to:

                                       58
<PAGE>


                           Steel Technologies Inc.
                           15415 Shelbyville Road
                           Louisville, Kentucky  40245
                           Attn:  John Baumann, Esq., General Counsel
                           Facsimile:  (502) 245-0542

               with an additional copy (which shall not constitute notice) to:

                           Frost Brown Todd LLC
                           400 West Market Street
                           32nd Floor
                           Louisville, Kentucky  40202-3363
                           Attention:  C. Edward Glasscock, Esq.
                           Facsimile:  (502) 581-1087

     Section 8.5 Interpretation. When a reference is made in this Agreement to a
Section,  Article or Exhibit,  such reference shall be to a Section,  Article or
Exhibit of this Agreement unless otherwise indicated.  The table of contents and
headings  contained in this  Agreement or in any Exhibit are for  convenience of
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation  of this  Agreement.  All words  used in this  Agreement  will be
construed  to be of such  gender  or number as the  circumstances  require.  Any
capitalized  terms used in any Exhibit but not otherwise  defined  therein shall
have the meanings as defined in this Agreement.  All Exhibits  annexed hereto or
referred to herein are hereby  incorporated in and made a part of this Agreement
as if set forth herein.  The word  "including"  and words of similar import when
used in  this  Agreement  will  mean  "including,  without  limitation,"  unless
otherwise  specified.  Each  representation,  warranty or covenant  made in this
Agreement  with  respect  to the  "enforceability"  of  any  Contract  or  other
agreement  shall  be  deemed  qualified  by the  following  phrase:  "except  as
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting  creditors' rights generally and by general
principles of equity (regardless of whether considered in a proceeding in equity
or at law)".

     Section 8.6 Entire  Agreement.  This Agreement  (including the Exhibits and
Disclosure Schedule hereto), and the Ancillary Agreements  constitute the entire
agreement,   and   supersede  all  prior   written   agreements,   arrangements,
communications  and  understandings  and  all  prior  and  contemporaneous  oral
agreements,  arrangements,  communications and understandings, among the parties
to this  Agreement,  and the  Ancillary  Agreements  with respect to the subject
matter of this Agreement,  and the Ancillary Agreements.  Neither this Agreement
nor  any  Ancillary   Agreements  shall  be  deemed  to  contain  or  imply  any
restriction, covenant, representation, warranty, agreement or undertaking of any
party with respect to the transactions contemplated hereby or thereby other than
those  expressly  set forth herein or therein or in any document  required to be
delivered  hereunder  or  thereunder,  and none  shall be  deemed to exist or be
inferred with respect to the subject  matter  hereof.  Notwithstanding  any oral
agreement of the parties or their agents or representatives to the contrary,  no
party to this  Agreement  shall be under any legal  obligation  to enter into or
complete the  transactions  contemplated  hereby unless and until this Agreement
shall have been executed and delivered by all of the parties hereto.

     Section  8.7 No  Third-Party  Beneficiaries.  Nothing  in  this  Agreement,
express or implied,  is intended to or shall  confer upon any Person  other than
the parties hereto and their  respective  successors  and permitted  assigns any
legal or equitable right, benefit or remedy of any

                                       59
<PAGE>



nature under or by reason of this  Agreement,  except as provided in Article VII
above,  and except that any Seller  Indemnified  Parties that are not parties to
this Agreement shall be deemed third party beneficiaries  hereunder with respect
to all rights of Seller  Indemnified  Parties  hereunder and all  obligations of
Buyer Indemnified Parties to Seller Indemnified Parties hereunder.

     Section 8.8 Governing Law. This Agreement and all disputes or controversies
arising out of or relating to this  Agreement or the  transactions  contemplated
hereby shall be governed by, and construed in accordance with, the internal laws
of the  COMMONWEALTH  OF  KENTUCKY,  without  regard  to the  laws of any  other
jurisdiction  that might be applied  because of the conflicts of laws principles
of the COMMONWEALTH OF KENTUCKY.

     Section 8.9  Submission to  Jurisdiction.  Each of the parties  irrevocably
agrees that any legal  action or  proceeding  arising out of or relating to this
Agreement or for  recognition  and enforcement of any judgment in respect hereof
brought  by any other  party or its  successors  or assigns  may be brought  and
determined  in any  Kentucky  State or  federal  court  sitting  in  Louisville,
Kentucky  (or,  if  such  court  lacks  subject  matter  jurisdiction,   in  any
appropriate  Kentucky  State or federal  court),  and each of the parties hereby
irrevocably  submits to the  jurisdiction of the aforesaid courts for itself and
with respect to its property, generally and unconditionally,  with regard to any
such action or proceeding  arising out of or relating to this  Agreement and the
transactions  contemplated  hereby. Each of the parties further agrees to accept
service of process in any manner  permitted by such courts.  Each of the parties
hereby irrevocably and unconditionally  waives, and agrees not to assert, by way
of  motion  or as a  defense,  counterclaim  or  otherwise,  in  any  action  or
proceeding  arising  out of or relating to this  Agreement  or the  transactions
contemplated  hereby,  (a) any claim  that it is not  personally  subject to the
jurisdiction  of the  above-named  courts for any reason  other than the failure
lawfully to serve process,  (b) that it or its property is exempt or immune from
jurisdiction  of any such court or from any legal process  commenced in any such
court  (whether  through  service  of  notice,  attachment  prior  to  judgment,
attachment in aid of execution of judgment,  execution of judgment or otherwise)
and (c) to the fullest  extent  permitted by law,  that (i) the suit,  action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
or forum of such suit, action or proceeding is improper or (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by any such court.

     Section 8.10 Dispute Resolution. Any controversy,  dispute, or claim of any
nature arising out of, in connection with, or in relation to the interpretation,
performance,  enforcement or breach of this Agreement, including any claim based
on contract,  tort or statute,  shall be resolved at the written  request of any
party  to this  Agreement  by  binding  arbitration.  The  arbitration  shall be
administered in accordance with the then current Commercial Arbitration Rules of
the American  Arbitration  Association.  Any matter to be settled by arbitration
shall be  submitted  to the  American  Arbitration  Association  in  Louisville,
Kentucky.  Each  party  shall  select  one  arbitrator  within 15 days after the
claimant  commences the arbitration by giving written notice of  arbitration.  A
third  arbitrator shall be selected by the two arbitrators so selected within 45
days  of  their  appointment.  The  arbitrators  shall  decide  the  dispute  in
accordance with the laws of the  Commonwealth of Kentucky  without  reference to
its rules concerning conflicts of laws.

                                       60
<PAGE>




The  arbitration  shall be final and binding,  and  enforceable  in any court of
competent  jurisdiction.  The arbitrator  shall award attorneys' fees (including
those of in-house counsel) and costs to the prevailing party and charge the cost
of arbitration to the party which is not the prevailing party. If the arbitrator
determines that there is not a prevailing party, each party shall be responsible
for its own attorney's fees and expenses and a portion of the  arbitration  fees
and expenses as specified by the arbitrator. Arbitration awards shall be payable
out of the Escrow Amount, to the extent that they are adequate.  Notwithstanding
anything  herein to the  contrary,  this Section 8.10 shall not prevent Buyer or
any Seller  from  seeking  and  obtaining  equitable  relief on a  temporary  or
permanent basis, including, without limitation, a temporary restraining order, a
preliminary or permanent injunction or similar equitable relief, from a court of
competent  jurisdiction  located in  Louisville,  Kentucky (to which all parties
hereto consent to venue and jurisdiction) by instituting a legal action or other
court  proceeding  in order to protect or enforce the rights of such party under
this  Agreement  or  to  prevent   irreparable  harm  and  injury.  The  court's
jurisdiction over any such equitable matter, however, shall be expressly limited
only to the temporary,  preliminary,  or permanent  equitable relief sought; all
other claims initiated under this Agreement  between the parties hereto shall be
determined through final and binding arbitration in accordance with this Section
8.10.

     Section 8.11 Assignment;  Successors. Neither this Agreement nor any of the
rights,  interests  or  obligations  under this  Agreement  may be  assigned  or
delegated,  in whole or in part, by operation of law or  otherwise,  by Buyer or
any  Seller  without  the prior  written  consent  of the  others,  and any such
assignment without such prior written consent shall be null and void;  provided,
however,  that Buyer may assign its rights under this Agreement to any Affiliate
of Buyer without the prior consent of Sellers; provided further, that any Seller
may assign  any of its  rights  under  this  Agreement,  including  the right to
receive  its portion of the  Purchase  Price,  to one or more of its  Affiliates
without the consent of Buyer;  provided still further,  that no assignment shall
limit the  assignor's  obligations  hereunder  and no party  shall be liable for
performance to any such assignee until such party has received written notice in
accordance with the terms of this Agreement.  Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the Buyer and Sellers and their respective successors and assigns.

     Section 8.12 Severability.  Whenever possible, each provision or portion of
any provision of this  Agreement  shall be  interpreted  in such manner as to be
effective and valid under applicable Law, but if any provision or portion of any
provision of this Agreement is held to be invalid,  illegal or  unenforceable in
any  respect  under  any  applicable  Law  or  rule  in any  jurisdiction,  such
invalidity,  illegality or unenforceability shall not affect any other provision
or portion of any provision in such  jurisdiction,  and this Agreement  shall be
reformed,  construed  and  enforced  in such  jurisdiction  as if such  invalid,
illegal or  unenforceable  provision or portion of any  provision had never been
contained herein.

     Section 8.13  Counterparts.  This  Agreement may be executed in two or more
counterparts,  and by separate  parties on separate  counterparts,  all of which
shall be considered one and the same instrument and shall become  effective when
one or more  counterparts  have been signed by each of the parties and delivered
to the other parties.

                                       61
<PAGE>


     Section  8.14  Facsimile  Signature.  This  Agreement  may be  executed  by
facsimile  signature and a facsimile  signature shall constitute an original for
all purposes.

     Section  8.15 Time of Essence.  Time is of the  essence  with regard to all
dates and time periods set forth or referred to in this Agreement.

     Section 8.16 No  Presumption  Against  Drafting  Party.  Each party to this
Agreement  acknowledges  that each  party has been  represented  by  counsel  in
connection with this Agreement and the Ancillary Agreements and the transactions
contemplated by this Agreement and the Ancillary Agreements and has participated
jointly in the  negotiation  and drafting of this  Agreement  and the  Ancillary
Agreements.  In the event an ambiguity  or question of intent or  interpretation
arises,  this  Agreement or the  Ancillary  Agreements  shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall arise
favoring  or  disfavoring  any party by virtue of the  authorship  of any of the
provisions of this Agreement or the Ancillary  Agreements.  Any reference to any
federal,  state,  local, or foreign statute or Law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise.  In the event of any inconsistency between the statements in the body
of this Agreement and those in the Disclosure  Schedule (other than an exception
expressly  set  forth  as such in the  Disclosure  Schedule  with  respect  to a
specifically identified  representation or warranty), the statements in the body
of this  Agreement will control.  The parties  intend that each  representation,
warranty, and covenant contained herein shall have independent significance.  If
there is a breach of any representation,  warranty, or covenant contained herein
in any respect, the fact that there exists another representation,  warranty, or
covenant relating to the same subject matter  (regardless of the relative levels
of  specificity)  which has not been breached shall not detract from or mitigate
the fact  that  there is a breach  of the  first  representation,  warranty,  or
covenant.

                            [signature page follows]

                                       62
<PAGE>


     IN WITNESS WHEREOF,  Sellers,  Buyer, the  Representative,  and the Company
have executed this Agreement as of the date first written above,  or have caused
this  Agreement  to be  executed  as of the date  first  written  above by their
respective officers or managers thereunto duly authorized.

SELLERS:                                             REPRESENTATIVE:

/s/ Roger Kasle                                /s/ Roger Kasle
--------------------------------               --------------------------------
Roger Kasle                                    Roger Kasle, as Representative

/s/ Matthew Kasle
--------------------------------
Matthew Kasle

/s/ Julie Kasle
--------------------------------
Julie Kasle

/s/ Mickael A. Lamauro
--------------------------------
Michael A. Limauro


COMPANY:

KASLE STEEL CORPORATION, a Michigan corporation

By:  /s/
     ----------------------------
Name:
     --------------------------
Title:
      -------------------------


BUYER:

KASLE ACQUISITION COMPANY, LLC, a Delaware limited liability company


By: /s/ Bradford T. Ray
     ------------------------------------
Name: Bradford T. Ray
      ----------------------------------
Title:Chief Executive Officer
      ---------------------------------


By:  /s/ John M. Baumann, Jr.
     ------------------------------------
Name: John M. Baumann, Jr.
      ----------------------------------
Title: Secretary
      ---------------------------------



STEEL TECH:

STEEL TECHNOLOGIES INC., a Kentucky corporation


By: /s/ Bradford T. Ray
     ------------------------------------
Name: Bradford T. Ray
      ----------------------------------
Title:Chief Executive Officer
      ---------------------------------


By:  /s/ John M. Baumann, Jr.
     ------------------------------------
Name: John M. Baumann, Jr.
      ----------------------------------
Title: Secretary
      ---------------------------------
                                    EXHIBIT A

                          Adjustments to Purchase Price

A.       Items which reduce the Purchase Price:
<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>


1.       Aggregate amount of the following Current and Long Term Liabilities as of the Closing Date:

--------------------------------- ---------------------------------------- --------------------------
Current and Long Term             Value  indicated  in Binding  Letter of  Value as of Closing Date
Liabilities                       Intent
 --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (a)     Loan from shareholder             ($400,000 as of February 28, 2006);      $            0.
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (b)     Current   portion  of   Comerica  ($1,200,000 as of February 28, 2006);    $3,277,287.    (including
                 Bank Term Loan                                                             long term portion)
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (c)     Current portion of Buyout Notes   ($466,000 as of February 28, 2006);      $  465,599.

---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (d)     Current   portion   of   Capital  ($501,000 as of February 28, 2006);      $  465,166.
                 Leases
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (e)     Teamster Pension                  ($917,000 as of February 28, 2006);      $-           0.-
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (f)     Long  Term   portion  of  Buyout  ($2,841,000 as of February 28, 2006);    $2,822,068.
                 Notes
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (g)     Long Term  portion  of  Comerica  ($3,325,000 as of February 28, 2006);    $    0.    included    in
                 Bank Term Loan                                                             current   portion   (item
                                                                                            1(b)) above
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (h)     Long  Term  portion  of  Capital  ($79,000 as of February 28, 2006);       $   11,179.
                 Leases
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (i)     Supplemental            Deferred  ($3,156,175  as of  December  31,  2005  $2,173,404    (of   which
                 Compensation Plan                 with  a  net  present  value  at  8% of  $205,205    is    current
                                                   $1,964,467;  currently  estimated to be  portion  and   $1,968,199
                                                   $1,916,000   consisting   of   $205,000  is    the    long    term
                                                   short term and $1,711,000 long term);    portion,   including  net
                                                                                            present value  adjustment
                                                                                            of $334,000.
---------------- --------------------------------- ---------------------------------------- --------------------------
---------------- --------------------------------- ---------------------------------------- --------------------------
         (j)     Revolving  Credit  Loan  owed to  amount  in  excess  of the sum of (i)  $      0.      ($593,049,
                 Comerica Bank                     $672,000 plus (ii) any                   which is  below  $672,000
                                                   borrowings  to  fund  the  closing  day  by $78,951.
                                                   bonuses  described  in Part A(3)  below
                                                   ($1,175,000  as of  February  28,  2006
                                                   which exceeds $672,000 by $503,000).
---------------- --------------------------------- ---------------------------------------- --------------------------









         2.       Aggregate amount of the following loans and advances receivable as of the Closing Date:

---------------- ---------------------------------------- --------------------------------- --------------------------
                 Loans and Advances Receivable            Value   indicated   in   Binding  Value as of Closing Date
                                                          Letter of Intent
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (a)     Loan Receivable from  Northwestern Real  -$245,000-                        $         0
                 Estate Ventures, LLC;
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (b)     Employee Advances;                       Included in above figure.         $          0.
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (c)     Receivable/Advance - David Yates;        Included in above figure.         $ 451,129.
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (d)     Loan to Julie Kasle;                     Included in above figure.         $           0
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (e)     Loan to John  Luelo - but  only for the  Included in above figure.         $           0
                 amount  of  excess   over  the  reserve
                 taken
                 for this receivable; and
---------------- ---------------------------------------- --------------------------------- --------------------------
---------------- ---------------------------------------- --------------------------------- --------------------------
         (f)     Advance    to     Reginald     Campbell  Included in above figure.         $ 285,916
                 referenced in the Consulting  Agreement
                 dated
                 October 18, 2004.
---------------- ---------------------------------------- --------------------------------- --------------------------

         3.       Aggregate  amount of  bonuses,  not to exceed  $1,000,000,  payable  at  closing to  certain  Kasle  employees
to be designated by the Shareholders.

B.       Items which do not reduce the Purchase Price:

         1.       Post-closing payments made pursuant to the employment agreements (including change of control severance,  if any)
for Keith Bailey, Ivan Meltzer, Michael Ulewicz, and Thom Parker; and

         2.       Payments made to Reginald  Campbell for consulting and advisory  services  through December 31, 2007 (estimated
to be $389,000).
</TABLE>


<PAGE>

                                   EXHIBIT 10



                                 THIRD AMENDMENT

                                       to

                                CREDIT AGREEMENT

                                  by and among

                             STEEL TECHNOLOGIES INC.

                                       and

                           THE GUARANTORS PARTY HERETO

                                       and

                            THE LENDERS PARTY HERETO

                                       and

                    PNC BANK, NATIONAL ASSOCIATION, as Agent

                                       and

                       SUNTRUST BANK, as Syndication Agent

                                       and

      JPMORGAN CHASE BANK, N.A. (successor by Merger to Bank One, N.A.), as
                               Documentation Agent


                             Dated as of May 8, 2006

<PAGE>


     THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third  Amendment")  dated as
of May 8, 2006, by and among STEEL  TECHNOLOGIES  INC. (the  "Borrower") and the
GUARANTORS  party  hereto  (the  "Guarantors"),  the Lenders  party  hereto (the
"Lenders"),  PNC Bank, National  Association,  as Agent (the "Agent"),  SUNTRUST
BANK, as Syndication  Agent (the  "Syndication  Agent") and JPMORGAN CHASE BANK,
N.A.  (successor  by merger to Bank One,  N.A.),  as  Documentation  Agent  (the
"Documentation Agent").

                                    RECITALS

     WHEREAS, reference is made to the Credit Agreement dated as of September 2,
2004 by and among the Borrower,  the  Guarantors,  the Lenders,  the Agent,  the
Syndication  Agent  and the  Documentation  Agent,  as  amended  by  that  First
Amendment thereto dated as of November 2, 2004 and that Second Amendment thereto
dated as of October 11, 2005 (as so amended, the "Credit Agreement");

     WHEREAS,  capitalized  terms used herein and not otherwise  defined  herein
shall have the meanings assigned to such terms in the Credit Agreement;

     WHEREAS,  on or about May 4, 2006,  effective as of April 30,  2006,  Kasle
Acquisition  Company,  LLC, a Delaware limited  liability  company ("Sub") whose
sole member is Steel Technologies  Inc., a Kentucky  corporation  ("STI"),  will
acquire all of the outstanding stock of Kasle Steel Corporation  ("Kasle") (such
acquisition referred to herein as the "Kasle  Acquisition")  pursuant to a Stock
Purchase Agreement (together with all schedules, exhibits and related documents,
the "Kasle Acquisition Documents");

     WHEREAS,  Kasle owns (i) one hundred percent of the  outstanding  ownership
interests  of  Kasle  Steel  Auto   Blankers,   Inc.,  a  Michigan   corporation
("Blankers") and Kasle Steel of Canada, Ltd., a company organized under the laws
of Ontario,  Canada ("Kasle Canada"),  (ii) fifty percent (50%) of the ownership
interests in each of Kasle Metal Processing, LLC ("Metal") and RSDC of Michigan,
L.L.C. ("RSDC") and (iii) forty-nine percent (49%) of the ownership interests in
Delaco-Kasle LLC ("Delaco");

     WHEREAS, the Loan Parties have requested that RSDC, Metal, Delaco and Kasle
Canada not be required to join as a Guarantor under the Credit Agreement,  given
that (i) RSDC, Metal and Delaco are each joint ventures which are precluded from
guarantying the Credit Agreement pursuant to the terms of their respective joint
venture agreements unless authorized and no such guarantees have been authorized
and (ii) a Guaranty by Kasle Canada could create  adverse tax  consequences  for
the Loan Parties;

     WHEREAS,  Upon the Kasle  Acquisition,  Sub, Kasle,  and Blankers will each
become a Guarantor under the Credit  Agreement  pursuant to Section 10.17 of the
Credit Agreement and the related Guarantor Joinder;

     WHEREAS,  the parties  hereto desire to amend the Credit  Agreement as more
fully set forth herein;

                                       1
<PAGE>


     NOW,  THEREFORE,  the parties  hereto,  in  consideration  of their  mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, covenant and agree as follows:

          1. Acknowledgments Relating to Acquisition.

          The  Loan  Parties  represent  and  warrant  that  the  recitals  (the
     "Recitals") above are true and correct.

          2. Amendment to Definitions.

          A. The following  definitions  in Section 1.1 of the Credit  Agreement
     are hereby amended and restated in their entirety to read as follows:

          "Joint Ventures shall mean (i) Mi-Tech Steel,  Inc., a corporate joint
     venture owned 50% by the Borrower and 50% by Mitsui Steel  Holdings,  Inc.,
     (ii)  Ferrolux  Metals Co., LLC, a limited  liability  company owned 49% by
     Borrower and 51% by Ferragon Corporation, (iii) RSDC of Michigan, L.L.C., a
     limited  liability  company owned 50% by Kasle Steel Corporation and 50% by
     Marubeni-Itochu  Steel America,  Inc., (iv) Kasle Metal Processing,  LLC, a
     limited  liability  company owned 50% by Kasle Steel Corporation and 50% by
     Automatic Feed Company,  (v) Delaco-Kasle  LLC, a limited liability company
     owned 49% by Kasle Steel  Corporation and 51% by Delaco Steel  Corporation,
     and (vi) other  partnerships or joint ventures to which either the Borrower
     or one of its Subsidiaries is now or in the future a party."

          "Subsidiary  of any Person at any time shall mean any of the following
     (except that with respect to each Joint Venture, if one or more of the Loan
     Parties does not  individually or collectively  own greater than 50% of the
     ownership  interests of such Joint Venture,  or does not control such Joint
     Venture,  such Joint  Venture shall not be deemed to be a Subsidiary of the
     Loan Parties): (i) any corporation or trust of which 50% or more (by number
     of shares or number of votes) of the outstanding capital stock or shares of
     beneficial  interest  normally  entitled to vote for the election of one or
     more directors or trustees (regardless of any contingency which does or may
     suspend  or dilute the voting  rights)  is at such time owned  directly  or
     indirectly  by such  Person or one or more of such  Person's  Subsidiaries,
     (ii) any  partnership of which such Person is a general partner or of which
     50% or  more  of the  partnership  interests  is at the  time  directly  or
     indirectly   owned  by  such  Person  or  one  or  more  of  such  Person's
     Subsidiaries, (iii) any limited liability company of which such Person is a
     member and of which 50% or more of the limited  liability company interests
     is at the time directly or  indirectly  owned by such Person or one or more
     of such Person's Subsidiaries or (iv) any corporation,  trust, partnership,
     limited liability company or other entity which is controlled or capable of
     being   controlled  by  such  Person  or  one  or  more  of  such  Person's
     Subsidiaries."

          B. The  definition  of  Permitted  Liens in Section  1.1 of the Credit
     Agreement is hereby amended by amending and restating clause (viii) thereof
     as follows:

          "(vii)  (a) Any  Lien  existing  on the  date of  this  Agreement  and
     described on Schedule  1.1(P),  provided that the principal  amount secured
     thereby is not hereafter increased, and no additional assets become subject
     to such Lien and the aggregate  amount of obligations  secured by all Liens
     referred to in this clause (viii)(a) does not exceed $10,000,000; (b) Liens

                                       2
<PAGE>



     on the 1063  shares  of stock of Kasle  Steel  Corporation  to  secure  the
     Indebtedness described in Section 7.2.1(viii);  provided that the principal
     amount secured thereby is not hereafter increased, and no additional assets
     become subject to such Lien,  and (c) Liens on time deposit  account number
     385106031623  at  Comerica  Bank to  secure  indebtedness  permitted  under
     Section 7.2.1(viii)(d);  provided that the principal amount secured thereby
     is not hereafter increased."

          C. The following new  definition  is hereby  inserted in  alphabetical
     order in Section 1.1 of the Credit Agreement:

          "Third Amendment Effective Date shall mean May 8, 2006."

          3. Amendment to Section 7.2.1 [Indebtedness].

          A  new  Subsection  (viii)  is  hereby  inserted  into  Section  7.2.1
     immediately following subsection (vii) to read as follows:

          "(viii) (a) secured Indebtedness of Kasle Steel Corporation to Barbara
     Rothstein in the maximum aggregate amount of $1,945,700,  secured solely by
     943 shares of stock of Kasle Steel Corporation, (b) secured Indebtedness of
     Kasle Steel Corporation to Barbara Kasle Rothstein Irrevocable Trust in the
     maximum aggregate amount of $238,000, secured solely by 120 shares of stock
     of Kasle Steel Corporation, (c) unsecured Indebtedness to Reginald Campbell
     in the maximum aggregate amount of $1,400,000, and (d) secured Indebtedness
     in favor of Comerica  Bank in the  maximum  principal  amount of  $200,000,
     secured solely by cash held on deposit Comerica Bank."

          4. Amendment of Section 7.2.3 [Guaranties].

          Section 7.2.3  [Guaranties] of the Credit  Agreement is hereby amended
     and restated in its entirety to read as follows:

         "7.2.3   Guaranties.

          Each of the Loan  Parties  shall not,  and shall not permit any of its
     Subsidiaries to, at any time,  directly or indirectly,  become or be liable
     in respect  of any  Guaranty,  or assume,  guarantee,  become  surety  for,
     endorse or  otherwise  agree,  become or remain  directly  or  contingently
     liable upon or with  respect to any  obligation  or  liability of any other
     Person,  except for (i)  Guaranties  of  Indebtedness  of the Loan  Parties
     permitted  hereunder and (ii)  Guaranties of Indebtedness of Joint Ventures
     not to exceed $6,500,000 in the aggregate."

          5. Amendment of Section 7.2.4 [Loans And Investments].

          Subsection  (vi) of Section  7.2.4 is hereby  amended and  restated to
     read as follows:

          "(vi)  capital  contributions  or loans (a) to each of Mi-Tech  Steel,
     Inc. and Ferrolux Metals Co., LLC existing on the Closing Date as set forth
     on Schedule 7.2.4(vi) and (b) to each of Kasle Metal Processing,  LLC, RSDC
     of Michigan,  L.L.C.  and  Delaco-Kasle LLC existing on the Third Amendment
     Effective Date as set forth on Schedule 7.2.4(vi);"

                                       3
<PAGE>


          A  new  Subsection   (ix)  is  hereby   inserted  into  Section  7.2.4
     immediately after subsection (viii) to read as follows:

          "(ix) loans and advances to the  individuals and in the amounts listed
     on Schedule  7.2.4(ix)  hereto  provided that the aggregate  amount thereof
     does not exceed $750,000."

     The remainder of Section 7.2.4 remains unchanged hereby.

          6. Amendment of Section 7.2.9  [Subsidiaries,  Partnerships  and Joint
     Ventures.]

          Subsection  (iii) of Section  7.2.9 is hereby  amended and restated to
     read as follows:

          "(iii)  Steel  Technologies  De Mexico  S.A.  De C.V.,  Kasle Steel of
     Canada, Ltd. or, to the extent not required to join pursuant to clause (ii)
     above, the Joint Ventures."

          The remainder of Section 7.2.9 remains unchanged

          7. Warranties

          A. Warranties Under the Credit Agreement

          The  representations  and warranties of Loan Parties  contained in the
     Credit Agreement are true and correct on and as of the date hereof with the
     same  force and  effect as though  made by the Loan  Parties  on such date,
     except to the extent that any such  representation  or  warranty  expressly
     relates solely to a previous date. The Loan Parties are in compliance  with
     all terms,  conditions,  provisions,  and covenants contained in the Credit
     Agreement.

          B. Power and Authority; Validity and Binding Effect; No Conflict.

          Each Loan Party has full power to enter  into,  execute,  deliver  and
     carry out this Third Amendment,  and such actions have been duly authorized
     by all necessary  proceedings  on its part.  This Third  Amendment has been
     duly and validly  executed  and  delivered  by each Loan Party.  This Third
     Amendment  constitutes the legal, valid and binding obligation of each Loan
     Party which is enforceable  against such Loan Party in accordance  with its
     terms.  Neither the execution and delivery of this Third  Amendment nor the
     consummation of the transactions  herein  contemplated  will conflict with,
     constitute  a default  under or result in any breach of  (i) the  terms and
     conditions  of any  organizational  documents of any Loan Party or (ii) any
     Law or any material  agreement or instrument  or other  obligation to which
     any Loan Party or any of its  Subsidiaries is a party or by which it or any
     of its  Subsidiaries  is bound, or result in the creation or enforcement of
     any Lien upon any  property  of any Loan  Party or any of its  Subsidiaries
     other than as set forth herein.

                                       4
<PAGE>


          C. Consents and Approvals; No Event of Default.

          No consent, approval,  exemption, order or authorization of any Person
     other than the parties  hereto is required by any Law or any  agreement  in
     connection  with the  execution,  delivery  and  carrying out of this Third
     Amendment.  No event has occurred and is continuing and no condition exists
     or will exist after giving effect to this Third Amendment which constitutes
     an Event of Default or Potential Default.

          8. Conditions to Effectiveness.

          The  effectiveness  of this Third Amendment is subject to satisfaction
     of each of the following conditions on or before the date hereof:

          A. Representations and Warranties.

          Each of the  representations and warranties under Section 6 hereof are
     true and correct on the date hereof.

          B. Execution by Lenders, Agent and Loan Parties.

          This Third Amendment shall have been executed by the Required Lenders,
     the Agent and the Loan Parties on or before the date hereof.

          C. Secretary's Certificates.

          There shall have been  delivered  to the Agent for the benefit of each
     Lender  a  certificate  dated  as of the  date  hereof  and  signed  by the
     Secretary or an Assistant  Secretary of each of the Loan Parties certifying
     as  appropriate  to: (a) all  corporate  action taken by each Loan Party in
     connection  with  this  Third  Amendment   together  with  a  copy  of  the
     resolutions  of each  Loan  Party  evidencing  same;  (b) the  names of the
     officer or officers  authorized  to sign this Third  Amendment and the true
     signatures  and  specifying  that such  officers are  authorized  to act on
     behalf of each Loan Party for  purposes of this Third  Amendment,  on which
     the Agent and each Lender may conclusively rely; and (c) a certificate from
     the  Secretary  or  Assistant  Secretary  stating  that each  Loan  Party's
     organizational   documents,   including  its  certificate  or  articles  of
     incorporation,  bylaws,  certificate  of limited  partnership,  partnership
     agreement,   certificate  of  formation,   and  limited  liability  company
     agreement  have not been modified  since the Closing Date and are in effect
     on the date hereof as on the Closing Date or attaching  certified copies of
     such modified  documents if any have been modified and certifying that such
     documents are currently in effect.

          D. Kasle Acquisition.

          The transactions contemplated by the Kasle Acquisition Documents shall
     have been  consummated  in accordance  with the terms and conditions of the
     Kasle  Acquisition  Documents  as  heretofore  reviewed by the Agent and as
     certified  by the  Borrower  without  any  amendment  or waiver by the Loan
     Parties  not  consented  to by  the  Agent.  Each  of the  conditions  to a
     Permitted   Acquisition   under  Section  7.2.6   [Liquidations,   Mergers,
     Consolidations,  Acquisitions]  of the Credit Agreement shall have been met
     with respect to the Kasle Acquisition.

                                       5
<PAGE>


          E. Guarantor Joinders.

          Kasle,  Blankers and Sub shall have executed and  delivered  Guarantor
     Joinders together with updates to schedules,  certificates, legal opinions,
     and related documents  required under Section 10.17 [Joinder of Guarantors]
     of the Credit Agreement.

          F. Fees and Expenses.

          The Loan  Parties  shall have paid the costs and expenses of the Agent
     and reasonable  fees of the Agent's  counsel in connection  with this Third
     Amendment.

          9. References to Credit Agreement, Loan Documents.

          Any reference to the Credit  Agreement or other Loan  Documents in any
     document,  instrument,  or agreement  shall  hereafter mean and include the
     Credit  Agreement  or such Loan  Document,  including  such  schedules  and
     exhibits,  as amended hereby. In the event of irreconcilable  inconsistency
     between the terms or  provisions  hereof and the terms or provisions of the
     Credit  Agreement  or such Loan  Document,  including  such  schedules  and
     exhibits, the terms and provisions hereof shall control.

          10. Force and Effect.

          Each  Loan  Party  reconfirms,   restates,  and  ratifies  the  Credit
     Agreement and all other Loan  Documents  executed in  connection  therewith
     except to the extent any such  documents  are  expressly  modified  by this
     Third  Amendment and each Loan Party  confirms that all such documents have
     remained in full force and effect since the date of their execution.

          11. Governing Law.

          This Third  Amendment  shall be deemed to be a contract under the laws
     of the  Commonwealth of Pennsylvania and for all purposes shall be governed
     by and construed  and enforced in accordance  with the internal laws of the
     Commonwealth  of  Pennsylvania  without  regard  to its  conflict  of  laws
     principles.

          12. Counterparts; Effective Date.

          This Third Amendment may be signed in any number of counterparts  each
     of which  shall be  deemed an  original,  but all of which  together  shall
     constitute one and the same  instrument.  This Third Amendment shall become
     effective when it has been executed by the Agent,  the Loan Parties and all
     of the Lenders and each of the other  conditions  set forth in Section 8 of
     this Third Amendment has been satisfied.

                           [SIGNATURE PAGES TO FOLLOW]

                                       6
<PAGE>


                   [SIGNATURE PAGE 1 OF 6 TO THIRD AMENDMENT]



     IN WITNESS WHEREOF,  the parties hereto,  by their officers  thereunto duly
authorized,  have  executed  this Third  Amendment  as of the day and year above
written.

                                        BORROWER:

                                        STEEL TECHNOLOGIES INC.



                                        By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------



                                        GUARANTORS:

                                        STEEL TECHNOLOGIES CORP.

            By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------




<PAGE>

                   [SIGNATURE PAGE 2 OF 6 TO THIRD AMENDMENT]



                                        STEEL TECHNOLOGIES CO. (successor
                                        by conversion to STEEL
                                        TECHNOLOGIES, L.P.)

                                    By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------





                                        STEEL TECHNOLOGIES, LLC,
                                        a South Carolina limited liability
                                        company


                                        By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------




<PAGE>
                   [SIGNATURE PAGE 3 OF 6 TO THIRD AMENDMENT]



                                        KASLE ACQUISITION COMPANY, LLC,
                                        a Delaware limited liability company


                                       By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------




                                        KASLE STEEL CORPORATION,
                                        a Michigan corporation



                                       By: /s/ Bradford T. Ray
                                           ------------------------------------
                                        Name: Bradford T. Ray
                                             ----------------------------------
                                        Title:Chief Executive Officer
                                              ---------------------------------


                                        By:  /s/ John M. Baumann, Jr.
                                           ------------------------------------
                                        Name: John M. Baumann, Jr.
                                             ----------------------------------
                                        Title: Secretary
                                              ---------------------------------




<PAGE>

                   [SIGNATURE PAGE 4 OF 6 TO THIRD AMENDMENT]



                                        KASLE STEEL AUTO BLANKERS, INC.,
                                        a Michigan corporation



                                        By:  /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------


                                        By:  /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------




<PAGE>


                   [SIGNATURE PAGE 5 OF 6 TO THIRD AMENDMENT]



                                        PNC BANK, NATIONAL ASSOCIATION,
                                        individually and as Agent


                                        By: /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------


                                        SUNTRUST BANK,
                                        individually and as Syndication Agent


                                        By: /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------


                                        NATIONAL CITY BANK OF KENTUCKY



                                        By: /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------



                                        JPMORGAN CHASE BANK, N.A. (successor
                                        by merger to Bank One, N.A.),
                                        individually and as Documentation Agent


                                        By: /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------

<PAGE>


                   [SIGNATURE PAGE 6 OF 6 TO THIRD AMENDMENT]



                                        U.S. BANK NATIONAL ASSOCIATION



                                        By: /s/
                                           ------------------------------------
                                        Name:
                                             ----------------------------------
                                        Title:
                                              ---------------------------------





                                        FIFTH THIRD BANK



                                        By: /s/
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                                        Name:
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                                        Title:
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