10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

þ           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

¨           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          000-24293

LMI AEROSPACE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Missouri	43-1309065
(State or Other Jurisdiction of	(IRS Employer
Incorporation or Organization)	Identification No.)
411 Fountain Lakes Blvd.,
St. Charles, Missouri	63301
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code  (636) 946-6525

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Each Exchange On Which Registered

Common stock, $0.02 par value per share	The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.¨YesþNo

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.¨YesþNo

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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.þYes     ¨No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer¨           Accelerated filerþ

Non-accelerated filer¨ (Do not check if a smaller reporting company)    Smaller reporting company¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨Yes                           þNo

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter ended June 30, 2008, was $150,760,731.

There were 11,569,474 shares of common stock outstanding as of March 6, 2009.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference portions of the Proxy Statement for the Registrant’s 2009 Annual Meeting.

TABLE OF CONTENTS

Item No.		Page
PART I
1	Business	4
1A	Risk Factors	16
1B	Unresolved Staff Comments	23
2	Properties	24
3	Legal Proceedings	26
4	Submission of Matters to a Vote of Security Holders	26
PART II
5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
6	Selected Financial Data	30
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
7A	Quantitative and Qualitative Disclosures About Market Risk	41
8	Financial Statements and Supplementary Data	42
9	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	65
9A	Controls and Procedures	65
9B	Other Information	67
PART III
10	Directors, Executive Officers, and Corporate Governance	68
11	Executive Compensation	69
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
13	Certain Relationships and Related Transactions, and Director Independence	70
14	Principal Accountant Fees and Services	70
PART IV
15	Exhibits and Financial Statement Schedules	70
Signatures		71
Exhibit Index		72

1 

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. LMI Aerospace, Inc. (“LMI Aerospace” or the “Company”) makes forward-looking statements in this Annual Report on Form 10-K and in the public documents that are incorporated herein by reference, which represent the Company’s expectations or beliefs about future events and financial performance. When used in this report and the documents incorporated herein by reference, the words “expect,” “believe,” “anticipate,” “goal,” “plan,” “intend,” “estimate,” “may,” “will” or similar words are intended to identify forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events or results.  Such statements are subject to known and unknown risks, uncertainties and assumptions, including those referred to under “Risk Factors” in this Annual Report on Form 10-K and otherwise described in the Company’s periodic filings and current reports filed with the Securities and Exchange Commission.

All predictions as to future results contain a measure of uncertainty, and accordingly, actual results could differ materially. Among the factors that could cause actual results to differ from those contemplated, projected or implied by the forward-looking statements (the order of which does not necessarily reflect their relative significance) are:

l the effect of the declining global economy on the financial well-being of Spirit AeroSystems, Gulfstream Aerospace Corporation, The Boeing Company, Vought Aircraft Industries, Sikorsky Aircraft Corporation, and Aviation Partners Boeing, whose orders comprise a majority of the Company’s consolidated revenues;

l general economic conditions, including the effect of the recent tightening in the credit markets, particularly with respect to the availability of, terms of and access to credit;

l the effect of terrorism and other factors that adversely affect the commercial travel industry;

l difficulties with the implementation of the Company’s growth strategy, such as acquisition integration problems and unanticipated costs relating to the Company’s manufacture of new parts for its current customers and new customers;

l competitive pressures, such as pricing pressures relating to low-cost foreign labor and industry participation commitments made by the Company’s customers to foreign governments;

l changes in the quality, costs and availability of the Company’s raw materials, principally aluminum;

l the Company’s ability to stay current with technological changes, such as advancements in semiconductor and laser component technology and the development of alternative aerospace materials;

l governmental funding for certain military programs that utilize the Company’s products;

l changes in fuel prices;

l changes in production rates;

l asserted and unasserted claims, and in particular, the Company’s ability to successfully negotiate claims relating to cost over-runs of work performed on certain customer contracts;

l changes in employee relations;

l environmental matters;

2

l changes in accounting principles or new accounting standards; and

l compliance with laws and regulations.

In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. Accordingly, investors are cautioned not to place undue reliance on the forward-looking statements. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors should, however, review additional disclosures made by the Company from time to time in its periodic filings with the Securities and Exchange Commission.

This Annual Report on Form 10-K and the documents incorporated herein by reference should be read completely and with the understanding that the Company’s actual future results may be materially different from what the Company expects. All forward-looking statements made by the Company in this Annual Report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission are qualified by these cautionary statements.

3 

PART I

ITEM 1. BUSINESS

General Overview

LMI Aerospace, Inc. is a leading provider of design engineering services, structural assemblies, kits and components to the aerospace, defense and technology markets.  The Company is comprised of talented and dedicated people committed to providing outstanding service to our customers.  We provide a broad array of manufacturing capabilities and value-added services to the large commercial, corporate, regional and military aircraft and technology markets.  LMI Aerospace is a preferred supplier to aircraft original equipment manufacturers (“OEMs”) and Tier 1 aerospace suppliers.  In addition to aerospace products, we produce components and assemblies for laser equipment used by semiconductor and medical equipment manufacturers in the technology industry.  We also provide prototyping and design capabilities to customers to support new product development.

Founded in 1948 as a manufacturer of components to the large commercial aircraft market of the aerospace industry, LMI Aerospace became a publicly-held company in 1998.  In recent years we have expanded our capabilities and diversified our operations through a number of acquisitions and business initiatives.

In 2001, we acquired the operating assets of Tempco Engineering, Inc., which expanded our aerospace product line and added technology components used in semiconductor and medical equipment.  In 2002, LMI Aerospace acquired Versaform Corporation and Southern Stretch Forming and Fabrication, Inc., producers of large formed metal components for the regional jet, business jet and military markets of the aerospace industry.

Since 2003, LMI Aerospace has expanded into assembling and kitting and opened a distribution center in Savannah, Georgia.  In 2006, we opened a 23,000 square foot manufacturing center in Mexicali, Mexico to support our U.S. operations. This facility has now grown into a facility with over 72,000 square feet of space.

In 2007, LMI Aerospace acquired D3 Technologies, Inc., a premier design and engineering services firm based in San Diego, California.  D3 Technologies, Inc. performs structure and sub-structure design work for manufacturers of commercial, corporate and military aircraft, including The Boeing Company, Spirit AeroSystems, Vought Aircraft Industries, Airbus North America and Lockheed Martin Aeronautics Company, and plays a key role on  Lockheed’s Joint Strike Force and Boeing’s 747-8, 777, and 787 programs.  D3 Technologies, Inc.’s engineers have worked on a range of design and analysis projects including airframe, electro/mechanical and hydraulic/pneumatic systems and have expertise in mechanical, structural, and system design; stress and infinite element analysis; tool design and engineering; numerical controlled programming; logistics and program support; and avionics software and hardware development.

In January 2009, we acquired all of the shares of Everett, Washington-based Integrated Technologies, Inc. (“Intec”), a provider of advanced materials testing, manufacturing, and design services to the aerospace, defense and transportation industries.  Intec's primary business is designed to support composite testing, manufacturing and research, by analyzing new and existing materials, including organic matrix composites, ceramics, metal matrix composites and metal.  We believe the acquisition of Intec, together with other initiatives, will provide significant composite assembly and component production to allow LMI Aerospace to broaden its customer offerings and to use its skilled workforce in both the Aerostructures and Engineering Services segments to transition to production of non-metallic products.  See Note 17 of the Notes to Consolidated Financial Statements in Item 8 below.

4 

Our Strategy

Our current strategy focuses on being well positioned to meet the more demanding requirements of OEMs and Tier 1 aerospace suppliers for more complex products, using both metal and non-metal technologies, and for related services. We believe that OEMs and Tier 1 aerospace suppliers will continue to outsource the design and manufacturing of components, assemblies and sub-systems to fewer preferred suppliers. In addition, these companies have formed relationships with a small number of preferred suppliers in order to improve quality and service levels while reducing purchasing costs. Accordingly, we continue to focus on remaining well positioned to benefit from these trends by:

· Leveraging strong customer relationships. We plan to continue to strengthen our relationships with current customers by expanding our product and service offerings. With our breadth of capabilities and track record of performance, we believe that we can capture additional outsourcing opportunities in the design, engineering, fabrication and assembly of aircraft components, assemblies and sub-systems with our existing customers. We will continue to seek to formalize our customer relationships through long-term agreements.

· Pursuing design-build opportunities. We intend to leverage our highly complementary design, engineering and fabrication capabilities to offer design-build solutions to our customers. We plan to integrate these core competencies to ultimately develop proprietary engineering designs for increasingly complex sub-systems work from OEMs and Tier 1 aerospace suppliers.

· Expanding value-added services and solutions. We intend to grow by increasing the array of value-added services and solutions that we offer our customers. We believe that, by expanding our capability to integrate components into higher level aerospace assemblies and providing point of use kitting for our customers, we will enhance our reputation as a preferred supplier to aerospace manufacturers and improve our position in the aerospace supply chain. As OEMs and Tier 1 aerospace suppliers continue to outsource production of components and assemblies, we believe that we will be well positioned to capture additional sales and become an increasingly important provider to new and existing customers.

· Expanding into more complex metal and non-metal technologies. We are planning to apply our expertise in metals and close tolerance manufacturing to emerging materials and techniques. We believe we can take advantage of opportunities in related metal technologies, including high speed machining of hard metals. We intend to expand our fabrication capabilities to include composite materials, as composite structures are being used more frequently for aerospace applications.

· Improving inventory management. Given the current economic environment, we have set aggressive inventory reduction goals for 2009. We believe this will better position us for potential decreases in production rates by our customers.

· Using lean techniques to maintain manufacturing margins.  We will seek to reduce waste throughout the organization and focus our efforts on set-up reductions, determining how to efficiently reduce lot sizes and lead times and various other techniques. We plan to continue our focus on applying lean techniques to maintain our manufacturing margins. In recent years, these techniques have been successfully used to improve our profitability and we believe they will serve as effective tools in maintaining our margins in a slowed economy with decreased production rates.

We believe that implementation of this strategy will enhance our ability to successfully compete in the future.  Our plans for the implementation of this strategy include:

5

· Continuing our investment in production efficiencies and capacity.  We remain focused on targeted investment in our domestic production capabilities, while seeking more cost solutions by expanding into lower labor cost areas through direct investment in facilities or augmenting our supply chain.  We expect that additional future cost-saving opportunities will arise from increased productivity, further improvements to quality, lean manufacturing techniques, continued outsourcing of non-core activities and investment in human resources, software and improved processes designed to better manage supply chain procurement. 

· Pursuing strategic acquisitions.  We will continue to explore acquisition opportunities that will enhance our strategic position as a preferred supplier in the aerospace industry.  We believe we are well-positioned to take advantage of acquisition opportunities as consolidation trends continue in the aerospace industry. We believe that our ability to integrate strategic acquisitions with our current capabilities will enable us to capture additional market share and diversify our current businesses.

Financial Information About Our Business Segments

Financial information with respect to our business segments, including product line disclosures, revenues and operating earnings is contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 below, and in Note 15 of the Notes to Consolidated Financial Statementsin Item 8 below.

Description of Business by Segment

We operate in two business segments consisting of our Aerostructures segment and our Engineering Services segment.  These two segments are described in detail below.

Through our Aerostructures segment, we assemble, kit, fabricate, machine, finish and integrate formed, close tolerance aluminum and specialty alloy components and sheet metal products primarily for large commercial, corporate, regional and military aircraft.  We manufacture more than 30,000 products for integration into a variety of aircraft platforms manufactured by leading OEMs, and Tier 1 aerospace suppliers, including Spirit AeroSystems, Gulfstream Aerospace Corporation, The Boeing Company, Sikorsky Aircraft Corporation, Vought Aircraft Industries, Bombardier, Inc. and Aviation Partners Boeing.  We are the sole-source provider, under long-term agreements, for many of the products that we provide.  Our primary aerospace products include:

· leading edge wing slats and flapskins;

· winglets and related wing modification kits;

· fuselage and wing skins;

· helicopter cabin  and aft section components and assemblies;

· wing panels;

· door components, assemblies and floorbeams;

· thrust reversers and engine nacelles/cowlings;

· cockpit window frames and landing light lens assemblies;

· detail interior components;

· structural sheet metal and extruded components;

· auxiliary power units;

· housings and assemblies for gun turrets; and

· various components and assemblies.

We also offer our customers value-added services related to the design, production, assembly and distribution of aerospace components, and deliver kits of products directly to customer points of

6

use. We believe these value-added services strengthen our position as a preferred supplier by improving overall production efficiencies and value for our customers. These services include:

· fabrication;

· machining;

· finishing;

· assembly;

· kitting; and

· distribution.

Our Engineering Services segment, operated by our D3 Technologies, Inc., provides a complete range of design, engineering and program management services, supporting aircraft lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution, including:

· structural design and analysis;

· systems design and integration;

· tool design and fabrication;

· certification planning and support;

· logistics and fleet maintainability;

· complex program management support; and

· avionics and tactical software development.

Our team of engineers has extensive experience across multiple disciplines, enabling us to creatively address the needs of our customers throughout the life cycle of our customers’ programs.  We have the ability to work with OEM customers to launch new programs by assisting in the preliminary and conceptual design, certification planning support, risk mitigation and producibility trade studies, and the development of high level program schedules and resource planning. Working with our customer in this early stage better positions us to provide tooling design support in the fabrication stage, as well as modifications and upgrades throughout the platform’s life cycle.

Additional Information

We were organized as a Missouri corporation in 1948.  Our principal executive offices are located at 411 Fountain Lakes Blvd., St. Charles, Missouri 63301.  Our Internet address is www.lmiaerospace.com.  Interested readers can access our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, through the Securities and Exchange Commission website at www.sec.gov.  Such reports are generally available on the day they are filed.  Additionally, we will furnish interested readers a paper copy of such reports, upon request, free of charge.

Customers and Products & Services

Customers

Our principal customers are primarily leading OEMs and Tier 1 suppliers in the corporate, regional, large commercial and military aircraft markets of the aerospace industry.   Through December 31, 2008, direct sales to our top three customers (Spirit AeroSystems, Gulfstream Aerospace Corporation, and The Boeing Company) accounted for a total of approximately 61% of our sales.  The loss of, or substantial reduction of orders from, any of these customers could materially affect our sales and profitability.  See Management’s Discussion and Analysis of Financial Condition – Results of Operations – Year ended December 31, 2008 compared to year ended December 31, 2007 – Aerostructures Segment in Item 7 below and Note 14 of the Notes to Consolidated Financial Statements in Item 8 below.

7

We have entered into long-term agreements with our customers whereby the customer generally commits to purchase all of its requirements of a particular component from us, subject to termination rights. When operating under these agreements, our customers issue purchase orders or provide a shipment signal to schedule delivery of products at a previously negotiated price. Our products sold outside of long-term agreements are based upon previously negotiated pricing and specific terms and conditions on purchase orders.

Products & Services

Our Aerostructures segment fabricates, machines and integrates formed, close tolerance aluminum and specialty alloy components for use by the aerospace, defense and technology industries. All of our components and assemblies are based on designs and specifications prepared and furnished by our customers.  Our Engineering Services segment provides a complete range of design, engineering and program management services for the aerospace industry.  Because we manufacture thousands of components and provide design services on various programs, no one component or service program accounts for a significant portion of our sales. The following table describes some of the principal products we manufacture and the structural design services we provide, as well as the models into which they are integrated:

Product & Services	Models
Aerostructures Segment
Leading edge assemblies, wing slats and flapskins/components	- Gulfstream Aerospace Corporation: G-450, G-550, G-650 - The Boeing Company: 737, 777, 787 - Bombardier, Inc.: Learjet 45 & 60, Challenger 604/605Dash-8, CRJ 200/700/900/1000 - Cessna: Citation X - Spirit AeroSystems : G-250, G-650
Winglets, wing modification kits	- The Boeing Company: 737, 757 - Aviation Partners Boeing: 767
Detail interior components	- Gulfstream Aerospace Corporation: G-350, G-450, G-550 - The Boeing Company: 727, 737, 747,  767, 777 - Lockheed Martin Aeronautics Company: C-130
Helicopter cabin components and assemblies	- Sikorsky Aircraft: UH-60 Black Hawk
Helicopter aft section components and assemblies	- Sikorsky Aircraft: UH-60 Black Hawk
Wing panels	- The Boeing Company: 747 - Bombardier, Inc.: CRJ 200/700/900
Door components, assemblies and floorbeams	- Gulfstream Aerospace Corporation: G-450 - The Boeing Company: 737, 747 - Bombardier, Inc.: Challenger 604 - Lockheed Martin Aeronautics Company: F-16 Fighting Falcon, C-130 Hercules
Thrust reversers and engine nacelles/cowlings	- Gulfstream Aerospace Corporation: G-450 - Boeing Commercial: 737, 747, 777 - Boeing Defense: B-52 Buffalo

8

Product & Services	Models
Cockpit window frames and landing light lens assembly	- Gulfstream Aerospace Corporation: G-350, G-450 - The Boeing Company: 737, 747, 767, 777, MD-80, KC-10 - Bombardier, Inc.: Learjet 45 & 60, Challenger 300 - Lockheed Martin Aeronautics Company: F-16 Fighting Falcon - Cessna: Citation III, VII and Excel
Fuselage and wing skin	- Gulfstream Aerospace Corporation: G-350, G-450, G-550, G-650 - The Boeing Company: 737, 747, 767, 777, 787 - Bombardier, Inc.: Learjet 45 & 60, Dash-8, CRJ 200/700/900 - Lockheed Martin Aeronautics Company: F-16 Fighting Falcon, C-130 Hercules - Cessna: Citation III
Structural sheet metal and extruded components	- Gulfstream Aerospace Corporation: G-350, G-450, G-550, G-650 - Boeing Commercial: 737, 747, 767, 777 - Boeing Defense: F-15 Eagle, F/A-18 Hornet, C-17 Globemaster - Bombardier, Inc.: CRJ 200/700/900 - Lockheed Martin Aeronautics Company: F-16 Fighting Falcon, C-130 Hercules
Auxiliary power unit components	- Gulfstream Aerospace Corporation: G-550 - The Boeing Company: V-22 Osprey
Fans, heat exchangers, and various assemblies	- Cymer: ELS 7000, ELS 6010 and XLA 100
Housings and assemblies for gun turrets	- The Boeing Company: AH-64 Apache - Alliant Techsystems, Inc.:  AH-64 Apache
Various components and assemblies	- Gulfstream Aerospace Corporation: G-550 - Cymer: IntraLase FS Laser

Engineering Services Segment
Structural design and analysis
· Wing/wingbox, fuselage,    empennage design	- Boeing Commercial: 767, 777, 747-8, 787-8/-9 - Spirit AeroSystems: Boeing 747-8, 787-8, Gulfstream G-250, G-650, Sikorsky CH-53, Cessna Citation Columbus - Vought Aircraft Industries: Boeing 787-8 - Lockheed Martin Aeronautics Company: JSF F-35 - Bombardier, Inc.: Learjet L-85
· Winglet design	- Aviation Partners Boeing: 757, 767 - Spirit AeroSystems:Gulfstream G-250, G-650
· Nacelle, engine cowl, thrust    reverser design	- NORDAM: PD427 Fan Cowl (Hawker 4000)

9

· Weight improvement    engineering	- Boeing Commercial: 747-8, 787-8 - Spirit AeroSystems: Boeing 787-8, Gulfstream G-250, G-650 - Vought Aircraft Industries:  Boeing 787-8
· Aircraft modification    engineering	- Boeing Commercial: 747-LCF, 777-F - Boeing Defense: F/A-18A/B/C/D Hornet, F/A-18E/F Super Hornet, EA-18G Growler - Lockheed Martin Aeronautics Company:  P3
Systems design and integration	- Boeing Commercial: 747-8, 787
Tool design and fabrication	- Boeing Commercial: 777, 747-8, 787 - Boeing Defense: MMA - Spirit AeroSystems: Boeing 747-8 - Vought Aircraft Industries:787, 747-8, C-17
Aviation training system	-  Northrop Grumman: C-2A Greyhound, E-2C Hawkeye, E-2D Advanced Hawkeye
Aviation maintenance engineering	- USS Nimitz (CVN-68), USS Abraham Lincoln (CVN 72),  USS George Washington (CVN 73), USS John C Stennis (CVN-74) - Naval Air Station: Lemoore, CA, Oceana, VA, and Atsugi, Japan - Marine Corps Air Station: Cherry Point, NC, Beaufort, SC, and Iwakuni, Japan
Aviation system software engineering	- Northrop Grumman: Fire Scout, Sea Scout - Sikorsky Aircraft: SH-60 Sea Hawk, HH-60 Jay Hawk,  MH- 60 Black Hawk - Space and Naval WarfareSystemsCenter (Pacific) - Naval Air Station: Key West, FL, Jacksonville, FL

Manufacturing Process

Fabrication

We deliver a broad range of fabrication capabilities ranging from a single-piece component to complex, multiple-quantity orders. We can bend, stretch, draw, and stamp a myriad of materials including aluminum alloys, stainless steel, titanium, hasteloy and other metals.  We organize our manufacturing facilities by work centers focusing on a particular manufacturing process. Depending on the component, we utilize either a forming process or a machining process. Each work center is staffed by a team of operators who are supported by a supervisor, lead operators and quality inspectors. Throughout each stage of the manufacturing and finishing processes, we collect, maintain and evaluate data, including customer design inputs, process scheduling, material inventory, labor, inspection results and completion and delivery dates. Our information systems employ this data to provide accurate pricing and scheduling information to our customers as well as to establish production standards used to measure internal performance.

We use several different processes in manufacturing components, including:

· fluid cell press;

· sheet metal and extrusion stretch;

· skin stretch;

10

· stretch draw;

· hot joggle;

· machining and turning;

· brake forming; and

· roll forming.

These processes shape or form aluminum, stainless steel or titanium sheet metal and extrusion, known as a work piece, into components by applying pressure through impact, stretching or pressing, which causes the work piece to conform to a die. The shapes may be simple with a single angle, bend or curve, or may be complex with compound contours having multiple bends and angles. Some processes incorporate heat to soften the metal prior to or during forming.

Machining

Our machining capabilities range from simple 2-axis to complex 5-axis milling.  State-of-the-art machining, computer numerical controls (“CNC”), programming tools, and highly trained operators assure that the machined products that we deliver meet specifications and exceed expectations. We produce components using close-tolerance machining methods. These methods involve the machining of various metals, such as stainless steel, aluminum, monel, kevlar and numerous varieties of steel and castings. We have the capability of machining steel and castings in both heat-treated and non-heat-treated conditions. The parts we manufacture using these close-tolerance machining methods are typically small to medium sized parts.

We process parts through conventional and CNC machining methods from raw material or castings up to and including assembly processes. In addition, complex machining of parts is accomplished through the use of engineering set-ups to produce intricate and close tolerances with very restrictive finish requirements. Each machining facility is also set up to complete turnkey, research and development projects to better support customers’ engineering changes.

Value-Added Services

In addition to the products we sell, each segment offers various value-added services that are intended to result in both cost and time savings. These services include:

· finishing;

· assembly;

· kitting;

· distribution;

· engineered tool design, fabrication and repair; and

· prototyping and manufacturing producibility design.

Finishing

Our finishing plant is located in Tulsa, Oklahoma, and offers chemical milling, processing, painting and polishing functionalities.  We deliver finished projects that meet or exceed standards of our commercial, business jet and military aircraft customers.  We have received quality approvals from most major aircraft manufacturers in the United States and Canada.

Assembly

We are an industry leader in the assembly of multiple-detail components into large sub-assemblies or finished-assemblies.  We apply this critical manufacturing step to a range of products in

11

the commercial and business jet markets, as well as military aviation, for both fixed-wing and rotor craft.  Customers who receive our assemblies include The Boeing Company, Sikorsky Aircraft Corporation and Gulfstream Aerospace Corporation.

Kitting

In support of our customers’ lean and best practice initiatives, we offer kitting services to help streamline the flow of components to their assembly lines. Our distribution facilities in Savannah, Georgia and Tulsa, Oklahoma are designed to kit manufactured components and deliver to customer points of use in a just-in-time manner. These locations also serve as warehousing and detail storage facilities where finished goods may be stored and kitted to customer specification, upon demand.

Distribution

We deliver value-added service to our customers through our distribution centers located in Tulsa, Oklahoma, and Savannah, Georgia.  These facilities are designed with high-density storage and narrow-aisle parts retrieval systems that support storage and direct shipping of products to our customers’ points of use.  This warehousing and just-in-time delivery supports and conforms to our customers’ lean manufacturing processes.

Backlog

Our Engineering Services segment does not utilize backlog to monitor its operations.  Our Aerostructures segment’s backlog is displayed in the following table:

	As of December 31, ($ in millions)
	2008		2007
Total	$	250.3	$	160.9
Portion deliverable within 12 months	$	184.0	$	126.0

Our customers often modify purchase orders to accelerate or delay delivery dates. The level of unfilled orders at any given time during the year will be materially affected by our customers’ provisioning policies, the timing of our receipt of orders and the speed with which those orders are filled. Moreover, sales during any period may include sales that are not part of the backlog at the end of the prior period.  See “Item 1A. Risk Factors, Risks Related to Our Business – We may not realize all of the sales expected from our existing backlog.”

Raw Materials and Procurement Practices

We manufacture the majority of our components from aerospace quality aluminum sheet metal and extrusion. We also use steel, titanium, inconel, monel and other metals to support the balance of our components.  We purchase the majority of these materials through a contract we have negotiated with a mill as well as contracts certain of our customers have negotiated with distributors. These contracts are designed to provide an adequate supply of material at predictable pricing levels. If supply is not available or we need a product that is not covered under these agreements, we use a variety of mills and distributors to support our needs. We believe that currently there are adequate alternative sources of supply. During 2008, we purchased approximately 64% of the raw materials used in production from three suppliers.

In line with our customers’ demands for more sophisticated and complex products, we have focused our attention on operational execution of an unprecedented number of assembled products.  As

12

a result, we anticipate a greater use of third party suppliers for strategic components.  To meet this challenge, we established a management procurement process designed to develop strategic relationships with key suppliers and to manage the supply chain to ensure the timely delivery of quality components.

Quality Assurance and Control

Our Aerospace Quality Systems are continuously reviewed and updated to comply with the requirements of ISO9001-2000/AS9100 Revision B and Nadcap (National Aerospace and Defense Contractors Accreditation Program) special processes quality requirements. The continuous review and updating of our processes have allowed our fabrication facilities, with third party ISO9001-2000/AS9100 registrations from National Quality Assurance, USA and Perry Johnson Registrars and Performance Review Institute, to maintain those certifications for 2009 and beyond. Our Engineering Services segment’s quality management system is continuously reviewed and updated to comply with the requirements of ISO9001-2000/ AS9100 Revision B.

This attention to quality system and business processes has allowed us to remain an approved supplier for many of the leading OEMs and Tier 1 suppliers such as Gulfstream Aerospace Corporation, The Boeing Company, Bombardier, Inc., Sikorsky Aircraft Corporation, Spirit AeroSystems, Lockheed Martin Aeronautics, Cessna, Raytheon Company, Goodrich and others.

Our quality systems include the quality review of work order masters and outside purchase orders to ensure that the flow-down of our customer’s requirements is being addressed both internally and externally. The quality review of the work order master also ensures that the necessary inspection operations are properly located within the work order to verify and control the outcome of the fabrication processes. We use an ongoing employee training program and lean manufacturing techniques to assist employees in becoming familiar with any changes in our procedures or special customer requirements. We use a robust internal auditing program for each of the facilities to ensure that the training is effective and to ensure ongoing compliance to industry and customer required standards. The internal auditing is provided by a combination of Quality Engineer/Auditors located in some of our facilities or by Corporate Quality Engineer/Auditors traveling to our individual facilities from our headquarters to perform internal audits. All of our quality auditors have completed Registrar Accreditation Board approved Lead Auditor training and have been observed by a Corporate Quality Engineer/Auditor.

We utilize a first part buy-off at each operation during the fabrication process as well as a 100% final inspection of parts to verify their compliance with the customer’s configuration requirements.

We use the AS9102 Rev A standard and forms to perform First Article Inspections. Our Corporate Quality Group maintains our Approved Supplier List (“ASL”) for all facilities. This includes reviewing surveys, performing on-site audits and constant monitoring of customer ASLs to verify that suppliers are maintaining their customers’ direct approvals.

Our Engineering Services segment’s monthly management review meetings are performed with the segment’s executive level team on all internal processes and performance to ensure that we meet expectations with positive measurable results. All suppliers of our Engineering Services segment are approved through our supplier rating system and are maintained in our ASL database. All fabrication suppliers of our Engineering Services segment are reviewed on a continual basis with documented quality performance reviews and quality deliverable reviews. All certification documentation is reviewed through preliminary design reviews and critical design reviews by our engineering department and is routed through our internal quality design verification group for verification and validation of data. All Engineering Services sites are required to go through a robust quality assurance internal audit program every year to ensure the effectiveness of our quality management system structure. All final

13

audit reports are reviewed by the segment’s executive level team, site director, and internal audit team on all audit findings, to assess required process improvements.

Sales and Marketing

Our Aerostructures sales and marketing team targets four market sectors: corporate and regional aircraft, large commercial aircraft, military aircraft and non-aerospace. We utilize five Program Managers to support these sectors. At each of our facilities, customer service representatives establish and maintain a business relationship between customers and our production and fabrication business units with a focus on customer satisfaction.

Awards of new work for the Aerostructures segment are generally processed by a Request for Quotation (“RFQ”).  Upon receipt, the RFQ is reviewed by a team consisting of senior management, a Program Manager, Advanced Manufacturing Engineering personnel, Fabrication Plant Management and/or Engineering personnel, as appropriate, and Estimating personnel.  If the team determines that the project fits our strategic goals and is within our manufacturing and supply chain management capabilities, a Proposal Response is developed.  The majority of new programs are awarded on a competitive bid basis.  Following award, the project is reviewed for consistency with existing work and the amount of development required.  If engineering is evolving and the effort spans multiple fabrication plants, a Project Manager and support team are assigned.  The New Projects Team will coordinate customer requirements, schedule, and manufacturing approach across the operations organization.  Throughout the process, the Aerostructures Program Management Office (“PMO”) provides performance data and metrics to the Project Manager.  PMO also coordinates with the Project Team on a regular basis for changes to be communicated with the customer.  There are multiple levels of communication with our customers that include the Program Manager (primarily for on-going efforts), the Project Manager, PMO (for development efforts) and Corporate/Plant Engineering for clarification of requirements and resolution of issues.

The Marketing and Business Development team for the Engineering Services segment serves as the main focal point for sales and marketing activities relating to design-build programs, working in conjunction with Program Managers, Manager of New Business Development and other LMI corporate personnel to ensure seamless customer service and integrated responses to customer inquiries.  This team’s main areas of responsibility include establishing and maintaining ongoing business relationships with our engineering services customer base, managing responses to all proposal activity within the Engineering Services segment, and facilitating the cross functional execution of our business strategy as it pertains to marketing and business development. All employees of the Engineering Services segment who come in contact with customers are also a part of the Marketing and Business Development team.  The Directors of Engineering Operations, the Program Management Organization, and the organizations they oversee, directly engage with existing customers and programs. All internal organizations work together to maintain and expand new and existing customer relationships.

Competition

Our competitors in the aerospace industry consist of a large fragmented group of companies, including certain business units or affiliates of our customers. However, we are unaware of any single company in the aerospace industry that competes in all of our processes. We believe competition within the aerospace industry will increase substantially as a result of industry consolidation, trends favoring greater outsourcing of components and design engineering, the reduction of the number of preferred suppliers and increased capabilities of foreign sources. We also believe participants in the aerospace industry compete primarily with respect to delivery, price and quality.

Unlike the aerospace industry, we believe there are only a few producers of components similar to the principal technology components we manufacture. We believe engineering capability, responsiveness and price are key aspects of competition in the technology industry.

14

In all of our industries, some of our competitors, including business units affiliated with our customers, have substantially greater financial, production and other resources than we have. We also believe that foreign aerospace manufacturers and engineering service providers are becoming an increasing source of competition, due largely to foreign manufacturers’ access to low-cost labor. Within the aerospace industry, the prevalence of industry participation commitments, pursuant to which domestic OEMs agree to award production work to foreign manufacturers in order to obtain work orders from that country, is also driving this trend.

Governmental Regulations and Environmental Compliance

Our operations are subject to extensive and frequently changing federal, state and local laws and substantial regulation by government agencies, including the United States Environmental Protection Agency, the United States Occupational Safety and Health Administration and the Federal Aviation Administration. Among other matters, these agencies impose requirements that:

· regulate the handling, transportation and disposal of hazardous materials generated or used by us during the normal course of our operations;

· govern the health and safety of our employees; and

· require that we meet standards and licensing requirements for aerospace components.

This extensive regulatory framework imposes significant compliance burdens and risks and, as a result, may substantially affect our operational costs.

In addition, we may become liable for the costs of removal or remediation of hazardous substances released on or in our facilities without regard to whether we knew of, or caused, the release of such substances.  Furthermore, we are subject to U.S. Export Regulations, including the Arms Export Control Act (“AECA”), and the associated International Traffic in Arms Regulations (“ITAR”), as well as other federal regulations promulgated by various departments within the U.S. government.

We believe that we are currently in material compliance with applicable laws and regulations and we are not aware of any material environmental violations at any of our current or former facilities. There can be no assurance, however, that our prior activities did not create a material environmental situation for which we could be responsible or that future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations, or an increase in the amount of hazardous substances generated or used by our operations) will not result in any material environmental liability to us or result in a material adverse effect to our financial condition or results of operations.

Employees

As of December 31, 2008, we had approximately 1,350 permanent employees, of whom 11 served in executive positions, approximately 340 were engineers and engineering-related personnel, 150 served in administrative positions and 840 were engaged in manufacturing operations. In addition, we also used the services of approximately 60 temporary employees. None of our employees are subject to a collective bargaining agreement, and we have not experienced any material business interruption as a result of labor disputes since our inception. We believe we have an excellent relationship with our employees.

We strive to continuously train and educate our employees, which enhances the skill and flexibility of our work force. Through the use of internally developed programs, which include formal classroom and on-the-job, hands-on training, lean manufacturing training developed jointly with external resources and our tuition reimbursement programs, we seek to attract, develop and retain the personnel necessary to achieve our growth and profitability objectives.

15

Seasonality

We do not generally experience any seasonality in the demand for our products.  However, profitability of our Engineering Services segment could be impacted by reduced billable hours in the fourth quarter due to concentration of holidays and vacation days.

Foreign Operations

The Company has a manufacturing facility in Mexico.  The Company did not have any sales to a foreign country greater than 5% of its total sales in 2008, 2007 and 2006, respectively.  The amounts of profitability and identifiable assets attributable to foreign sales activity are not material when compared with revenue, profitability and identifiable assets attributed to United States domestic operations during 2008, 2007 and 2006. The Company is not subject to any significant foreign currency risks since all sales are made in United States dollars.  See Risk Factors – Risks Related to Our Business – Risks associated with foreign operations could adversely impact the Company in Item 1A below.

ITEM 1A.  RISK FACTORS

You should carefully consider the following risks and other information contained in or incorporated by reference in this Annual Report on Form 10-K when evaluating our business and financial condition. Although the risks described below are the risks that we believe are material, there may also be risks of which we are currently unaware, or that we currently regard as immaterial based on the information available to us that later prove to be material. These risks may adversely affect our business, financial condition and operating results.

Risks Related to Our Business

Sales to a limited number of customers represent a significant portion of our revenues, and our long-term agreements with these customers are generally terminable upon written notice.

As of December 31, 2008, 61% of our aggregate sales were dependent upon relationships with three major customers: Spirit AeroSystems, The Boeing Company, and Gulfstream Aerospace Corporation. Although a majority of our sales, including sales to these customers, are made pursuant to long-term agreements, these agreements are generally terminable upon written notice by the customer and typically do not require the customer to purchase any specific quantity of products. As a result, our sales under these agreements may not continue for the full term of the agreements or be consistent with historical sales levels. Additionally, the loss of any one of these customers, or a significant reduction in the amount of orders received from any one of these customers, could cause a significant decrease in our net sales and profitability. We anticipate that a small number of large customers will continue to represent a significant portion of our sales for the foreseeable future. See “Item 1. Business — Customers and Products & Services - Customers.”

We may experience cost over-runs related to orders for new products and changes to existing products, and we may be unable to recoup the resulting increased costs.

We generally sell our components, kits and assemblies under multi-year firm agreements on a fixed-price basis, regardless of our production costs. As a result, factors such as inaccurate pricing, manufacturing inefficiencies, start-up costs and increases in the cost of labor, materials or overhead may result in cost over-runs and losses on those agreements. We may not succeed in obtaining the agreement of a customer to reprice a particular product, and we may not be able to recoup previous losses resulting from incomplete or inaccurate engineering data or out-of-tolerance tooling.

16

Demand for our defense-related products depends upon government spending.

A material portion of our sales (22.5% in 2008) is derived from the military market. The military market is largely dependent upon government budgets, particularly the U.S. defense budget. The funding of government programs is subject to Congressional appropriation. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may be expected to continue for several years. Consequently, programs, including those that require our components, may be only partially funded or never enter full-scale production as expected. As a result, future U.S. defense spending may not be allocated to programs that would benefit our business or at levels that we had anticipated. A decrease in levels of defense spending or the government’s termination of, or failure to fully fund, one or more of the contracts for the programs in which we participate would adversely impact our revenues and cash flow.

Our performance may be affected by the economic conditions in the United States and in other nations where our customers do business.

Declining economic conditions may have a negative impact on overall demand for our products.  As a result, our consolidated results of operations, our financial condition and our cash flows could be reduced as a direct result of a global economic recession.

Access to funding through the capital markets is essential to the execution of our business plan and, if we are unable to maintain such access, we could experience a material adverse effect on our business and financial results.

Our ability to invest in our businesses, fund our operations and contractual commitments, make strategic acquisitions and refinance maturing debt obligations requires access to the capital markets and sufficient bank credit lines to support short-term borrowings.  The current economic environment has resulted in a deterioration in credit markets, making borrowing more difficult.  If we are unable to continue to access the capital markets as a result of, for example, disruption or declines in the capital markets and/or a decline in our financial performance or outlook or credit ratings, we could experience a material adverse effect on our business and financial results.

We may not realize all of the sales expected from our existing backlog.

As of December 31, 2008, we had approximately $250 million of order backlog. We consider backlog to be firm customer orders for future delivery. From time to time, our OEM customers provide projections of components and assemblies that they anticipate purchasing in the future under new and existing programs. These projections are not included in our backlog unless we have received a firm purchase order or order commitment from our customers. Our customers may have the right, under certain circumstances and with certain penalties or consequences, to terminate, reduce or defer firm orders that we have in backlog. If our customers terminate, reduce or defer firm orders, we may be protected from certain costs and losses, but our sales will nevertheless be adversely affected.

Given the nature of our industry and customers, there is always a risk that orders may be cancelled or rescheduled due to fluctuation in our customers’ business needs, purchasing budgets or inventory management practices. Moreover, our realization of sales from new and existing programs is inherently subject to a number of important risks and uncertainties, including the possibility that our customers will not launch programs on time, or at all, the number of units that our customers will actually produce may change or the timing of production may be altered. Also, until firm orders are pledged, our customers generally have the right to discontinue a program or replace us with another supplier at any time without penalty. Our failure to realize sales from new and existing programs would adversely impact our net sales, results of operations and cash flow.

17

We may be required to risk our capital to continue existing partnerships or develop new strategic partnerships with OEMs.

Many OEMs are moving toward developing strategic, and sometimes risk-sharing, partnerships with their larger suppliers. Each strategic partner provides an array of integrated services, including purchasing, warehousing and assembly for OEM customers. We have been designated as a strategic partner by some OEMs and are striving to become a strategic partner of other OEMs. In order to maintain our current strategic partnerships and establish new ones, we will likely need to expand our existing capacities or capabilities. We may not, however, have the financial ability or technical expertise to do so.

Our long-term success and growth strategy depend on our senior management and our ability to attract and retain qualified personnel.

We have written employment agreements with certain of our senior management that expire on December 31, 2009 and 2010. We also maintain key man life insurance policies on the lives of certain members of senior management. The loss of service of one or more of our senior management personnel, however, could result in a loss of leadership and an inability to successfully pursue our long-term success and growth strategy.

Our success and future growth also depend on management’s ability to attract, hire, train, integrate and retain qualified personnel in all areas of our business. Competition for such personnel is intense, and our inability to adequately staff our operations with qualified personnel could render us less efficient and decrease our rate of production. For example, our Engineering Services segment competes in a highly competitive market to attract and retain highly qualified and well-trained engineers. Such a competitive market could put upward pressure on labor costs for engineering talent. Although we have historically been able to pass through increases in engineering labor costs to our customers, there can be no assurance that we will be able to do so in the future.

In addition, rising costs associated with certain employee benefits, in particular employee health coverage, could limit our ability to provide certain employee benefits in the future. If we are unable to provide a competitive employee benefits package, recruiting and retaining qualified personnel may become more difficult.

We use sophisticated equipment that is not easily repaired or replaced, and therefore equipment failures could cause us to be unable to meet quality or delivery expectations of our customers.

Many of our manufacturing processes are dependent on sophisticated equipment used to meet the strict tolerance requirements of our customers. Because sophisticated equipment generally is not easily repaired or replaced, unexpected failures of this equipment could result in production delays or the manufacturing of defective products. Our ability to meet the expectations of our customers with respect to on-time delivery of quality products is critical. Our failure to meet the quality or delivery expectations of our customers could lead to the loss of one or more of our significant customers.

The use by end-users of the product platforms into which our components are integrated could expose us to product liability claims.

We may be exposed to possible claims of personal injury, death, grounding costs, property damage or other liabilities that result from the failure or malfunction of any component or assembly fabricated or designed by us. We currently have in place policies for products liability and premises insurance, which we believe provide adequate coverage in amounts and on terms that are generally consistent with industry practice. Nevertheless, to the extent a claim is made against us that is not covered in whole or in part by our current insurance, we may be subject to a material loss. Moreover, any claims that are covered by our policies would likely cause our premiums to increase, and we might not be able to maintain adequate insurance coverage levels in the future.

18

Our long-term growth strategy depends on our ability to maintain a robust and effective supply chain management system.

As we pursue our long-term growth strategy, we will be providing to our customers increasingly sophisticated components, value-added services and design-build programs. In addition, many OEMs are moving toward developing strategic partnerships with their larger suppliers, which are providing purchasing, warehousing and assembly services. The increased complexity of our products, the expected increased outsourcing of non-core activities and the value-added services we are providing to our customers require us to maintain and manage an effective supply chain to assure timely delivery to us of quality components needed to meet our delivery schedules. Failure to procure from our suppliers quality components on a timely basis could decrease customer satisfaction, and thus our competitiveness, and could also result in lost revenue due to contractual penalties or lost sales.

Risks associated with foreign operations could adversely impact the Company.

The Company operates a facility in Mexico. Doing business in foreign countries is also subject to various risks, including political instability, local economic conditions, foreign government regulatory requirements, trade tariffs and the potentially limited availability of skilled labor in proximity to the Company’s facilities.  The Company has been operating its Mexican facility through a Maquiladora arrangement with a Mexican company, the term of which has expired in accordance with its terms.  The Company and the Mexican company have agreed to continue to operate pursuant to the terms of this arrangement, pending the execution of a renewal, but no assurances can be given that the arrangement will be renewed or, if renewed, on terms as favorable.  If the Company is unable to renew this arrangement on terms satisfactory to it, the Company may incur increased labor costs and/or experience a disruption in its operations in Mexico.

Our facilities are located in regions that are affected by natural disasters.

Several of our facilities are located in regions that have an increased risk of earthquake activity, and one of our facilities has experienced damage due to floods. Although we maintain earthquake and flood loss insurance where necessary, an earthquake, flood or other natural disaster could disrupt our business, result in significant recovery costs and cause our productivity and profits to decrease.

We may be required to record material impairment charges for goodwill and other intangible assets, which would reduce our net income and earnings per share.

Current accounting standards require a periodic review of goodwill and other intangible assets for impairment in value if circumstances indicate that the carrying amount will not be recoverable.  In assessing the recoverability of our goodwill and other intangible assets, management is required to make certain critical estimates and assumptions, particularly as to manufacturing efficiency, the achievement of reductions in operating costs, and increased sales and backlog. If any of these or other estimates and assumptions are not realized in the future, we may be required to record impairment charges for goodwill and other intangible assets, which charges will reduce net income and earnings per share.

Risks associated with acquisitions could result in increased costs and production inefficiencies.

A key element of our growth strategy continues to be expansion of our business through the acquisition of complementary businesses involved in the aerospace industry and strategic acquisitions that will provide us with access to new industries, product lines and technology. Our ability to expand by acquisition is dependent upon, and may be limited by, the availability of suitable acquisition candidates, our capital resources, and available credit which is currently less certain. Acquisition risks include:

· difficulties in assimilating the operations and personnel of acquired companies;

19

· difficulties associated with implementing and integrating new product lines and meeting new   tolerance requirements;

· difficulties in accurately pricing new products;

· the failure to realize potential cost savings or other financial and strategic benefits;

· the incurrence of substantial unanticipated integration costs;

· the potential loss of key employees of the acquired companies;

· the incurrence of substantial, additional indebtedness in funding such acquisitions;

· significant strain on our managerial, financial and other resources; and

· potential goodwill and intangible asset impairment.

Furthermore, although we will investigate the business operations and assets of entities that we acquire, there may be liabilities that we fail or are unable to discover and for which we, as a successor owner or operator, may be liable. Also, the necessity of integrating our internal controls over financial reporting with businesses acquired by us in order to meet the requirements of Section 404 of the Sarbanes - Oxley Act of 2002 will add additional cost and expense to acquisitions and expose us to the risk that we may not be successful in integrating our internal controls over financial reporting with that of the acquired business on a timely basis.

Certain newer aircraft platforms include fewer metal products and could, over time, limit our ability to grow.

Newer military aircraft, such as the Lockheed Martin F-35 Series, and newer aircraft designs for large commercial aircraft, such as the Boeing 787, include more composite and other non-metal components than previous models. Additionally, redesigns of existing platforms could include greater amounts of non-metal components. Although we are in the process of developing and/or acquiring non-metallic production capabilities, we currently do not have the capability to produce non-metal components. If we are unsuccessful in developing and/or acquiring such production expertise, the trend toward the use of non-metal components could limit our opportunities for new work, cause the loss of certain existing work and increase the competitive environment with other suppliers of metal components.

Anti-takeover statutes and anti-takeover provisions in our organizational documents may discourage our acquisition by a third party, which could limit your opportunity to sell your shares at a premium.

Our restated articles of incorporation and amended and restated bylaws contain certain provisions that reduce the probability of a change of control or acquisition of our company. These provisions include, among other things:

· the ability of our Board of Directors to issue preferred stock in one or more series with such rights, obligations and preferences as the Board of Directors may determine, without any further vote or action by our shareholders;

· advanced notice procedures for shareholders to nominate candidates for election of directors and for shareholders to submit proposals for consideration at shareholders’ meetings;

· the staggered election of our directors; and

· restrictions on the ability of shareholders to call special meetings of shareholders.

20

In addition, we are subject to Section 459 of the General and Business Corporation Law of Missouri, which, under certain circumstances, may prohibit a business combination with any shareholder holding 20% or more of our outstanding voting power. This provision may have the effect of delaying, deterring or preventing certain potential acquisitions or a change of control of the Company.

If our directors and executive officers choose to act together, they will exercise voting control over matters requiring approval by our shareholders.

As of December 31, 2008, our directors and executive officers beneficially owned approximately 26% of our common stock. As a result, these shareholders, acting together, would be able to effectively control all matters requiring approval by our shareholders, including the election of our directors and any merger, sale of assets or other change of control transaction.

Risks Related to Our Industry

We are subject to the cyclical nature of the aerospace industry, and any future downturn in the aerospace industry or general economic conditions could cause our sales and operating income to decrease.

We derive approximately 97% of our revenue from the sale of services and components for the aerospace industry. Consequently, our business is directly affected by certain characteristics and trends of the aerospace industry or general economic conditions that affect our customers, such as:

· fluctuations in the aerospace industry’s business cycle;

· varying fuel and labor costs;

· intense price competition and regulatory scrutiny;

· certain trends, including a possible decrease in aviation activity, a decrease in outsourcing by aircraft manufacturers or the failure of projected market growth to materialize or continue; and

· changes in military budgeting and procurement for certain military aircraft.

In the event that these characteristics and trends adversely affect customers in the aerospace industry, they will reduce the overall demand for our products and services, thereby decreasing our sales and operating income.

The commercial aerospace industry may be adversely affected by high fuel prices and disruptions in the supply of fuel, which could adversely impact the demand for our products.

Fuel prices are volatile, having increased substantially in the last few years and spiked at record high levels in 2008 before falling dramatically during the latter part of the year.  Factors influencing fuel prices include weather-related events, natural disasters, limited refining capacity, political disruptions or wars involving oil-producing countries, changes in governmental policy concerning aircraft fuel production, transportation and marketing, and other unpredictable events may result in fuel supply shortages and fuel price increases in the future, which could negatively impact the commercial aerospace industry and, thus, the demand for our products.

The global economic recession has resulted in weaker demand for air travel, which could adversely affect the demand for our products.

As the effects of the global economic recession have been felt in domestic and international commercial aerospace markets, demand for commercial air travel has weakened, and the challenging operating environment currently faced by commercial airlines is expected to continue.  As a result, some commercial airlines have reduced their capacity.  Capital spending by commercial airlines may be negatively influenced by a wide variety of factors, including current and predicted traffic levels, load

21

factors, aircraft fuel prices and general economic conditions, all of which could reduce both the demand for air travel and the demand for our products from our customers.  In addition, continued weakness in economic conditions may cause our customers to request that firm orders be rescheduled or canceled, which could have an adverse effect on our financial performance or results of operations.

Terrorist attacks could reduce demand for our large commercial, corporate and regional products and services.

Acts of sabotage or terrorism or adverse results to the United States or its military conflicts, such as the current conflict in Iraq, would likely have an adverse impact on the large commercial, corporate and regional aircraft industries, which could lead to reduced demand for our products and services. Prior industry downturns caused by such acts or results have negatively affected our Aerostructures segment’s sales, gross margin, net income and cash flow. In particular, we and the aerospace industry suffered significantly as a result of the events of September 11, 2001, the events of which caused a substantial downturn in new large commercial aircraft deliveries and order cancellations or deferrals by major domestic and international air carriers.

We may not be able to maintain or improve our competitive position because of the intense competition in the markets we serve.

Our competitors in the aerospace industry consist of a large fragmented group of companies, including certain business units or affiliates of our customers. We believe that competition within the aerospace industry will increase substantially as a result of industry consolidation, trends favoring greater outsourcing of components and a decrease in the number of preferred suppliers. We also believe foreign aerospace manufacturers and engineering service providers will become an increasing source of competition, due largely to foreign manufacturers’ access to low-cost labor and the increased prevalence of industry participation commitments, pursuant to which domestic OEMs agree to award production work to manufacturers from a foreign country in order to obtain orders from that country. Some of our competitors have substantially greater financial, production and other resources than we have. These competitors may have:

· the ability to adapt more quickly to changes in customer requirements and industry conditions or trends;

· greater access to capital;

· stronger relationships with customers and suppliers; and

· greater name recognition.

Decreases in the availability or increases in the cost of our raw materials will increase our operating costs.

Most of our components are manufactured from aluminum products. From time to time, we, and the aerospace components industry as a whole, have experienced shortages in the availability of aerospace quality aluminum. In addition, we utilize certain materials in the manufacture of our non-aerospace products that, in some cases, may be provided by a limited number of suppliers. Raw material shortages could limit our ability to meet our production needs and adversely affect our ability to deliver products to our customers on a timely basis. Also, raw material shortages and capacity constraints at our raw material producers are outside of our control and can cause the price of aluminum to increase. Any significant shortage or price escalation of raw materials such as aluminum could increase our operating costs, which will likely reduce our profits.

22

OEMs in the aerospace industry have significant pricing leverage over suppliers such as ourselves, and may be able to achieve price reductions over time, which could adversely impact our profitability.

There is substantial and continuing pressure from OEMs in the aerospace industry on suppliers such as ourselves, to reduce prices for products and services. If we are unable to absorb OEM price reductions through operating cost reductions and other methods, our gross margins, profitability and cash flows could be reduced.

Compliance with and changes in environmental, health and safety laws and other laws that regulate the operation of our business and industry standards could increase the cost of production and expose us to regulatory claims.

Our operations are subject to extensive and frequently changing federal, state and local laws and substantial regulation by government agencies, including the United States Environmental Protection Agency, the United States Occupational Safety and Health Administration and the Federal Aviation Administration. Among other matters, these agencies impose requirements that:

· regulate the operation, handling, transportation and disposal of hazardous materials generated or used by us during the normal course of our operations;

· govern the health and safety of our employees; and

· require that we meet standards and licensing requirements for aerospace components.

In particular, we use and generate hazardous waste in our operations. Consequently, we monitor hazardous waste management and applicable environmental permitting and reporting for compliance with applicable laws at our locations in the ordinary course of our business. We may be subject to potential material liabilities relating to any investigation and cleanup of our locations or properties where we deliver hazardous waste for handling or disposal that may be contaminated and to claims alleging personal injury. In addition, we have incurred, and expect to continue to incur, costs to comply with environmental laws and regulations. The adoption of new laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new cleanup requirements could require us to incur costs and become subject to new or increased liabilities that could increase our operating costs and adversely affect the manner in which we conduct our business.

While we require Federal Aviation Administration certifications only to a limited extent, we typically are required to maintain third-party registrations with respect to industry specification standards, such as AS9100 and National Aerospace and Defense Contractors Accreditation Program (“Nadcap”), for our quality systems and processes. In fact, many individual OEMs and Tier 1 suppliers require certifications or approvals of our work for them based on third-party registrations in order to engineer and serve the systems and components used in specific aircraft models. If material OEM certifications or approvals were revoked or suspended, OEMs may cease purchasing our products.

We are also subject to U.S. Export Regulations, including the Arms Export Control Act (“AECA”) and associated International Traffic in Arms Regulations (“ITAR”).

Moreover, if in the future new or more stringent governmental regulations are adopted, or industry oversight heightened, such action could result in our incurrence of significant additional costs.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

23

ITEM 2.  PROPERTIES.

Facilities

The following table provides certain information with respect to our headquarters and manufacturing, and engineering centers:

Location	Principal Use	Square Footage	Interest
Aerostructures Segment
3600 Mueller Road St. Charles, Missouri	Administrative Offices and Manufacturing Center	62,590	Leased(1)
411 Fountain Lakes Blvd. St. Charles, Missouri	Executive and Administrative Offices and Manufacturing Center	65,580	Leased(2)
3030-3050 N. Hwy 94 St. Charles, Missouri	Plant Offices, Manufacturing Center and Storage	92,740	Leased(3)
101 Western Ave. So. Auburn, Washington	Manufacturing Center	79,120	Leased(4)
2629-2635 Esthner Ct. Wichita, Kansas	Manufacturing Center	31,000	Leased(5)
2621 W. Esthner Ct. Wichita, Kansas	Manufacturing Center and Administrative Offices	39,880	Leased(6)
2104 N. 170th St. E. Ave. Tulsa, Oklahoma	Finishing and Manufacturing Facility	75,000	Leased(7)
5270 N Skiatook Road Catoosa, Oklahoma	Distribution Center	80,000	Leased(8)
14813 Trinity Boulevard Fort Worth, Texas	Machining Facility	21,030	Leased(9)
101 Coleman Blvd. Savannah, Georgia	Distribution Center	86,200	Leased(10)
A.V. Eucalipto, #2351 Col. Rivera Modula Cy D, C.P. 21259 Mexicali, Baja California, Mexico	Offices and Manufacturing Center	74,200	Leased(11)
8866 Laurel Canyon Blvd. Sun Valley, California	Office and Manufacturing	26,200	Leased(12)
11011-11021 Olinda Street Sun Valley, California	Office, Manufacturing and Storage	22,320	Leased(13)
1377 Specialty Drive Vista, California	Office and Manufacturing	85,000	Leased(14)
Engineering Services Segment
4838 Ronson Court San Diego, California	Administrative Offices and Engineering	16,360	Leased(15)
8217 44th Ave. West Mukilteo, Washington	Engineering	18,050	Leased(16)
8223 44th Ave. West Mukilteo, Washington	Engineering	9,890	Leased(17)

We believe that the space and location of our current facilities will be sufficient to reach the level of sales and production projected for the current year.

24

__________________________________

(1) Subject to graduated yearly rent payments of $381,960 to $549,580 during the lease term. The lease expires on February 28, 2025, subject to our option to extend the lease for four additional five-year terms.

(2) Subject to graduated yearly rent payments of $397,570 to $528,730 during the lease term.  The lease expires on February 28, 2017, subject to our options to extend the lease for two additional three-year terms.

(3) Subject to graduated yearly rent payments of $250,010 to $359,710 during the lease term. The lease expires on February 28, 2025, subject to our option to extend the lease for four additional five-year terms.

(4) Subject to yearly rent payments of $492,000 through lease expiration date of June 30, 2011; we retain the option to extend the lease for two additional three-year terms.

(5) Subject to graduated yearly rent payments of $122,330 to $176,000 during the lease term. The lease expires on February 28, 2025, subject to our option to extend the lease for four additional five-year terms.

(6) Subject to yearly rent payments of $148,620 and expires on July 31, 2009; we retain the option to extend the lease for an additional five years.

(7) Subject to graduated yearly rent payments of $156,250 to $224,820 during the lease term. The lease expires on February 28, 2025, subject to our option to extend the lease for four additional five-year terms.

(8) Subject to yearly rent payments of $329,440 and expires on April 30, 2014.

(9) Subject to graduated yearly rent payments of $94,640 to $100,960 through August 31, 2013; we retain the option to extend the lease for two additional five-year terms.

(10) Subject to yearly rent payments of $478,410 to $495,650 through August 31, 2015; we retain the option to extend the lease for three additional five-year terms.

(11) Subject to graduated yearly rent payments of $402,810 to $470,030 during the lease term. The lease expires on August 31, 2014, subject to our option to extend the lease for one additional five-year term.  Pursuant to an oral agreement, the Company is responsible for the rental payments of this leased facility.  See Risk Factors – Risks Related to Our Business – Risks associated with foreign operations could adversely impact the Company in Item 1A above.

(12) Subject to yearly rent payments of $182,350 and expires on March 31, 2009; we retain an option to extend the lease for one additional three-year term and one additional two-year term.

(13) Subject to yearly rent payments of $160,700 and expires on March 31, 2009.

(14) Subject to graduated yearly rent payments of $451,780 to $572,300 during the lease term. The lease expires on September 30, 2013, subject to our option to extend the lease for two additional five-year terms.

(15) Subject to graduated yearly rent payments of $206,080 to $222,890 during the lease term; the lease expires on March 31, 2009.

(16) Subject to graduated yearly rent payments of $232,030 to $261,190 during the lease term.  The lease expires on December 31, 2011, subject to our option to extend the lease for four additional one-year terms.

(17) Month to month lease with monthly rental of $11,000 through March 31, 2009.

25

ITEM 3.  LEGAL PROCEEDINGS.

We are not a party to any legal proceedings, other than routine claims and lawsuits arising in the ordinary course of our business. We do not believe such claims and lawsuits, individually or in the aggregate, will have a material adverse effect on our business.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS.

None.

26

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

The Company’s common stock is traded on The NASDAQ Stock Market LLC under the symbol “LMIA.” The following table sets forth the range of high and low sales prices for the Company’s common stock for the periods indicated during the Company’s past two fiscal years:

Period	High		Low
Fiscal 2008
1st quarter	$	26.26	$	16.08
2nd quarter	$	22.45	$	17.00
3rd quarter	$	26.14	$	15.46
4th quarter	$	20.74	$	6.48
Fiscal 2007
1st quarter	$	20.80	$	15.48
2nd quarter	$	25.50	$	17.76
3rd quarter	$	27.20	$	19.69
4th quarter	$	30.91	$	22.66

Holders

As ofMarch 6, 2009,there were approximately149holders of record of the Company’s common stock.

Dividends

We have not historically declared or paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Our credit facility prohibits us from declaring a dividend with respect to our common stock without the lender’s approval. We currently intend to retain our earnings, if any, and reinvest them in the development of our business.

Securities Authorized for Issuance Under Equity Compensation Plans

On July 7, 2005, our shareholders approved the LMI Aerospace, Inc. 2005 Long-term Incentive Plan (the “2005 Plan”). The 2005 Plan is the Company’s only compensation plan under which the Company’s common stock is authorized for issuance to employees or directors. The 2005 Plan provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance awards, and other stock-based awards and cash bonus awards.  Up to 1,200,000 shares of common stock are authorized for issuance under the 2005 Plan.

27

The following table summarizes information about our equity compensation plan as of December 31, 2008. All outstanding awards relate to the Company’s common stock.

Equity Compensation Plan Information

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))
	(a)(1)		(b)		(c)(2)
Equity compensation plans approved by security holders:
2005 Long-Term Incentive Plan		63,890	$	2.81		662,913
Equity compensation plans not approved by security holders		-		-		-
Total		63,890	$	2.81		662,913

(1) Share total is exclusive of 294,774 shares of unvested restricted stock outstanding with a $22.78 per share weighted-average grant date fair market value.

(2) This column includes securities remaining for issuance as restricted stock.

Issuer Purchases of Equity Securities

In 1998, the Company’s Board of Directors authorized the repurchase of up to 1,100,000 shares.  As of December 31, 2008, the Company had purchased 960,520 shares under this arrangement, but the Company made no purchases of stock under this arrangement during 2008.

Performance Graph

Set forth below is a line graph presentation comparing the yearly percentage change in cumulative total shareholder returns since December 31, 2003 on an indexed basis with the S & P 500 Index and the S&P Small Cap Aerospace/Defense Index, which is a nationally recognized industry standard index.

28

The following graph assumes the investment of $100 in LMI Aerospace, Inc. common stock, the S & P 500 Index and the S&P Small Cap Aerospace/Defense Index as well as the reinvestment of all dividends.  There can be no assurance that the performance of the Company’s common stock will continue into the future with the same or similar trend depicted in the graph below.

29

ITEM 6.  SELECTED FINANCIAL DATA.

The selected financial data set forth below for each of the five years ended December 31, 2008, should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements, related notes and other financial information included herein. The financial data for the years ended December 31, 2004 through 2008 was derived from our consolidated financial statements for those periods that were audited by BDO Seidman, LLP, independent registered public accounting firm.

(Dollar amounts in thousands, except share and per share data)

	2008			2007(1)			2006			2005			2004
Statement of Operations Data:
Net sales	$	239,462		$	168,502		$	122,993		$	101,073		$	85,908
Cost of sales		178,347			123,588			89,527			76,326			69,510
Gross profit		61,115			44,914			33,466			24,747			16,398
Selling, general & administrative expenses (2)		33,128			23,466			17,243			14,474			13,870
Impairment of goodwill (3)		2,303			-			-			-			-
Income from operations		25,684			21,448			16,223			10,273			2,528
Other income (expense)
Interest expense		(1,815	)		(902	)		(93	)		(2,019	)		(2,175	)
Other income (expense), net		10			(20	)		(121	)		30			313
Total other income (expense)		(1,805	)		(922	)		(214	)		(1,989	)		(1,862	)
Income before income taxes		23,879			20,526			16,009			8,284			666
Provision for income taxes		8,611			7,369			5,334			3,133			236
Net income	$	15,268		$	13,157		$	10,675		$	5,151		$	430
Amounts per common share:
Net income	$	1.36		$	1.18		$	1.02		$	0.62		$	0.05
Net income - assuming dilution	$	1.35		$	1.17		$	1.01		$	0.61		$	0.05
Weighted average common shares outstanding		11,198,610			11,157,396			10,494,747			8,291,337			8,186,158
Weighted average dilutive common shares outstanding		11,301,382			11,288,486			10,615,251			8,401,426			8,200,114
Other Financial Data:
Capital expenditures	$	8,055		$	6,570		$	6,671		$	2,903		$	1,266
Cash flows from operating activities		8,993			3,166			6,160			5,342			7,426
Cash flows used by investing activities		(5,867	)		(56,055	)		(4,964	)		(2,786	)		(314	)
Cash flows from (used by) financing activities		(3,179	)		28,560			23,180			(2,935	)		(7,119	)
Gross profit margin		25.5	%		26.7	%		27.2	%		24.5	%		19.1	%
Balance Sheet Data:
Cash and equivalents	$	29		$	82		$	24,411		$	35		$	414
Working capital		68,780			51,689			65,411			28,941			25,593
Total assets		182,347			166,597			108,610			71,957			65,381
Total long-term debt, excluding current portion		25,536			29,022			583			15,462			18,583
Shareholders' equity		122,800			104,827			90,510			39,832			34,352

(1) Includes results of D3 Technologies, Inc. for the five-month period commencing on our acquisition of D3 Technologies, Inc. on July 31, 2007.  See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Year ended December 31, 2007 compared to year ended December 31, 2006.

30

(2) Includes a charge of $288 in 2008 for the remaining balance of customer intangibles from the acquisition of Technical Change Associates, Inc. (“TCA”) in 2006. The Company ceased operations of TCA as of December 31, 2008. Also includes restructuring charges of $8 and $923 for the years ended December 31, 2005 and 2004, respectively.  There were no restructuring charges for the years ended December 31, 2008, 2007 and 2006.

(3) In the fourth quarter of 2008, the Company recorded a non-cash charge of $2,303 at the Aerostructures segment (relating to Tempco Engineering, Inc.) for the impairment of goodwill.  The test as of October 1, 2008 indicated that the book value of Tempco Engineering, Inc. exceeded the fair value of the business.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We are a leading provider of design engineering services, structural, assemblies, kits and components to the aerospace, defense, and technology markets.  We primarily sell our products and services to the large commercial, military, corporate and regional aircraft, and technology markets.  Historically, our business was primarily dependent on the large commercial aircraft market, specifically with one principal customer. In order to diversify our product and customer base, we implemented an acquisition and marketing strategy in the late 1990’s that has broadened the number of industries to which we sell our products and services and, within the aerospace industry, diversified our customer base to reduce our dependence on any one principal customer.  Our acquisition of D3 Technologies, Inc. in 2007 was in furtherance of our growth strategy of increasing the array of value-added services and solutions that we offer to our customers. We believe that OEMs and Tier 1 aerospace companies will continue the trend of selecting their suppliers based upon the breadth of more complex and sophisticated design and manufacturing capabilities and value-added services and the ability of their suppliers to manage large production programs.

In accordance with the criteria set forth in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” we are organized into two reportable segments: the Aerostructures segment and the Engineering Services segment.  The Aerostructures segment fabricates, machines, assembles, and kits formed, close tolerance aluminum and specialty alloy components and sheet metal products for use by the aerospace, semiconductor and medical products industries. The Engineering Services segment, comprised of the operations of D3 Technologies, Inc. provides engineering solutions to commercial and military aviation, aerospace, military weapons systems, marine and industrial markets.

The following table illustrates our sales percentages to our primary industries and markets over the last three years.

Market	2008			2007			2006
Corporate and regional aircraft		34.7	%		34.3	%		38.6	%
Large commercial aircraft		36.3	%		35.4	%		30.7	%
Military		22.5	%		22.5	%		21.5	%
Technology		3.0	%		4.3	%		5.0	%
Other (1)		3.5	%		3.5	%		4.2	%
Total		100.0	%		100.0	%		100.0	%

__________________________________________________

(1)           Includes commercial consulting services, and various aerospace products.

31

Results of Operations

Year ended December 31, 2008 compared to year ended December 31, 2007

The following table provides the comparative data for 2008 and 2007:

	2008
	($ in millions)
	Aerostructures		Engineering Services		Elimination			Total
Net sales	$	150.8	$	89.9	$	(1.2	)	$	239.5
Cost of sales		108.1		71.4		(1.2	)		178.3
Gross profit		42.7		18.5		-			61.2
S, G, & A (1)		26.4		9.1		-			35.5
Income from operations	$	16.3	$	9.4	$	-		$	25.7
	2007
	($ in millions)
	Aerostructures		Engineering Services (2)		Elimination			Total
Net sales	$	138.1	$	30.4	$	-		$	168.5
Cost of sales		98.5		25.1		-			123.6
Gross profit		39.6		5.3		-			44.9
S, G, & A		20.4		3.1		-			23.5
Income from operations	$	19.2	$	2.2	$	-		$	21.4

_____________________

(1) Includes $2.3 of impairment of goodwill in the Aerostructures segment.

(2) For the five-month period commencing with our acquisition of D3 Technologies, Inc. on July 31, 2007 and ending on December 31, 2007.

Aerostructures Segment

Net Sales.  Net sales were $150.8 million in 2008, an increase of 9.2% from $138.1 million in 2007.  The following table summarizes the segment’s total sales and the percentage of the segment’s total sales represented by the market served:

Category	2008		% of Total			2007		% of Total
	($ in millions)
Corporate and regional aircraft	$	55.0		36.5	%	$	49.5		35.8	%
Large commercial aircraft		43.8		29.0	%		44.1		31.9	%
Military		40.2		26.7	%		33.1		24.0	%
Technology		7.3		4.8	%		7.3		5.3	%
Other		4.5		3.0	%		4.1		3.0	%
Total	$	150.8		100.0	%	$	138.1		100.0	%

Net sales for corporate and regional aircraft were $55.0 million during 2008 compared to $49.5 million in 2007, an increase of 11.1%.  This increase was primarily attributable to increased production rates on Gulfstream Aerospace Corporation aircraft. Sales to this customer in 2008 and 2007 were $46.2 million and $43.4 million, respectively.  Subsequent to year end, Gulfstream Aerospace Corporation announced a reduction in production rates of large cabin aircraft by approximately 25%, which we expect to have a material impact upon our 2009 sales.

32

Large commercial aircraft generated net sales of $43.8 million in 2008 compared to $44.1 million in 2007, a decrease of 0.7%.  Net sales of certain aircraft models were negatively impacted by the strike by employees of The Boeing Company, which affected the last four months of 2008. In particular, we generated net sales for the Boeing 737 of $22.3 million in 2008, down 13.9% from $25.9 million in 2007, and net sales for the Boeing 777 of $3.8 million in 2008, down 22.4% from $4.9 million in 2007. These declines were partially offset by sales for the Boeing 747, which generated $10.6 million in 2008, up 21.8% from $8.7 million in 2007, and the Boeing 767, which generated $4.4 million, up 193.3% from $1.5 million in 2007.

Net sales of military products were $40.2 million in 2008 compared to $33.1 million in 2007, an increase of 21.5%. During the third quarter of 2007, we settled a claim with a customer that generated $1.2 million of net sales. Excluding this settlement, sales of military products experienced an increase of 26.0% in 2008 compared to $31.9 million in 2007. This increase in net sales resulted from net sales for the Sikorsky Black Hawk program, which generated $30.2 million of net sales in 2008, up 64.1% from $18.4 million in 2007.  This increase was partially offset by net sales for the Boeing Apache helicopter, which generated $5.8 million in 2008, down 4.9% from $6.1 million in 2007.

Net sales of technology products were $7.3 million in both 2008 and 2007. This result was due to flat net sales of products used in semiconductor equipment.

Other net sales are primarily consulting services for lean manufacturing, commercial sheet metal and machined components and various aerospace products that are not easily identifiable to the appropriate aircraft and market.

Gross Profit.  Gross profit for 2008 was $42.7 million (28.3% of net sales) compared to $39.6 million (28.7% of net sales) for 2007.  Excluding the one-time benefit of the claim settlement discussed above, net of costs related to such settlement of $0.2 million, gross profit for 2007 was $38.6 million (28.0% of net sales). Gross profit was positively impacted by our higher production rates with aerospace customers which provided better coverage of fixed costs, but was reduced by slightly lower margin on newer assembly work on the Sikorsky Black Hawk program as well as increased salaries and wages.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $26.4 million (17.5% of net sales) in 2008 compared to $20.4 million (14.8% of net sales) in 2007.  This 29.4% increase includes a non-cash charge of $2.3 million for the impairment of goodwill relating to Tempco Engineering, Inc. and a charge of $0.3 million for the remaining balance of customer intangibles from the acquisition of TCA in 2006. The Company ceased operations of TCA as of December 31, 2008. The remaining increase was primarily due to higher professional fees and recruiting costs.

Engineering Services Segment

Our Engineering Services segment was created with the acquisition of D3 Technologies, Inc. on July 31, 2007. The 2007 results for this segment are for the five-month period ended December 31, 2007.

Net Sales.The following table specifies the amount of the Engineering Services segment’s net sales by market and the percentage of the segment’s total net sales represented by each market for the twelve month period ended December 31, 2008 and the five month period ended December 31, 2007.

33

							Five Months Ended December 31,
Category		2008		% of Total			2007		% of Total
	($ in millions)
Corporate and regional aircraft		$	28.2		31.4	%	$	8.3		27.3	%
Large commercial aircraft			43.1		47.9	%		15.4		50.7	%
Military			13.6		15.1	%		4.8		15.8	%
Tooling and Other			5.0		5.6	%		1.9		6.2	%
Total		$	89.9		100.0	%	$	30.4		100.0	%

Approximately $87.1 million, or 96.9% of the segment’s 2008 net sales; and approximately $28.6 million or 94.1% of the 2007 five month period net sales were recorded under reimbursement type contracts for engineering services.  The Engineering Services segment generates net sales from labor hours worked at varying, pre-negotiated rates and other direct costs plus an administrative fee.  Net sales under these reimbursement contracts are primarily for commercial, corporate, and military markets.  In 2008, the segment’s net sales of services supporting corporate and regional aircraft were approximately $28.2 million or 31.4% of total sales, while the same category had $8.3 million, or 27.3% of total net sales for the five month period ending December 31, 2007.  The majority of these sales resulted from services provided in the development of new aircraft programs.  Net sales for services for commercial aircraft were approximately $43.1 million, or 47.9% of net sales.  In the last five months of 2007, the segment’s net sales for services for large commercial aircraft were $15.4 million or 50.7 % of total net sales.  These revenues are primarily from programs supporting the Boeing 747, 767, 777, and 787 platforms.  Military programs had net sales of approximately $13.6 million, or 15.1% of 2008 net sales.  The five month 2007 net sales for the military category were $4.8 million, or 15.8% of the total net sales.  The military revenues were derived from support provided on multiple Navy programs, Lockheed Martin’s F-35, and various other programs.  Approximately $5.0 million, or 5.6% of 2008 net sales, and $1.9 million, or 6.2% of net sales for the five month period in 2007, were categorized as tooling or other.  These sales represented services primarily related to design and delivery of tooling on various programs supporting commercial aircraft.

Gross Profit.Gross profit for this segment was $18.5 million (20.6% of net sales) for 2008 and $5.3 million (17.4% of net sales) for the five month period ended December 31, 2007.  Costs included in cost of goods sold are primarily direct labor, fringe benefits, subcontract labor, direct costs related to specific contracts, depreciation and facility costs and are part of the negotiated rate structures for reimbursement type contracts.  The higher gross profit in 2008 compared to the five months in 2007 is primarily due to the concentration of holidays in the last five months of the year that impact the number of billable hours.  In addition, higher profitability was due to favorable negotiations with clients and minimization of indirect charges by direct personnel.

Selling, General and Administrative Expenses.Selling, general and administrative expenses were $9.1 million (10.1% of net sales) in 2008 and $3.1 million (10.2% of net sales) for the five month period ended December 31, 2007.  These costs primarily include salaries, wages and benefit costs of approximately $4.5 million in 2008 and $1.5 million in 2007, stock based compensation of $1.5 million in 2008 and $0.7 million in 2007, relating to a restricted stock award made on July 31, 2007 and vesting over five years, and amortization of intangibles of $1.0 million in 2008 and $0.4 million in 2007, valued in connection with the acquisition of D3 Technologies, Inc.

Non-segment Expenses

Other Income (Expense), Net.  Other expense was $1.8 million for 2008, compared to $0.9 million for 2007. The increased expense resulted from interest expense on borrowings related to the

34

acquisition of D3 Technologies, Inc., offset by a charge in 2007 for $0.2 million of unamortized prepaid financing costs related to our former credit facility.

Income Tax Expense.  Income tax expense for 2008 was $8.6 million compared to $7.4 million for 2007. During 2008, we applied an effective income tax rate of 36.5%, up from 35.9% in 2007.  Our 2008 effective tax rate was positively impacted by higher deductions available for manufacturing companies and negatively impacted by a higher effective state income tax rate.

Year ended December 31, 2007 compared to year ended December 31, 2006

The following table provides the comparative data for 2007 and 2006:

	2007									2006
	($ in millions)
	Aerostructures			Engineering Services (1)			Total			Aerostructures			Engineering Services			Total
Net sales		$	138.1		$	30.4		$	168.5		$	123.0		$			$	123.0
Cost of sales			98.5			25.1			123.6			89.5						89.5
Gross profit			39.6			5.3			44.9			33.5			-			33.5
S,G & A			20.4			3.1			23.5			17.3						17.3
Income from operations		$	19.2		$	2.2		$	21.4		$	16.2		$	-		$	16.2

(1)           For the five-month period commencing on our acquisition of D3 Technologies, Inc. on July 31, 2007 and ending on December 31, 2007.

Aerostructures Segment

Net Sales.  Net sales were $138.1 million in 2007, an increase of 12.3% from $123.0 million in 2006.  The following table summarizes our total sales by the market served:

Category	2007		% of Total			2006		% of Total
	($ in millions)
Corporate and regional aircraft	$	49.5		35.8	%	$	47.4		38.6	%
Large commercial aircraft		44.1		31.9			37.8		30.7
Military		33.1		24.0			26.5		21.5
Technology		7.3		5.3			6.2		5.0
Other		4.1		3.0			5.1		4.2
Total	$	138.1		100.0	%	$	123.0		100.0	%

Net sales for corporate and regional aircraft were $49.5 million during 2007 compared to $47.4 million in 2006, an increase of 4.4%.  This increase was primarily attributable to higher production rates at Gulfstream Aerospace Corporation.

Large commercial aircraft generated net sales of $44.1 million in 2007 compared to $37.8 million in 2006, an increase of 16.7%.  Increase in net sales to this market was driven by higher production rates on certain models at The Boeing Company.  In particular, we generated net sales for the Boeing 737 of $25.9 million in 2007, up 14.6% from $22.6 million in 2006, and net sales for the Boeing 747 of $8.7 million in 2007, up 17.6% from $7.4 million in 2006. In addition, sales for the Boeing 787, which primarily began in the first quarter of 2007, generated $1.8 million for the year.

35

Net sales of military products were $33.1 million in 2007 compared to $26.5 million in 2006, an increase of 24.9%. During the third quarter of 2007, we settled a claim with a customer which generated $1.2 million of net sales. Excluding this settlement, sales of military products was $31.9 million in 2007, an increase of 20.4% compared to 2006. This increase in net sales resulted from net sales for the Sikorsky Black Hawk program which generated $18.4 million of net sales in 2007, up 49.6% from $12.3 million in 2006.  Additionally, net sales for the Boeing Apache helicopter generated $6.1 million in sales in 2007, up 15.1% from $5.3 million in 2006.

Net sales of technology products were $7.3 million in 2007 compared to $6.2 million in 2006, an increase of 17.7%. This increase was due to higher net sales of products used in semiconductor equipment.

Other net sales are primarily consulting services for lean manufacturing, commercial sheet metal and machined components and various aerospace products that are not easily identifiable to the appropriate aircraft and market.

Gross Profit.  Gross profit for 2007 was $39.6 million (28.7% of net sales) compared to $33.5 million (27.2% of net sales) for 2006.  Excluding the one-time benefit of the claim settlement discussed above, net of costs related to such settlement of $0.2 million, gross profit for 2007 was $38.6 million (28.0% of net sales). Gross profit was positively impacted by our higher production rates with aerospace customers which provided better coverage of fixed costs, but was reduced by increased salaries and wages, primarily from investment in our materiel organization. Specifically, salary, wages and fringe benefits increased 13.7%, from $27.7 million in 2006 to $31.5 million in 2007.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $20.4 million (14.8% of net sales) in 2007 compared to $17.3 million (14.1% of net sales) in 2006.  This 17.9% increase was primarily due to higher rent expenses and compensation and fringe benefit costs resulting from increased staffing to support our planned growth.

Engineering Services Segment

Net Sales.The following table specifies the amount of the Engineering Services segment’s net sales by category for the five months ending December 31, 2007 and the percentage of the segment’s total net sales represented by each category. This segment was created with the acquisition of D3 Technologies, Inc. on July 31, 2007 and includes revenue for the period of August 1 through December 31 of 2007.

Category	Five Months Ended December 31, 2007		% of Total
	($ in millions)
Commercial Aircraft	$	15.4		50.7	%
Corporate Aircraft		8.3		27.3
Military		4.8		15.8
Tooling		1.9		6.2
Total	$	30.4		100.0	%

Approximately $28.6 million, or 94.1% of net sales, of the segment’s revenues were recorded under reimbursement type contracts for engineering services which generate net sales from labor hours incurred at varying, pre-negotiated rates and other direct costs plus an administrative fee.  Net sales under these reimbursement contracts are primarily for commercial, corporate, and military markets.  Net sales for services for commercial aircraft were approximately $15.4 million, or 50.7% of net sales. These revenues are primarily from programs supporting Boeing’s 747, 777 and 787 platforms.  Net sales for services supporting corporate and regional aircraft were approximately $8.3 million, or 27.3% of net sales, the majority of which related to the development of new aircraft programs. Net sales of

36

services for military programs were $4.8 million, or 15.8% of net sales. These military revenues were derived from support provided on multiple Navy programs, the Lockheed Martin’s F-35 and various other programs.  Approximately $1.9 million, or 6.2% of net sales, primarily related to design and delivery of tooling on various programs supporting commercial aircraft.

Gross Profit.Gross profit for the segment was $5.3 million (17.4% of net sales).  Costs included in cost of goods sold are primarily direct labor, fringe benefits, subcontract labor, direct costs related to specific contracts, depreciation and facility costs and are part of the negotiated rate structures for reimbursement type contracts.

Selling, General and Administrative Expenses.Selling, general and administrative expenses for the segment were $3.1 million (10.2% of net sales).  These costs primarily include salaries, wages and benefits costs of approximately $1.5 million, $0.7 million of stock based compensation relating to a restricted stock award made on July 31, 2007 and vesting over five years, and amortization of intangibles of $0.4 million valued in connection with the acquisition of D3 Technologies, Inc..

Non-segment Expenses

Other Income (Expense), Net.  Other expense was $0.9 million for 2007, compared to $0.2 million for 2006. The increased expense resulted from interest expense on borrowings due to the acquisition of D3 Technologies, Inc. as well as a charge for $0.2 million of unamortized prepaid financing costs related to our former credit facility.

Income Tax Expense.  Income tax expense for 2007 was $7.4 million compared to $5.3 million for 2006. During 2007 our effective income tax rate was 35.9%, up from 33.5% in 2006.  The lower 2006 effective tax rate was due to recognition of certain tax credits. Our 2007 effective tax rate was positively impacted by additional deductions available for manufacturers and favorable changes in state apportionment while negatively impacted by a higher tax rate for D3 Technologies, Inc. and the reserving of certain credits challenged by the Internal Revenue Service.

Liquidity and Capital Resources

On July 31, 2007, we entered into a new credit agreement. See Note 6 of the Consolidated Financial Statements. The credit agreement provides for a senior secured revolving credit facility in an aggregate principal amount of up to $80 million, of which $25 million was utilized at December 31, 2008. Borrowings under the credit facility are secured by substantially all of our assets and bear interest at either (a) the “base rate” (the higher of the federal funds rate plus one-half of one percent or the prime commercial lending rate) plus an applicable interest margin ranging from 0.125% to 1.0%, depending upon our total leverage ratio at the end of each quarter, or (b) the LIBOR rate plus an applicable interest margin ranging from 1.125% to 2.0% depending upon our total leverage ratio at the end of each quarter. The maturity date of the credit facility, which is subject to acceleration upon breach of the financial covenants (consisting of a maximum total leverage ratio and a minimum fixed charge coverage ratio) and other customary non-financial covenants contained in the credit agreement, is July 31, 2012. On January 30, 2008, the credit facility was amended to extend the maximum period permitted to fix the interest rate under LIBOR from six months to one year. In connection with our acquisition of D3 Technologies, Inc. we borrowed a total of approximately $38.5 million under the credit facility. The foregoing description of the credit agreement does not purport to be complete and is qualified in its entirety by reference to the credit agreement, a copy of which is attached as Exhibit 4.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 6, 2007.

In August, 2007, the Company entered into a line of credit agreement providing a revolving credit facility in the amount up to $1 million at the base rate plus 1.125%, of which none was utilized at December 31, 2008.

37

On December 28, 2006, we entered into an agreement with a third party to sell and lease back certain of our real estate properties for a total sale price of $10.2 million.  The sale of one of these properties occurred on December 28, 2006 for a sale price of $4.3 million.  On February 13, 2007, the sale of the remaining properties was completed at a price of $5.9 million.  The four operating lease agreements resulting from the sales expire on February 28, 2025 and we have the options for three additional five-year renewal terms.  The combined initial annual minimum lease payment for the four properties is $0.9 million and will be increased by 2.3% per year.  Total gain from the sale of these properties in the amount of $4.2 million was deferred and was recognized over the term of the leases.  Proceeds from the sale were included in cash.

We generated cash from operations of $9.0 million in 2008 compared to $3.2 million in 2007 and $6.2 million in 2006. Net cash provided by operating activities for 2008 was favorably impacted by increased net income, depreciation and amortization, non-cash charge of impairment of goodwill, non-cash restricted stock compensation expense and decreased trade accounts receivable. Cash generated from operating activities was negatively impacted by an increase in inventory of $22.7 million. This increase was partially due to delays in delivery that resulted from the Boeing strike and deferral of orders from two customers on the Black Hawk helicopter. In addition, in 2008, we deferred certain costs, totaling $1.5 million, as part of inventory, which are specific to a particular contract and will be recouped as part of the unit cost charged to the customer under the contract.  The balance of the increase was due to planned increases to support the growth in our assembly business.

Net cash used in investing activities for the year ended December 31, 2008 was $5.9 million compared to $56.1million and $5.0 million for the years ended December 31, 2007 and 2006, respectively. We spent $8.1 million in 2008 on capital expenditures primarily for equipment in order to meet current and expected customer demand, compared to $6.6 million and $6.7 million during 2007 and 2006, respectively. The sale and lease back of certain equipment generated $2.5 million of cash proceeds in 2008.  We paid $59.1 million, net of cash acquired, in the 2007 acquisition of D3 Technologies, Inc., which accounts for the marked increase in net cash used in investing activities in 2007. The sale and leaseback of our real estate properties generated $5.9 million and $4.3 million of cash proceeds for 2007 and 2006, respectively.  In 2006, we purchased $18.2 million of debt securities, of which $16.2 million matured.

Cash flow used by financing activities was $3.2 million in 2008 compared to cash flow provided of $28.6 million and $23.2 million in 2007 and 2006, respectively. In connection with the acquisition of D3 Technologies, Inc., we incurred $38.5 million of debt, of which $3.0 million and $10.5 million were repaid in 2008 and 2007, respectively. Funds generated in 2006 resulted from our public offering of common stock of $39.2 million completed on March 29, 2006, reduced by payments of outstanding debt of $17.0 million.

We continue to assess the potential impact of recent trends in the global economic environment on our liquidity and overall financial condition, particularly with respect to the availability of, terms of and access to credit.  Our capital budget for 2009 anticipates capital expenditures of approximately $5.0 million. Despite a general tightening in the credit markets, we expect to meet our ongoing working capital, acquisition and capital expenditure needs presently and for the next twelve months from a combination of our cash on hand, cash flow from operating activities, including the impact of our planned inventory reduction initiatives, and cash obtained by drawing down our credit facility.

38

Off-Balance Sheet Arrangements

Our off-balance sheet arrangements consist primarily of operating leases as reflected under “Contractual Obligations and Commitments” below.

Contractual Obligations and Commitments

We had the following contractual obligations and commitments for debt and non-cancelable operating lease payments:

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	($ in thousands)
Debt (1)	$	26,034	$	498	$	507	$	25,029	$	-
Interest on long-term debt (2)		4,047		1,035		2,017		995		-
Operating leases		40,086		5,841		10,476		7,818		15,951
Total (3)	$	70,167	$	7,374	$	13,000	$	33,842	$	15,951

(1) Balances include obligations under capital leases.

(2) Interest expense assumes the balances of long-term debt at the end of the period and current effective interest rate.

(3) We have not committed to any significant current or long-term purchase obligations for our operations and have no other long-term liabilities reflected on our balance sheet under GAAP.

Critical Accounting Estimates

Certain accounting issues require management estimates and judgments for the preparation of financial statements. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements. Therefore, we consider these to be our critical accounting estimates. Our management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our disclosure relating to these estimates. Our most significant estimates and judgments are listed below.

Accounts Receivable Reserves.  We evaluate the collectibility of our accounts receivable based on a combination of factors, including historical trends and industry and general economic conditions. In circumstances in which we are aware of a specific customer’s inability to meet its financial obligations (e.g., bankruptcy filings or substantial downgrading of credit scores), a specific reserve for bad debts is recorded against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. Our evaluation also includes reserves for billing adjustments, pricing changes, warranty claims and disputes. If circumstances change (i.e., an unexpected material adverse change in a major customer’s ability to meet its financial obligations to us), estimates of the recoverability of amounts due to us could be reduced by a material amount. We apply this policy to our acquired businesses and make adjustments to existing bad debt reserves based upon our evaluation.

As described in Note 14 of the Notes to Consolidated Financial Statements in Item 8 below, we generate a significant portion of our revenues and corresponding accounts receivable from sales to a limited number of customers in the aerospace and technology industries. If these customers experience significant adverse conditions in their industries or operations, including the impact of the potential future downturn in demand for aerospace and technology products, these customers may not be able to

39

meet their ongoing financial obligations to us for prior sales or purchase additional products under the terms of existing contracts.

Inventory. We value our inventories at the lower of cost or market using actual cost for raw materials and average cost for work in process, manufactured and purchased components and finished goods. In assessing the ultimate realization of inventories, we make judgments as to future demand requirements based upon customer orders in backlog, historical customer orders, customer and industry analyst estimates of aircraft production rates, and other market data available to us. Additionally, in the aviation industry, these future demand requirements depend on estimates of aircraft lives and the need for spare parts over the course of the aircraft life. We have recorded charges in recent periods due to discontinuances of product lines, losses of customer contracts, lack of order activity, or changes in expectations of future requirements.

We sell many of our products under fixed-price arrangements.  Occasionally, costs of production may exceed the market values of certain products and product families, which requires us to adjust our inventory value. In these circumstances, management is required to make estimates of costs not yet incurred to determine the ultimate cost of these products that are in work in process. Changes in the assumptions and estimates of such factors as expected scrap, costs of material, labor and outside services and the amount of labor required to complete the products may result in actual results that vary from management’s estimates.

At times, we accept new orders for products from our customers in which actual production costs may differ from our expectations when we quoted the product. Additionally, customers may request engineering changes or quality acceptance changes in products that may alter the cost of products produced by us. In these circumstances, we notify the customer of these issues and seek reimbursement for costs incurred over and above the selling price of the products and re-pricing of the product on future deliveries. Our inventory valuation considers the estimated recovery of these costs. Actual negotiation of the claim amounts may result in outcomes different from those estimated by us and may have material impacts upon our operating results.

For certain long-term contracts requiring development and delivery of multiple units of product over more than one year, we incur and defer, as part of the inventory, certain costs which are specific to a particular contract and which we expect to recoup as part of the unit cost charged to the customer under the contract.  Such costs are charged to cost of product sales ratably as the manufactured units are shipped pursuant to the contract.  Changes in the estimated number of units expected to be delivered under the contract result in prospective adjustments of the ratable charge-off of deferred inventoriable costs per unit shipped.  Should the remaining inventoried costs plus estimated costs of production of units yet to be shipped under the contract exceed estimated future contract revenues, the resulting full loss is recognized in the period it becomes probable and estimable.  While the number of long-term contracts in 2008 was not material, consistent with the Company’s business strategy of growing design-build and complex assembly capabilities, the Company expects significant increases in programs calling for long-term contracts in the future.  See Note 1 of the Notes to Consolidated Financial Statements in Item 8 below.

Goodwill and Intangible Assets. As required by Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), we perform a goodwill impairment test at least annually. We establish the value of the underlying business with the assistance of an outside expert that uses Company-provided forecasts of operations by reporting unit, independently reviews the assumptions in these forecasts, evaluates the carrying value of certain assets and liabilities, and independently appraises our fixed assets. These forecasts require us to estimate future sales prices and volumes of our reporting units. We use our internal budgets, customer order backlog, historical customer ordering patterns, customer and industry projections of demand and other market information as well as the current cost of production to estimate future cash flows. If required, an impairment charge may be recognized for the amount by which the carrying amount of goodwill

40

exceeds its implied value as calculated in accordance with SFAS No. 142. Actual results may vary significantly from our projections and may result in future material adjustments to the goodwill balance on our financial statements.

Customer-related intangible assets resulting from the acquisitions of D3 Technologies, Inc. and Versaform Corporation have an original estimated useful life of 15 years.  However, if events or changes in circumstances indicate that the carrying amount of these intangible assets may not be recoverable, an impairment charge will be recognized for the amount by which the carrying amount of these assets exceeds its fair value.

As of December 31, 2008, our net book value (i.e., shareholders’ equity) was approximately $122.8 million, and our market capitalization was approximately $97.6 million.  We believe that, when assessing whether an additional asset impairment may exist, the difference between the net book value and market capitalization as of December 31, 2008 is reasonable when market-based control premiums are applied and in light of the volatility in the equity markets in the latter part of 2008.

Income Taxes. We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We record an income tax expense or benefit based on the net income earned or net loss incurred in each tax jurisdiction and the tax rate applicable to that income or loss. In the ordinary course of business, there are transactions for which the ultimate tax outcome is uncertain. These uncertainties are accounted for in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The final tax outcome for these matters may be different from management’s original estimates made in determining the income tax provision. A change to these estimates could impact the effective tax rate and net income or loss in subsequent periods.

Recent Accounting Pronouncements

For information related to recently issued accounting standards, see Note 1 of the Notes to Consolidated Financial Statements in Item 8 below.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk represents the risk of loss that may impact our consolidated financial position, results of operations or cash flows.  We are exposed to market risk primarily due to fluctuations in interest rates.  We do not utilize any particular strategy or instruments to manage our interest rate risk.

Our outstanding credit facility carries a fluctuating interest rate that varies based on changes in the prime lending rate of Wachovia. Accordingly, we are subject to potential fluctuations in our debt service. Based on the amount of our outstanding debt as of December 31, 2008, a hypothetical 1% change in the interest rate of our outstanding credit facility would result in a change in our annual interest expense of approximately $0.3 million during the next fiscal year. However, we have the ability to fix the interest rate under LIBOR for a period not to exceed one year (see Note 6 to Consolidated Financial Statements). While not eliminating interest rate risk, this allows us to moderate the impact of changes in the prime lending rate.

41 

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following financial statements are included in Item 8 of this report:

Financial Statement	Page
Report of Independent Registered Public Accounting Firm	43
Consolidated Balance Sheets as of December 31, 2008 and 2007	44
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006	45
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2008, 2007 and 2006	46
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006	47
Notes to Consolidated Financial Statements	48
Schedule II - Valuation and Qualifying Accounts	63

42 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

LMI Aerospace, Inc.

St. Charles, Missouri

We have audited the accompanying consolidated balance sheets of LMI Aerospace, Inc. as of December 31, 2008 and 2007 and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. In connection with our audits of the financial statements, we have also audited the accompanying Schedule II, “Valuation and Qualifying Accounts” for each of the three years in the period ended December 31, 2008.  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of LMI Aerospace, Inc. at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), LMI Aerospace, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 13, 2009 expressed an unqualified opinion thereon.

/s/ BDO Seidman LLP

Chicago, Illinois

March 13, 2009

43

LMI AEROSPACE, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

	December 31,
	2008			2007
Assets
Current assets:
Cash and cash equivalents	$	29		$	82
Trade accounts receivable, net of allowance of $304 and $292 at December 31, 2008 and 2007, respectively		26,887			29,588
Inventories, net		62,393			40,940
Prepaid expenses and other current assets		2,137			2,135
Income taxes receivable		364			630
Total current assets		91,810			73,375
Property, plant and equipment, net		20,103			19,733
Goodwill		46,258			48,670
Intangible assets, net		17,861			19,428
Deferred income taxes		5,148			3,962
Other assets		1,167			1,429
Total assets	$	182,347		$	166,597
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	12,363		$	10,681
Accrued expenses		9,936			9,997
Short-term deferred gain on sale of real estate		233			233
Current installments of long-term debt		498			775
Total current liabilities		23,030			21,686
Long-term deferred gain on sale of real estate		3,540			3,773
Long-term debt, less current installments		25,536			29,022
Deferred income taxes		7,441			7,289
Total long-term liabilities		36,517			40,084
Shareholders’ equity:
Common stock, $0.02 par value per share; authorized 28,000,000 shares; issued 11,926,309  shares and 11,820,057 shares at December 31, 2008 and  2007, respectively		239			236
Preferred stock, $0.02 par value per share; authorized 2,000,000 shares; none issued at either date		-			-
Additional paid-in capital		69,855			67,244
Treasury stock, at cost, 364,088 shares and 385,688 shares at   December 31, 2008 and 2007, respectively		(1,727	)		(1,830	)
Retained earnings		54,433			39,177
Total shareholders’ equity		122,800			104,827
Total liabilities and shareholders’ equity	$	182,347		$	166,597
See accompanying notes to consolidated financial statements.

44

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except share and per share data)

	Year Ended December 31,
	2008			2007			2006
Sales and service revenue
Product sales	$	149,267		$	137,074		$	122,993
Service revenues		90,195			31,428			-
Net sales		239,462			168,502			122,993
Cost of sales and service revenue
Cost of product sales		105,425			97,293			89,527
Cost of service revenues		72,922			26,295			-
Cost of sales		178,347			123,588			89,527
Gross profit		61,115			44,914			33,466
Selling, general and administrative expenses		33,128			23,466			17,243
Impairment of goodwill		2,303			-			-
Income from operations		25,684			21,448			16,223
Other income (expense):
Interest income (expense), net		(1,815	)		(902	)		(93	)
Other, net		10			(20	)		(121	)
Total other income (expense)		(1,805	)		(922	)		(214	)
Income before income taxes		23,879			20,526			16,009
Provision for income taxes		8,611			7,369			5,334
Net income	$	15,268		$	13,157		$	10,675
Amounts per common share:
Net income per common share	$	1.36		$	1.18		$	1.02
Net income per common share assuming dilution	$	1.35		$	1.17		$	1.01
Weighted average common shares outstanding		11,198,610			11,157,396			10,494,747
Weighted average dilutive common shares outstanding		11,301,382			11,288,486			10,615,251
See accompanying notes to consolidated financial statements.

45 

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share data)

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Total Shareholders’ Equity
Balance at December 31, 2005	$	176	$	26,307		$	(2,059	)	$	15,408		$	39,832
Comprehensive income:
Net income		-		-			-			10,675			10,675
Public offering		55		39,194			-			-			39,249
TCA acquisition		-		150			-			-			150
Issuance of stock
56,890 shares in connection with exercise of options		1		32			210			(60	)		183
21,250 shares of restricted stock		-		-			-			-			-
Amortization of restricted
stock		-		186			-			-			186
Excess tax benefit over book expense from share-based compensation		-		235			-			-			235
Balance at December 31, 2006		232		66,104			(1,849	)		26,023			90,510
Comprehensive income:
Net income		-		-			-			13,157			13,157
Issuance of stock
5,044 shares in connection with exercise of options		-		3			19			(3	)		19
241,426 shares of restricted stock		4		(4	)		-			-			-
Amortization of restricted stock		-		1,084			-			-			1,084
Excess tax benefit over book expense from share-based compensation		-		57			-			-			57
Balance at December 31, 2007		236		67,244			(1,830	)		39,177			104,827
Comprehensive income:
Net income		-		-			-			15,268			15,268
Issuance of stock
67,000 shares in connection with exercise of options		1		150			103			(12	)		242
74,484 shares of restricted stock		2		(2	)		-			-			-
Other		-		(94	)		-			-			(94	)
Amortization of restricted stock		-		2,210			-			-			2,210
Excess tax benefit over book expense from share-based compensation				347									347
Balance at December 31, 2008	$	239	$	69,855		$	(1,727	)	$	54,433		$	122,800

See accompanying notes to consolidated financial statements.

46

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Year Ended December 31,
	2008			2007			2006
Operating activities:
Net income	$	15,268		$	13,157		$	10,675
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization		6,977			4,608			3,859
Impairment of goodwill		2,303			-			-
Charges for bad debt expense		43			150			127
Charges for inventory obsolescence and valuation		1,217			874			629
Restricted stock compensation		2,210			1,084			186
Excess tax benefit of share-based compensation		(347	)		(57	)		(235	)
Loss on sale of equipment		13			5			127
Deferred tax (benefit) provision		(1,034	)		526			(968	)
Changes in operating assets and liabilities, net of
acquired businesses:
Trade accounts receivable		2,658			(6,586	)		1,303
Inventories		(22,670	)		(7,858	)		(9,252	)
Prepaid expenses and other assets		215			(1,126	)		(384	)
Current income taxes		281			(39	)		(2,997	)
Accounts payable		1,682			20			2,351
Accrued expenses		177			(1,592	)		739
Net cash provided by operating activities		8,993			3,166			6,160
Investing activities:
Additions to property, plant and equipment		(8,055	)		(6,570	)		(6,671	)
Purchase of debt securities		-			-			(18,192	)
Proceeds from matured debt securities		-			2,243			16,223
Proceeds from sale of real estate		-			5,920			4,322
Proceeds from sale of equipment		2,467			1,703			254
Acquisitions, net of cash acquired		-			(59,092	)		(626	)
Other, net		(279	)		(259	)		(274	)
Net cash used by investing activities		(5,867	)		(56,055	)		(4,964	)
Financing activities:
Proceeds from stock offering		-			-			39,249
Proceeds from issuance of debt		74			902			525
Principal payments on long-term debt and notes payable		(808	)		(452	)		(8,114	)
Net advances (payments) on revolving line of credit		(3,034	)		28,034			(8,898	)
Proceeds from exercise of stock options		242			19			183
Excess tax benefit of share-based compensation		347			57			235
Net cash (used) provided by financing activities		(3,179	)		28,560			23,180
Net increase (decrease) in cash and cash equivalents		(53	)		(24,329	)		24,376
Cash and cash equivalents, beginning of year		82			24,411			35
Cash and cash equivalents, end of year	$	29		$	82		$	24,411
Supplemental disclosures of cash flow information:
Interest paid	$	1,675		$	1,200		$	126
Income taxes paid, net of refund received	$	8,449		$	7,091		$	9,298

See accompanying notes to consolidated financial statements.

47

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

1.  ACCOUNTING POLICIES

Description of Business

LMI Aerospace, Inc. (the “Company”) is a leading provider of design engineering services, structural, assemblies, kits and components to the aerospace, defense and technology markets. The Company primarily sells products and services to the large commercial, military, corporate and regional aircraft and technology markets within the aerospace and technology industries. The Company is a Missouri corporation with headquarters in St. Charles, Missouri.

Principles of Consolidation

The accompanying financial statements include the consolidated financial position, results of operations, and cash flows of the Company. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits in transit and all highly liquid investment instruments with an initial maturity of three months or less.

Inventories

The Company’s inventories are stated at the lower of cost or market and utilize actual costs for raw materials and an average cost for work in process, manufactured and purchased components and finished goods. The Company evaluates the inventory carrying value and reduces the carrying costs based on customer activity, estimated future demand, price deterioration, and other relevant information. The Company’s customer demand is unpredictable and may fluctuate due to factors beyond the Company’s control. The Company, therefore, maintains an inventory allowance for potential obsolete and slow moving inventories and for gross inventory items carried at costs higher than their potential market values.  In addition, inventoried costs include amounts relating to programs and contracts with long-term production cycles, a portion of which is not expected to be realized within one year.  See further discussion regarding deferred long-term contract costs under “Revenue Recognition”.

Revenue Recognition

The Company recognizes revenue for sales of products and related services when products are shipped and services are rendered, the price is fixed or determinable, and collection is reasonably assured.

For certain long-term contracts requiring development and delivery of multiple units of product over more than one year,  the Company incurs and defers, as part of the inventory, certain costs which are specific to the particular contract and will be recouped as part of the unit cost charged to the customer under the contract.   Such costs are charged to cost of product sales ratably as the manufactured units are shipped pursuant to the contract.  Changes in the estimated number of units expected to be delivered under such contracts result in prospective adjustments of the ratable charge-off of deferred inventoriable

48

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

costs per unit shipped. Should the remaining inventoriable costs plus estimated costs of production of units yet to be shipped under the contract exceed estimated future contract revenues, that resulting full loss is recognized in the period it becomes probable and estimable.  No such loss was recognized as of December 31, 2008.    During 2008, the Company recognized approximately $1,800 in net revenue and $275 in gross profit from sales related to these long-term contracts and had $1,572 of costs included in inventory as of December 31, 2008.  The Company had no such contracts in progress as of December 31, 2007.

The Company recognizes revenue on sale of engineering services based on the types of contracts. Revenue of cost-plus reimbursement contracts is recognized as labor hours and direct costs are incurred.  Such revenues include the value of labor hours at pre-negotiated rates; estimated overhead and general and administration costs allocable to the contract based on applicable rates for each quarter of the year; actual direct incidental costs under the contracts; and a pre-negotiated fee markup or margin. Revenue is recognized on fixed-price service contracts using the percentage-of-completion method measured by the percentage of costs incurred to estimated total costs.  Such revenue related to tooling contracts and constituted approximately 4% and 1% of the Company’s total revenue in 2008 and 2007, respectively.

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable reflects the Company’s best estimate of probable losses inherent in its accounts receivable. The basis used to determine this value is derived from historical experience, specific allowances for known troubled customers and other currently available information.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful lives of the assets. Estimated useful lives for buildings, machinery and equipment, and purchased software are 20 years, 4 to 10 years and 3 years, respectively.

Long Lived Assets

In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets”, long lived assets held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

Pre-Production Costs

The Company accounts for pre-production costs in accordance with Emerging Issues Task Force 99-5, “Accounting for Pre-Production Costs Related to Long-Term Supply Arrangements”. Unless there is a contractual agreement that provides for reimbursement of design and development costs, all design and development costs for products to be sold under long-term supply arrangements are expensed as incurred.

Goodwill and Intangible Assets

The Company’s acquisitions involve the purchase of tangible and intangible assets and the assumption of certain liabilities.  As part of the purchase price allocation, the Company allocates the purchase price to the tangible assets acquired and liabilities assumed based on estimated fair market values, and the remainder of the purchase price is allocated to intangibles and goodwill.  The Company

49

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

accounts for intangible assets in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”).  Goodwill and intangible assets with indefinite lives are not amortized but are subject to an impairment assessment at least annually in relation to their fair value.

Deferred Gain on Sale of Real Estate

On December 28, 2006, the Company entered into an agreement with a third party to sell and lease back certain of its real estate properties for $10,250.  The sale of these properties was completed in 2007. The amount of the sale price in excess of book value for these properties of $4,242 was deferred and is being amortized over the term of the leases on a straight-line basis.

Accounting for Share-Based Compensation

The Company recognizes compensation expense for share-based payment transactions in the financial statements at their fair value.  The expense is measured at the grant date, based on the calculated fair value of the share-based award, and is recognized over the requisite service period (generally the vesting period of the equity award).

Income Taxes

The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). The objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. SFAS No. 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), prescribes a recognition threshold and measurement process for recording in the financial statements a company’s uncertain tax positions taken or expected to be taken in its tax return filing.  In addition, FIN 48 provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions.

The Company had no unrecognized tax benefits as of December 31, 2008 and 2007.  The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2008.  The Company recognizes accrued amounts of interest and penalties related to its uncertain tax positions as part of its income tax expense within its consolidated statement of income.  The Company has no interest or penalties relating to income taxes recognized on the balance sheets as of December 31, 2008 and 2007.  As of December 31, 2008, returns for calendar years 2002 through 2007 remain subject to examination by the Internal Revenue Service and various state tax jurisdictions.

Financial Instruments

Fair values of the Company’s long-term obligations approximate their carrying values as the applicable interest rates approximate the current market rates. The Company’s other financial instruments have fair values that approximate their respective carrying values due to their short maturities or variable rate characteristics.

50

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

Recent Accounting Pronouncements

In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, “Determining the Fair Value of a Financial Asset in a Market That Is Not Active” (“FSP 157-3”), which clarifies the application of SFAS 157 when the market for a financial asset is inactive.  Specifically, FSP 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair value.  The guidance in FSP 157-3 is effective immediately and will apply to the Company upon the adoption of SFAS 157, as described below.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles (“GAAP”)” (“SFAS 162”). The purpose of the new standard is to provide a consistent framework for determining which accounting principles should be used when preparing U.S. GAAP financial statements.  Previous guidance did not properly rank the accounting literature. The new standard is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.  The adoption of SFAS 162 is not expected to have a material effect on the Company’s financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”).  SFAS 161 requires, among other things, enhanced disclosure about the volume and nature of derivative and hedging activities and a tabular summary showing the fair value of derivative instruments included in the statement of financial position and statement of operations.  SFAS 161 also requires expanded disclosure of contingencies included in derivative instruments related to credit risk.  SFAS 161 is effective for the Company in the first quarter of fiscal year 2009.  The adoption of SFAS 161 is not expected to have a material effect on the Company’s financial statements.

In December 2007, FASB issued SFAS No. 141, (revised 2007), “Business Combinations” (“SFAS No. 141(R)”), which continues the evolution toward fair value reporting and significantly changes the accounting for acquisitions that close beginning in 2009, both at the acquisition date and in subsequent periods. SFAS No. 141(R) introduces new accounting concepts and valuation complexities, and many of the changes have the potential to generate greater earnings volatility after an acquisition. SFAS No. 141(R) applies to acquisitions on or after January 1, 2009 and will impact the Company’s reporting prospectively only.

In December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS No. 160”), which requires companies to measure an acquisition of noncontrolling (minority) interest at fair value in the equity section of the acquiring entity’s balance sheet. The objective of SFAS No. 160 is to improve the comparability and transparency of financial data as well as to help prevent manipulation of earnings. The changes introduced by the new standards are likely to affect the planning and execution, as well as the accounting and disclosure, of merger transactions. The effective date of SFAS No. 160 for the Company is January 1, 2009 and is not expected to have a material effect on its results of operations and financial position.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions in SFAS No. 159 are elective; however, the amendment to SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, applies to all entities with available-for-sale and trading securities. The provisions of SFAS No. 159 are effective as of the

51

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

beginning of an entity’s first fiscal year that begins after November 15, 2007. The adoption of SFAS No. 159 on January 1, 2008 did not have a significant impact on the Company’s consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. In February of 2008, the FASB issued FASB Staff Position No. 157-2, which delays the effective date of SFAS No. 157 for non-financial assets and liabilities that are not measured at fair value on a recurring basis (at least annually) until fiscal years beginning after November 15, 2008. Certain provisions of SFAS No. 157 were effective for the Company beginning in the first quarter of 2008.  The adoption of SFAS No. 157 for financial assets and liabilities in 2008 did not have a material effect on the Company’s results of operations and financial position.  The Company is currently evaluating the impact of the remaining requirements of SFAS No. 157 for non-financial assets and liabilities, on its results of operations and on its financial position.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current presentation. There was no effect on net income or equity related to these reclassifications.

2.  INVENTORIES

Inventories consist of the following:

	December 31,
		2008		2007
Raw materials	$	9,078	$	6,764
Work in progress		12,765		9,470
Manufactured and purchased components		16,437		8,982
Finished goods		24,113		15,724
Total inventories	$	62,393	$	40,940

These amounts include reserves for obsolete and slow moving inventory of $1,838 and $1,263 and a reserve for lower of cost or market of $135 and $136 as of December 31, 2008 and 2007, respectively.

52

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

3.  PROPERTY, PLANT AND EQUIPMENT

	December 31,
		2008			2007
Land	$	67		$	67
Buildings and improvements		199			199
Machinery and equipment		47,322			44,622
Leasehold improvements		3,790			2,850
Software and other		7,305			5,271
Construction in progress		2,694			2,967
Total gross property, plant and equipment		61,377			55,976
Less accumulated depreciation		(41,274	)		(36,243	)
Total net property, plant and equipment	$	20,103		$	19,733

Depreciation expense (including amortization expense on software) recorded by the Company totaled $5,205, $3,698 and $3,412 for 2008, 2007 and 2006, respectively.

4.  GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill balance at December 31, 2008 consisted of $42,908 from the acquisition of D3 Technologies, Inc. in July 2007 and $3,350 from the acquisition of Tempco Engineering, Inc. (“Tempco”) in April 2001.  Goodwill balance at December 31, 2007 consisted of $43,017 from the acquisition of D3 Technologies, Inc. and $5,653 from the acquisition of Tempco.  We performed a goodwill impairment analysis as of October 1, 2008 in accordance with SFAS No. 142, using the expected present value of future cash flows. Due to the impact of the global economic downturn on Tempco’s major customers, the fair value of Tempco was determined to be less than its carrying value. The shortfall of implied fair value of goodwill below its carrying value resulted in recognition of $2,303 in goodwill impairment for the year ended December 31, 2008.

Intangible Assets

Intangible assets primarily consist of a trademark and customer intangibles resulting from the acquisitions of D3 Technologies, Inc. and Versaform Corporation. The trademark that resulted from acquisition of D3 Technologies, Inc. was determined to have an indefinite life. Customer intangibles have an original estimated useful life of 15 years.  The carrying values were as follows:

	December 31,
		2008		2007
Trademarks	$	4,222	$	4,222
Customer intangible assets		16,610		17,330
Other		160		-
Accumulated amortization		(3,131)		(2,124)
Intangible assets, net	$	17,861	$	19,428

Intangibles amortization expense for 2008, 2007 and 2006 was $1,727, $855 and $408, respectively. Amortization expense for 2008 includes a charge of $288, which represents the remaining

53

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

balance of customer intangibles resulting from the acquisition of Technical Change Associates, Inc. (“TCA”) in 2006. As of December 31, 2008, the Company ceased operations of TCA.  No other significant charges are expected to be incurred.

Estimated annual amortization expense for these intangibles is as follows:

Year ending December 31,
	2009	$	1,448
	2010		1,449
	2011		1,440
	2012		1,419
	Thereafter		7,883
		$	13,639

5.  ACCRUED EXPENSES

	December 31,
		2008		2007
Accrued payroll and payroll-related taxes	$	841	$	2,285
Accrued bonus		1,528		1,724
Accrued vacation & holiday		2,066		2,011
Accrued employee benefits		1,315		1,089
Accrued customer rebates		1,095		940
Accrued legal & accounting fees		532		378
Accrued operating lease obligations		911		579
Accrued interest		274		357
Accrued building improvement costs		461		423
Other		913		211
Total accrued expenses	$	9,936	$	9,997

6.  LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

Long-term debt and capital lease obligations consist of the following:

	December 31,
		2008		2007
Capital lease obligations	$	347	$	636
Revolving line of credit		25,000		28,034
Notes payable, principal and interest payable monthly, at fixed rates, ranging from 1.67% to 10.70% at December 31, 2008 and 1.67% to 7.20% at December 31, 2007		687		1,127
Total debt		26,034		29,797
Less current installments		498		775
Total	$	25,536	$	29,022

54

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

Concurrent with the acquisition of D3 Technologies, Inc. (see Note 12), the Company entered into a new credit agreement, replacing the Company’s then existing credit agreement, providing for a senior secured revolving credit facility in an aggregate principal amount of up to $80,000, of which $25,000 was utilized at December 31, 2008. Borrowings under the credit facility are secured by substantially all of the Company’s assets and bear interest at either (a) the “base rate” (the higher of the federal funds rate plus one-half of one percent or the prime commercial lending rate) plus the applicable interest margin ranging from 0.125% to 1.0%, depending upon the Company’s total leverage ratio at the end of each quarter, or (b) the LIBOR rate plus an applicable interest margin ranging from 1.125% to 2.0% depending upon the Company’s total leverage ratio at the end of each quarter.  The maturity date of the credit facility, which is subject to acceleration upon breach of the financial covenants (consisting of a maximum total leverage ratio and a minimum fixed charge coverage ratio) and other customary non-financial covenants contained in the credit agreement, is July 31, 2012. On January 30, 2008, the credit facility was amended to extend the maximum period permitted to fix the interest rate under LIBOR from six months to one year.  In addition, in August 2007, the Company entered into a line of credit agreement providing a revolving credit facility in the amount of up to $1,000 at the base rate plus 1.125% of which none was utilized at December 31, 2008.

At December 31, 2008, the “base rate” was 4.00% and the applicable margin was 0.125%.  The LIBOR rate was 2.85% for various notes the Company carried, and the applicable margin was 1.125%.

Other Notes and Capital Lease Obligations

The Company has also entered into various notes payable and capital lease agreements for the purchase of certain equipment and software. The notes are secured by the underlying assets and payable in monthly installments including interest rates ranging from 1.67% to 10.70% through January 2012.

Maturities

The aggregate maturities of long-term debt as of December 31, 2008 are as follows:

Year ending December 31:
2009	$	498
2010		326
2011		181
2012		25,029
	$	26,034

7.  TREASURY STOCK TRANSACTIONS

The Board of Directors authorized the Company to repurchase up to 1.1 million shares of its common stock and place these shares in a Treasury Stock account for use at management’s discretion. The Company issued 21,600, 4,044 and 44,240 shares from treasury stock in 2008, 2007 and 2006, respectively, in conjunction with the exercise of certain employees’ options but did not purchase any shares during those years.

8.  EARNINGS PER COMMON SHARE

Basic net income per common share is based upon the weighted average number of common shares outstanding.  Diluted net income per common share is based upon the weighted average number of common shares outstanding, including the dilutive effect of stock options and restricted stock, using the

55

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

treasury stock method.  The number of dilutive shares for the years ended December 31, 2008, 2007, and 2006 attributable to stock options and restricted stock was 102,772, 131,090, and 120,504, respectively.

A weighted average of 41,207 shares of non-vested restricted stock under the Company’s share-based compensation plan was excluded from the computation of 2008 diluted net income per common share because the grant date fair value was greater than the average market price of the common shares for the three month period ended December 31, 2008, causing such shares to have an anti-dilutive effect on earnings per share.

9.  COMMITMENTS AND CONTINGENCIES

In 2006, the Company entered into an agreement to sell and lease back certain of its real estate properties.  The four operating lease agreements resulting from the sale expire on February 25, 2025, and the Company has options for three additional five-year terms.  The annual minimum lease payments for these properties will be increased by 2.3% per year. The Company leases certain other facilities and equipment under various non-cancelable operating lease agreements that expire at various dates through 2017. At December 31, 2008, the future minimum lease payments under operating leases with initial non-cancelable terms in excess of one year are as follows:

Year ending December 31:
2009	$	5,841
2010		5,479
2011		4,997
2012		3,967
2013		3,851
Thereafter		15,951
	$	40,086

Rent expense totaled $6,347, $5,055 and $2,807 in 2008, 2007 and 2006, respectively.

The Company has been named as a defendant in certain lawsuits in the normal course of business.  It is the policy of management to disclose the amount or range of reasonably possible losses in excess of recorded amounts.  In the opinion of management, after consulting with legal counsel, the liabilities, if any, resulting from these matters should not have a material effect on the Company’s financial position or results of operations.

The Company has entered into employment agreements with certain members of senior management, the terms of which expire on December 31, 2009 and 2010. The terms of these agreements are up to three years, include non-compete and nondisclosure provisions, and provide for defined severance payments in the event of termination.

10.  DEFINED CONTRIBUTION PLANS

The Company has a non-contributory profit sharing plan and two contributory 401(k) plans that cover substantially all full-time employees. Contributions to the profit sharing plan are at the discretion of management and become fully vested after seven years. No contributions have been made by the Company to the profit sharing plan for 2008, 2007 and 2006.

56

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

Contributions by the Company to one of the 401(k) plans covering employees of the Aerostructures segment, which are fully vested to the employees immediately upon contribution, are based upon a percentage of employee contributions up to a maximum of $1,000 annually per employee (dollars not in thousands). Contributions to the second 401(k) plan, which covers the employees of the Engineering Services segment, are at the discretion of management and are vested over seven years.  The Company’s contributions to the 401(k) plans totaled $801, $800 and $388 for 2008, 2007 and 2006, respectively. In addition, at December 31, 2008, the Company had 459,829 shares of its common stock reserved for future contributions to the 401(k) plan.

11.  STOCK-BASED COMPENSATION

On July 7, 2005, the Company’s shareholders approved the LMI Aerospace, Inc. 2005 Long-term Incentive Plan (the “2005 Plan”). The 2005 Plan is the Company’s only compensation plan under which shares of the Company’s common stock are authorized for issuance to employees or directors. The 2005 Plan provides for the grant of non-qualified stock options, incentive stock options, shares of restricted stock, restricted stock units, stock appreciation rights, performance awards and other stock-based awards and cash bonus awards.  Stock awards may be made to directors, officers and key employees under the 2005 Plan on terms determined by the Compensation Committee of the Board of Directors or, with respect to directors, on terms determined by the Board of Directors. A total of 1,200,000 shares of the Company’s common stock are reserved for issuance in connection with awards granted under the 2005 Plan.

The Company did not grant any stock options during the years ended December 31, 2008, 2007, and 2006.  A summary of stock option activity under the Company’s share-based compensation plans is presented below:

	December 31, 2008
Stock Options	Shares			Weighted Average Exercise Price
Outstanding at beginning of year		131,790		$	3.23
Granted		-			-
Exercised		(67,000	)		3.62
Cancelled or expired		(900	)		3.29
Outstanding at end of year		63,890		$	2.81

All outstanding stock options were exercisable at December 31, 2008. The aggregate intrinsic value of vested stock options was $547 at December 31, 2008, which options had a weighted average remaining life of 1.6 years at December 31, 2008. The aggregate intrinsic value of options exercised during the years ended December 31, 2008, 2007 and 2006, based upon the market price on exercise date, were $755, $105 and $765, respectively.

57

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

The following table summarizes information about stock options outstanding at December 31, 2008:

Range of Exercise Prices	Number of Outstanding Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
$1.31 - $1.95	3,000	5.5	$1.31
$1.96 - $2.90	54,890	1.4	2.61
$2.91 - $4.35	200	0.9	3.13
$4.36 - $6.06	5,800	1.6	5.52
Total	63,890	1.6	$2.81

A summary of non-vested restricted stock activity under the Company’s share-based compensation plans is presented below:

	December 31, 2008			December 31, 2007			December 31, 2006
Restricted Stock Awards	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Non-vested shares outstanding at beginning of year	273,876	$	21.27	37,000	$	12.85	15,750	$	9.06
Granted	74,484		24.33	241,426		22.43	21,250		15.65
Vested	(43,554)		15.70	(4,550)		14.16	-		-
Forfeited	(10,032)		23.79	-		-	-		-
Non-vested shares outstanding at end of year	294,774	$	22.78	273,876	$	21.27	37,000	$	12.85

Restricted stock awards generally vest over three to five years.  Total unrecognized compensation costs related to non-vested restricted stock awards granted under the 2005 Plan were $3,972 and $4,609 as of December 31, 2008 and 2007, respectively. These costs are expected to be recognized over a weighted average period of 2.2 years and 3.8 years, respectively. The fair value of restricted stocks vested during the years ended December 31, 2008, 2007 and 2006, based on market price on exercise date, was $684, $64 and $0, respectively.

Common stock compensation expense related to restricted stock awards granted under the 2005 Plan was $2,210, $1,084 and $186 for the years ended December 31, 2008, 2007 and 2006, respectively. The tax benefit realized for the tax deductions from stock awards totaled $107, $3, and $0 for the years ended December 31, 2008, 2007, and 2006, respectively.

12.  ACQUISITION OF D3 TECHNOLOGIES, INC.

On July 31, 2007, the Company acquired all of the outstanding capital stock of D3 Technologies, Inc. (“D3 Technologies”), a premier design and engineering services firm, for $65,000 in cash plus transaction costs.  The operating results of D3 Technologies are included in the Company’s results from the date of the acquisition.

58

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

The purchase price for D3 Technologies was funded in part with $38,500 of borrowings under the credit agreement discussed in Note 6 and the remainder with the Company’s existing cash.

The following table presents unaudited pro forma consolidated operating results for the Company for the year ended December 31, 2007 as if D3 Technologies had been acquired as of the beginning of that year:

	Year Ended December 31, 2007
Net sales	$	210,606
Net earnings	$	13,517
Basic earnings per share	$	1.21
Diluted earnings per share	$	1.20

The following table summarizes the purchase price allocation for D3 Technologies at the date of acquisition:

Tangible assets, exclusive of cash	$	13,195
Intangible assets, net of deferred taxes		12,056
Goodwill		42,908
Liabilities assumed		(9,067)
Cost of acquisition, net of cash acquired	$	59,092

13.  INCOME TAXES

The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred income tax assets and liabilities are as follows:

	December 31,
		2008		2007
Deferred tax assets:
Accrued vacation	$	615	$	528
Inventories		1,901		1,280
Other accrued expenses		14		18
Gain on sale of real estate		1,358		1,442
Other		1,260		694
Total deferred tax assets		5,148		3,962
Deferred tax liabilities
Depreciation		(3,416)		(2,052)
Amortization of intangibles		(3,662)		(4,799)
Other		(363)		(438)
Total deferred tax liabilities		(7,441)		(7,289)
Net deferred tax assets (liabilities)	$	(2,293)	$	(3,327)

59

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

The Company’s income tax provision attributable to income before income taxes consisted of the following for the years ended December 31, 2008, 2007 and 2006:

	2008			2007		2006
Federal:
Current	$	8,831		$	6,156	$	5,508
Deferred		(949	)		482		(862	)
		7,882			6,638		4,646
State
Current		815			687		794
Deferred		(86	)		44		(106	)
		729			731		688
Provision for income taxes	$	8,611		$	7,369	$	5,334

The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense attributable to income before cumulative effect of change in accounting principle is as follows:

	2008			2007			2006
Federal taxes	$	8,357		$	7,184		$	5,603
State and local taxes, net of federal benefit		729			731			413
Production deduction		(323	)		(306	)		(196	)
Research and experimental and other tax credits		(160	)		(113	)		(314	)
Change in capital loss valuation reserve		-			-			(244	)
Other		8			(127	)		72
Provision for income taxes	$	8,611		$	7,369		$	5,334

14.  CUSTOMER AND SUPPLIER CONCENTRATION

Direct sales, through both of its business segments, to the Company’s largest customer accounted for 22.1%, 25.8% and 32.8% of the Company’s total revenues in 2008, 2007 and 2006, respectively. Accounts receivable balances related to the largest customer based on direct sales were 25.7% and 23.7% of the accounts receivable balance at December 31, 2008 and 2007, respectively.  There were no indirect sales to the Company’s largest customer in 2008.  Indirect sales to the Company’s largest customer accounted for an additional 0.8% and 1.1% of the Company’s total sales in 2007 and 2006, respectively.

Direct sales, through both of its business segments, to the Company’s second largest customer accounted for 19.4 %, 15.8% and 15.2% of the Company’s total revenues in 2008, 2007 and 2006, respectively.  Accounts receivable balances related to the second largest customer based on direct salesrepresented 15.3 % and 23.4% of the accounts receivable balance at December 31, 2008 and 2007, respectively.

Direct sales, through both of its business segments, to the Company’s third largest customer accounted for 19.0 %, 11.1% and 10.9% of the Company’s total revenues in 2008, 2007 and 2006, respectively. Accounts receivable balances related to the third largest customer based on direct sales were 9.2 % and 10.6% of the accounts receivable balance at December 31, 2008 and 2007, respectively.

60

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

The Company did not have any sales to a foreign country greater than 5% of its total sales in 2008, 2007, and 2006, respectively.  The amounts of profitability and identifiable assets attributable to foreign sales activity are not material when compared with revenue, profitability, and identifiable assets attributed to United States domestic operations during 2008, 2007 and 2006.

The Company purchased approximately 64%, 66% and 58% of the raw materials used in production from three suppliers in 2008, 2007 and 2006, respectively.

15.  BUSINESS SEGMENT INFORMATION

As a result of acquiring D3 Technologies, Inc. on July 31, 2007 and in accordance with the criteria set forth in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,”the Company is organized into two reportable segments: the Aerostructures segment and the Engineering Services segment.  The Aerostructures segment, comprised of all of the Company’s operations other than D3 Technologies, Inc., assembles, kits, fabricates, machines, finishes and integrates formed, close-tolerance aluminum and specialty alloy components and sheet metal products primarily for use by the aerospace, semiconductor and medical technology products industries. The Engineering Services segment, comprised of the operations of D3 Technologies, Inc., provides a complete range of design, engineering and program management services supporting aircraft lifecycles from conceptual design, analysis and certification through production support, fleet support and service life extensions via a complete turnkey engineering solution. The operating results of D3 Technologies, Inc. are included in the Company’s results from the date of acquisition.

61

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

The accounting policies of the segments are the same as those described in Note 1.  Corporate assets, liabilities and expenses related to the Company’s corporate offices, except for interest expense and income taxes, primarily support the Aerostructures segment.  The table below presents information about reported segments on the basis used internally to evaluate segment performance:

	December 31,
	2008			2007			2006
Net sales:
Aerostructures	$	150,804		$	138,101		$	122,993
Engineering Services		89,909			30,401			-
Eliminations		(1,251	)		-			-
	$	239,462		$	168,502		$	122,993
Income from operations:
Aerostructures	$	16,392		$	19,234		$	16,223
Engineering Services		9,384			2,214			-
Eliminations		(92	)		-			-
	$	25,684		$	21,448		$	16,223
Depreciation and Amortization:
Aerostructures(1)	$	6,790		$	3,674		$	3,859
Engineering Services		2,490			934			-
	$	9,280		$	4,608		$	3,859
Interest income (expense):
Aerostructures	$	-		$	-		$	-
Engineering Services		(28	)		(16	)		-
Corporate		(1,787	)		(886	)		(93	)
	$	(1,815	)	$	(902	)	$	(93	)
Capital expenditures:
Aerostructures	$	6,357		$	6,201		$	6,671
Engineering Services		1,698			369			-
	$	8,055		$	6,570		$	6,671
Goodwill:
Aerostructures	$	3,350		$	5,653
Engineering Services		42,908			43,017
	$	46,258		$	48,670
Total assets:
Aerostructures	$	110,481		$	95,604
Engineering Services		71,866			70,993
	$	182,347		$	166,597

(1)           Amount for 2008 includes a $2,303 charge for impairment of goodwill.

62

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, except share and per share data)

December 31, 2008

16.  QUARTERLY FINANCIAL DATA (UNAUDITED)

2008	First			Second			Third			Fourth
Net sales		$	60,417		$	64,904		$	61,941		$	52,200
Gross profit		$	15,623		$	16,671		$	16,883		$	11,938
Net income		$	4,476		$	5,027		$	5,180		$	585
Amounts per common share:
Net income		$	0.40		$	0.45		$	0.46		$	0.05
Net income - assuming dilution		$	0.40		$	0.45		$	0.46		$	0.04
2007(1)	First			Second			Third			Fourth
Net sales		$	32,176		$	33,935		$	47,795		$	54,596
Gross profit		$	8,271		$	9,218		$	13,301		$	14,124
Net income		$	2,241		$	2,891		$	4,185		$	3,840
Amounts per common share:
Net income		$	0.20		$	0.26		$	0.38		$	0.34
Net income - assuming dilution		$	0.20		$	0.26		$	0.37		$	0.34
2006	First			Second			Third			Fourth
Net sales		$	29,242		$	32,768		$	30,799		$	30,184
Gross profit		$	8,321		$	8,847		$	8,369		$	7,929
Net income		$	2,309		$	2,957		$	2,716		$	2,693
Amounts per common share:
Net income		$	0.27		$	0.27		$	0.24		$	0.24
Net income - assuming dilution		$	0.27		$	0.26		$	0.24		$	0.24

(1) Includes results of D3 Technologies, Inc. for the five-month period commencing on the acquisition of D3 Technologies, Inc. on July 31, 2007.

17.  SUBSEQUENT EVENT

In January 2009, the Company acquired all of the shares of Integrated Technologies, Inc. (“Intec”), an Everett, Washington-based provider of advanced materials testing, manufacturing, and design services to the aerospace, defense and transportation industries.  Intec's primary business is designed to support composite testing, manufacturing and research, by analyzing new and existing materials including organic matrix composites, ceramics, metal matrix composites and metal.  The acquisition was funded by drawing upon the Company’s line of credit.  In 2008, sales by Intec were approximately $7,000. Management believes the acquisition of Intec, together with other initiatives, will provide significant composite assembly and component production to allow the Company to broaden its customer offerings and to use its skilled workforce in both the Aerostructures and Engineering Services segments to transition to production of non-metallic products.  Operating results of Intec will be included in the Company’s Aerostructures segment from the date of acquisition.

63

LMI AEROSPACE, INC.

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(Dollar amounts in thousands)

December 31, 2008

			Additions				Deductions
	Beginning Balance		Charge to Cost/ Expense		Other Charge to Cost/ Expense (1)		Write-offs net of Recoveries			Ending Balance
Reserve for Accounts Receivable
Year ended December 31, 2006	$	244	$	127	$	-	$	(60	)	$	311
Year ended December 31, 2007	$	311	$	150	$	146	$	(315	)	$	292
Year ended December 31, 2008	$	292	$	43	$	-	$	(31	)	$	304
Reserves for Inventory
Year ended December 31, 2006	$	2,086	$	629	$	-	$	(528	)	$	2,187
Year ended December 31, 2007	$	2,187	$	874	$	-	$	(1,662	)	$	1,399
Year ended December 31, 2008	$	1,399	$	1,217	$	-	$	(643	)	$	1,973

(1)  Represents reserve acquired with D3 Technologies, Inc. on July 31, 2007.

 64

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2008.  Based upon and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (a) is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and (b) is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Report of Management Regarding Internal Control Over Financial Reporting

The management of LMI Aerospace, Inc. is responsible for the preparation, integrity, and fair presentation of the consolidated financial statements included in this annual report. The consolidated financial statements and notes included in this annual report have been prepared in conformity with accounting principles generally accepted in the United States of America and necessarily include some amounts that are based on management’s best estimates and judgments.

In order to produce reliable financial statements, management, under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Management evaluates the effectiveness of internal control over financial reporting and tests for reliability of recorded financial information through a program of ongoing internal audits. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

Management, under the supervision and with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, assessed the Company’s internal control over financial reporting as of December 31, 2008, as required by Section 404 of the Sarbanes-Oxley Act of 2002, based on the criteria for effective internal control over financial reporting described in the “Internal Control-Integrated Framework,” adopted by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2008, the Company’s internal control over financial reporting is effective.

BDO Seidman, LLP, our independent registered public accounting firm, has issued an audit report on our internal control over financial reporting which is included below.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

65

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

LMI Aerospace, Inc.

St. Charles, Missouri

We have audited LMI Aerospace, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). LMI Aerospace, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Report of Management Regarding Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, LMI Aerospace, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of LMI Aerospace, Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated March 13, 2009 expressed an unqualified opinion thereon.

/s/ BDO Seidman LLP

Chicago, Illinois

March 13, 2009

66

ITEM 9B. OTHER INFORMATION.

None.

67

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information regarding our directors required by Item 401 of Regulation S-K and the information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) required by Item 405 of Regulation S-K will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2008 Annual Meeting of Shareholders and is incorporated herein by this reference.

The following is a list of our current executive officers, their ages, their positions with us and their principal occupations for at least the past five years.

Name	Age	Position
Ronald S. Saks	65	Chief Executive Officer, President and Director
Darrel E. Keesling	47	Chief Operating Officer
Ryan P. Bogan	34	Vice President of the Company and President and Chief Executive Officer of D3 Technologies, Inc., a wholly-owned subsidiary of the Company
Lawrence E. Dickinson	49	Chief Financial Officer and Secretary
Robert Grah	54	Vice President – Central Region
Michael J. Biffignani	53	Chief Information Officer/Director of Supplier Management and Procurement
Cynthia G. Maness	58	Vice President of Human Resources and Organizational Development

Set forth below are biographies of each of our executive officers.

Ronald S. Saks. Mr. Saks has served as our Chief Executive Officer and President and as a director since 1984. Prior to his employment with the Company, Mr. Saks was an Executive Vice President with Associated Transports, Inc. for eight years and was a Tax Manager with Peat Marwick Mitchell & Co., now known as KPMG LLP, for the eight years prior thereto.

Darrel E. Keesling. Mr. Keesling was appointed the Chief Operating Officer on January 2, 2007. Prior to his employment with the Company, Mr. Keesling had been the Vice President and General Manager-Metal Structures of GKN Aerospace, Inc. since August, 2004 and prior thereto had served in other managerial capacities with GKN Aerospace, Inc., including Senior Director of Engineering and Director of Operations, since January, 2001.

Ryan P. Bogan. Mr. Bogan has served as a Vice President of the Company since 2007 and President and Chief Executive Officer of D3 Technologies, Inc. since 2001. Mr. Bogan had served in various management positions with D3 Technologies, Inc. since 1998, including Director of Business Development and Chief Operations Officer.

Lawrence E. Dickinson. Mr. Dickinson has been our Chief Financial Officer since 1993. He served as a Financial Analyst and Controller for LaBarge, Inc. from 1984 to 1993 and as a Cost Accountant with Monsanto from 1981 to 1984.

68

Robert Grah. Mr. Grah has served as Vice President - Central Region since December 2002. Mr. Grah joined the Company in 1984 as Production Control Manager. Mr. Grah has held various management positions with us, including Purchasing and Contracts Manager, Maintenance Manager, Facilities Manager and General Manager of LMI Finishing, Inc. until December 2002. Prior to joining us, Mr. Grah was a supervisor for Associated Transports, Inc. and a manager for Beneficial Finance.

Michael J. Biffignani. Mr. Biffignani has served as our Chief Information Officer since 1999. He also served as the Director of Supplier Management from 2003 to 2006. Prior to joining us, Mr. Biffignani held several positions at The Boeing Company in Information Technology and Business Management and prior thereto he served as an engineer and materials manager for the Sony Corporation from 1979 to 1983.

Cynthia G. Maness. Ms. Maness was appointed as Vice President of Human Resources and Organizational Development in 2008.  Ms. Maness joined the Company in 1990 as Human Resources Manager for Leonard’s Metal, Inc. Prior to joining us, Ms. Maness served in human resources management roles for Peper, Martin, Jensen, Maichel & Hetlage, the City of Ballwin, and Fontbonne College.

We have adopted a Code of Business Conduct and Ethics that applies to all of our executive officers and employees and our Board of Directors, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial and principal accounting officer).

The Board of Directors has established an Audit Committee within the meaning of Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee currently consists of Mr. John M. Roeder (Chairman), Mr. John S. Eulich, Mr. Thomas Unger and Ms. Judith W. Northup, each an independent director in accordance with The Nasdaq Stock Market Marketplace Rule 4200(a)(15).  In addition, our Board of Directors has determined that each member of the Audit Committee is independent under the standards of Rule 10A-3 of the Exchange Act and the requirements of The Nasdaq Stock Market Marketplace Rule 4350(d)(2) and that Mr. Roeder qualifies as an audit committee financial expert under Item 407(d)(5) of Regulation S-K.

ITEM 11.  EXECUTIVE COMPENSATION.

The information required by Item 402 of Regulation S-K regarding the compensation of our directors and executive officers will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2009 Annual Meeting of Shareholders and is incorporated herein by reference.

The information required by Item 407(e)(4) and (e)(5) of Regulation S-K will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2009 Annual Meeting of Shareholders under the captions “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 403 of Regulation S-K regarding the security ownership of our beneficial owners and our management and the information required by Item 201(d) of Regulation S-K regarding our equity compensation plans will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2009 Annual Meeting of Shareholders and is incorporated herein by this reference.

69

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 407(a) of Regulation S-K regarding director independence and Item 404 regarding transactions with related persons will be included in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2009 Annual Meeting of Shareholders and is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information contained under the caption “Fees Billed by Independent Registered Public Accounting Firm” in the Company’s definitive proxy statement to be filed pursuant to Regulation 14A for the Company’s 2009 Annual Meeting of Shareholders, which involves the election of directors, is incorporated herein by this reference.

PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)	1.	For a list of the Consolidated Financial Statements of the Company included as part of this report, see the index at Item 8.
	2.	Other than Schedule II - Valuation and Qualifying Accounts, all schedules have been omitted as the required information is not present in sufficient amounts or the required information is included elsewhere in the Consolidated Financial Statement or notes thereto.
	3.	Exhibits: See Exhibit Index (each management contract or compensatory plan or arrangement listed therein is identified).
(b)	See Exhibit Index below.
(c)	Other than Schedule II - Valuation and Qualifying Accounts, all schedules have been omitted as the required information is not present in sufficient amounts or the required information is included elsewhere in the Consolidated Financial Statement or notes thereto.

70 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Charles and State of Missouri on the 13th day of March, 2009.

LMI AEROSPACE, INC.
By:	/s/ Ronald S. Saks
	Ronald S. Saks President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Ronald S. Saks
Ronald S. Saks	Chief Executive Officer, President, and Director (Principal Executive Officer)	March 13, 2009
/s/ Lawrence E. Dickinson
Lawrence E. Dickinson	Chief Financial Officer and Secretary (Principal Financial Officer and Principal Accounting Officer)	March 13, 2009
/s/ Joseph Burstein
Joseph Burstein	Chairman of the Board, and Director	March 13, 2009
Sanford S. Neuman	Assistant Secretary and Director	March 13, 2009
Thomas Unger	Director	March 13, 2009
/s/ Brian D. Geary
Brian D. Geary	Director	March 13, 2009
/s/ John M. Roeder
John M. Roeder	Director	March 13, 2009
/s/ John S. Eulich
John S. Eulich	Director	March 13, 2009
/s/ Judith W. Northup
Judith W. Northup	Director	March 13, 2009

71

EXHIBIT INDEX

Exhibit Number	Description
2.1	Stock Purchase Agreement dated as of June 17, 2007 between John J. Bogan, Trustee of the John Bogan Separate Property Trust Dated October 5, 1999, William A. Huston, and LMI Aerospace, Inc. previously filed as Exhibit 2.1 to the Registrant’s Form 8-K filed June 18, 2007 and incorporated herein by reference.
3.1	Restated Articles of the Registrant previously filed as Exhibit 3.1 to the Registrant’s Form S-1 (File No. 333-51357) dated as of April 29, 1998 (the “Form S-1”) and incorporated herein by reference.
3.2	Amended and Restated By-Laws of the Registrant previously filed as Exhibit 3.2 to the Form S-1 and incorporated herein by reference.
3.3	Amendment to Restated Articles of Incorporation dated as of July 9, 2001 filed as Exhibit 3.3 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 and filed April 1, 2002 and incorporated herein by reference.
4.1	Form of the Registrant’s Common Stock Certificate previously filed as Exhibit 4.1 to the Form S-1 and incorporated herein by reference.
10.1+	Employment Agreement effective January 1, 2006 between the Registrant and Ronald S. Saks, as previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed January 11, 2006 and incorporated herein by reference.
10.2	Lease Agreement dated December 7, 2005 between Inmobiliaria LA Rumorosa S.A. de C.V. and Ivemsa S.A. De C.V. for the premises located at A.V. Eucalipto, #2351, Col. Rivera, Modulo Cy D, C.P. 21259, Mexicali, Baja California, Mexico and filed herewith.
10.3	Lease Agreement dated May 19, 2008 between Precise Machine Partners, LLP and Acquiport DFWIP, Inc. for the premises located at 14813 Trinity Blvd., Fort Worth, Texas and filed herewith.
10.4	Lease Agreement dated May 2, 2006 between LMI Finishing, Inc. and Port Partnership, LLP for the premises located at 5270 N. Skiatook, Catoosa, Oklahoma and filed herewith.
10.5	Lease Agreement dated September 1, 2003 between Leonard’s Metal, Inc. and Kole Warehouses for the premises located at 101 Coleman, Savannah, Georgia and filed herewith.
10.6	Lease Agreement dated March 24, 1997, including all amendments, between D3 Technologies, Inc. and H.G. Fenton Company for the premises located at 4838 Ronson Court, San Diego, California and filed herewith.

72

10.7	Lease Agreement dated June 23, 2005 between D3 Technologies, Inc. and Quadrant Park for the premises located at 8217-8223 44th Avenue, Mukilteo, Washington and filed herewith.
10.8	Lease Agreement dated February 13, 2007 between LMI Finishing, Inc. and CIT CRE LLC for the premises located at 2104 N. 170th St. East, Tulsa, Oklahoma and filed herewith.
10.9*	Master Agreement between the Registrant and Aviation Partners Boeing, LLC filed herewith.
10.10*	Purchase Order Number 801538 as Master Agreement between the Registrant and Vought Aircraft Industries, Inc.
10.11+	Employment Agreement effective January 1, 2008 between the Registrant and Lawrence E. Dickinson, Chief Financial Officer of the Registrant previously filed as Exhibit 10.37 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2007 filed March 14, 2008 and incorporated herein by reference.
10.12+	Employment Agreement effective January 1, 2008 between the Registrant and Michael J. Biffignani, Chief Information Officer of the Registrant, previously filed as Exhibit 10.38 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2007 filed March 14, 2008 and incorporated herein by reference.
10.13	Lease Agreement dated May 6, 1997 between the Registrant and Victor Enterprises, LLC, including all amendments, for the leased premises located at 101 Western Avenue S., Auburn, Washington previously filed as Exhibit 10.10 to the Form S-1/A and incorporated herein by reference.
10.14	Lease Agreement dated February 1, 1995 between the Registrant and RFS Investments for the leased premises located at 2621 West Esthner Court, Wichita, Kansas previously filed as Exhibit 10.11 to the Form S-1/A and incorporated herein by reference.
10.15+	Profit Sharing and Savings Plan and Trust including amendments previously filed as Exhibit 10.12 to the Form S-1/A and incorporated herein by reference.
10.16+	Employment Agreement dated January 1, 2006 between the Registrant and Michael J. Biffignani previously filed as Exhibit 10.2 to the Registrant’s Form 8-K filed January 11, 2006 and incorporated herein by reference.
10.17	General Conditions (Fixed Price - Non-Government) for the G-IV/F100 Program, Additional Conditions for the Wing Stub/Lower 45 Program Boeing Model 767 Commercial Aircraft and Form of Master Agreement, Purchase Order Terms and Conditions, all with Northrop Grumman previously filed as Exhibit 10.18 to the Form S-1/A and incorporated herein by reference.
10.18+	Employment Agreement effective as of January 1, 2006 between the Registrant and Lawrence E. Dickinson previously filed as Exhibit 10.3 to the Registrant’s Form 8-K filed January 11, 2006 and incorporated herein by reference.

73

10.19	Business Reformation Agreement between Leonard’s Metal, Inc. and Lockheed Martin Aeronautics Company dated September 21, 2001 previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed November 14, 2001 and incorporated by reference.
10.20	Lease Agreement dated April 2, 2001 between Peter Holz and Anna L. Holz Trustees of the Peter and Anna L. Holz Trust dated 2/8/89, as to an undivided one-half interest, and Ernest R Star and Linda Ann Zoettl, Trustees under the Ernest L. Star and Elizabeth H. Star 1978 Trust dated August 25, 1978, as to an undivided one-half interest and Metal Corporation for the premises located at 11011-11021 Olinda Street, Sun Valley, California previously filed as Exhibit 10.27 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 filed April 1, 2002 and incorporated herein by reference.
10.21	Lease Agreement dated April 2, 2001 between Tempco Engineering, Inc. and Metal Corporation for the premises located at 8866 Laurel Canyon Blvd., Sun Valley, California previously filed as Exhibit 10.28 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2001 filed April 1, 2002 and incorporated herein by reference.
10.22+	Employment Agreement effective as of January 1, 2006 between the Registrant and Robert T. Grah previously filed as Exhibit 10.4 to the Registrant’s Form 8-K filed January 11, 2006 and incorporated herein by reference.
10.23+	Employment Agreement effective as of January 1, 2004 between the Registrant and Duane Hahn filed as Exhibit 10.3 to the Registrant’s Form 10-Q filed August 16, 2004 and incorporated herein by reference.
10.24	Memorandum of Agreement between Leonard’s Metal, Inc. and Gulfstream Aerospace dated September 3, 2003 previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed September 12, 2003 and incorporated herein by reference.
10.25	Special Business Provisions Agreement between Leonard’s Metal, Inc. and The Boeing Company dated March 20, 2003 previously filed as Exhibit 10.2 to the Registrant’s Form 8-K filed September 12, 2003 and incorporated herein by reference.
10.26	General Terms Agreement between Leonard’s Metal, Inc. and The Boeing Company previously filed as Exhibit 10.3 to the Registrant’s Form 8-K filed September 12, 2003 and incorporated herein by reference.
10.27	Lease Agreement between Nonar Enterprises and Versaform Corporation dated September 12, 2003 for the premises located at 1377 Specialty Drive, Vista, California previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed November 14, 2003 and incorporated herein by reference.
10.28	Credit and Security Agreement between the Registrant and Wells Fargo Business Credit, Inc. dated November 29, 2004 previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed December 1, 2004 and incorporated herein by reference.

74

10.29	First Amendment to the Credit and Security Agreement between the Registrant and Wells Fargo Business Credit, Inc., dated February 15, 2006 previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed February 22, 2006 and incorporated herein by reference.
10.30+	2005 Long-Term Incentive Plan previously filed as Exhibit 10.1 in the Registrant’s Form 8-K filed July 13, 2005 and incorporated herein by reference.
10.31	General Terms Agreement between Spirit AeroSystems, Inc. (Tulsa Facility) and LMI Aerospace, Inc. dated April 19, 2006 previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed May 18, 2006 and incorporated herein by reference.
10.32	Special Business Provisions between Spirit AeroSystems, Inc. and LMI Aerospace, Inc. dated April 19, 2006 previously filed as Exhibit 10.2 to the Registrant’s Form 10-Q filed May 18, 2006 and incorporated herein by reference.
10.33	Lease Agreement between Leonard’s Metal and Welsh Fountain Lakes, L.L.C. dated June 9, 2006 between Welsh Fountain Lakes, L.L.C. for the premises located at 411 Fountain Lakes Blvd., St. Charles, Missouri previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed June 15, 2006 and incorporated herein by reference.
10.34	Memorandum of Agreement effective as of January 1, 2006 between LMI Aerospace, Inc. and Gulfstream Aerospace Corporation previously filed as Exhibit 10.1 to the Registrant’s Form 10-Q filed November 13, 2006 and incorporated herein by reference.
10.35	Amended and Restated Credit Agreement between the Registrant and Wells Fargo Bank dated December 28, 2006 previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.
10.36	Purchase Agreement among LMI Finishing, Inc., Leonard’s Metal, Inc. and CIT CRE LLC dated December 28, 2006 previously filed as Exhibit 10.2 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.
10.37	Lease Agreement between Leonard’s Metal, Inc. and CIT CRE LLC, dated as of December 28, 2006 for the premises located at 2629-2635 Esthner Court, Wichita, Kansas, 3600 Mueller Road, St. Charles, Missouri, 3030-3050 North Highway 94, St. Charles, Missouri previously filed as Exhibit 10.3 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.
10.38	Guaranty and Suretyship Agreement between the Registrant and CIT CRE LLC dated December 28, 2006 previously filed as Exhibit 10.4 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.
10.39+	Employment Agreement effective January 2, 2007 between the Registrant and Darrel E. Keesling previously filed as Exhibit 10.5 to the Registrant’s Form 8-K filed January 3, 2007 and incorporated herein by reference.

75 

10.40	Credit Agreement between the Registrant, Wachovia Bank, National Association (as Administrative Agent, Swingline Lender and Issuing Lender), Wells Fargo Bank, National Association (as Syndication Agent) and the other lender parties thereto dated July 31, 2007 previously filed as Exhibit 4.1 to the Registrant’s Form 8-K filed August 6, 2007 and incorporated herein by reference.
10.41+	Employment Agreement effective July 31, 2007, between the Registrant and Ryan P. Bogan previously filed as Exhibit 10.1 to the Registrant’s Form 8-K filed August 6, 2007 and incorporated herein by reference.
10.42+	Restricted Stock Award Agreement between the Registrant and Ryan P. Bogan dated July 31, 2007 previously filed as Exhibit 10.2 to the Registrant’s Form 8-K filed August 6, 2007 and incorporated herein by reference.
10.43+	Employment Agreement effective January 1, 2008 between the Registrant and Ronald S. Saks, Chief Executive Officer and President of the Registrant, previously filed as Exhibit 10.35 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2007 filed March 14, 2008 and incorporated herein by reference.
10.44+	Employment Agreement effective January 1, 2008 between the Registrant and Robert T. Grah, Vice President of Sheet Metal Operations of the Registrant, previously filed as Exhibit 10.36 to the Registrant’s Form 10-K for the fiscal year ended December 31, 2007 filed March 14, 2008 and incorporated herein by reference.
14	Code of Business Conduct and Ethics, filed as Exhibit 14.1 to the Registrant’s Form 10-K/A for the fiscal year ended December 31, 2003 filed May 6, 2004 and incorporated herein by reference.
21.1	List of Subsidiaries of the Registrant filed herewith.
23.1	Consent of BDO Seidman, LLP filed herewith.
31.1	Rule 13a-14(a) Certification of Ronald S. Saks, President and Chief Executive Officer filed herewith.
31.2	Rule 13a-14(a) Certification of Lawrence E. Dickinson, Chief Financial Officer filed herewith.
32	Certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002 filed herewith.

_________________________________________

+ Management contract or compensatory plan or arrangement required to be filed as exhibit to this report.

* The Company has requested confidential treatment of the redacted portions of this exhibit pursuant to Rule 24b-2, under the Securities Exchange Act of 1934, as amended, and has separately filed a complete copy of this exhibit with the Securities and Exchange Commission.

76

EX-10.2

Exhibit 10.2

LEASE AGREEMENT

THIS LEASE AGREEMENT (“LEASE”) ENTERED INTO ON THIS _7th_ DAY OF JANUARY, 2006, BY AND BETWEEN INMOBILIARIA LA RUMOROSA, S.A. DE C.V., HEREIN REPRESENTED BY PABLO CHARVEL OROZCO (HEREINAFTER REFERRED TO AS “LESSOR”) AND IVEMSA S.A. DE C.V., HEREIN REPRESENTED BY SERGIO TAGLIAPIETRA NASSRI, (HEREINAFTER REFERRED TO AS “LESSEE”), BINDS THE PARTIES PURSUANT TO THE FOLLOWING RECITALS AND CLAUSES.

RECITALS

The Lessor, through its legal representative, states:

A. That Lessor is a corporation duly organized and existing under the laws of the United Mexican States.

B. That Lessor is duly represented herein by Pablo Charvel Orozco, who has full power and authority to execute this Agreement on its behalf, as evidenced by the public instrument attached hereto as Exhibit A.  Furthermore, Pablo Charvel Orozco hereby represents that such authority has not been limited nor revoked in any manner whatsoever.

C. That as evidenced by public instrument number 3,807, dated January 6, 1997, granted before Mr. Horacio Carvajal Moreno, Notary Public Number 46, for the Judicial District of Tlalnepantla, State of Mexico, Mexico, which was duly recorded at the Public Registry of Property and Commerce of Mexicali, Baja California, Mexico, under record number 17,617, Civil Section, Lessor is the owner in fee simple of Lot Number Ninety-Eight (“Lot 98”) of Colonia Rivera, located in the city of Mexicali, Baja California, Mexico, which has a surface area of five (5) hectares approximately.  A legal description of Lot 98 is attached hereto as Exhibit B, which has a total surface area of 45,566.011 square meters.  That Lessor has the authorization to develop the Calafia Industrial Park (hereinafter referred to as the “Park”) granted by the Urban Control Department of Municipal Government issued on December 18, 1997.

D. Lessor leases to Lessee a portion of an industrial building (the “Building”) located within the Park and commonly known as Av. Eucalipto, #2351, Col. Rivera, Modulo Cy D, C.P. 21259, Mexicali, Baja California, Mexicoas depicted on Exhibit C attached hereto (hereinafter “Leased Premises”).

The Lessee, through its representative, states:

A. That Lessee is a corporation duly organized and existing in accordance with the laws of the United Mexican States.

B. That Lessee is duly represented by Sergio Taglapietra Nassri, who has full power and authority to execute this Agreement on its behalf, as evidenced by the public instrument attached hereto as Exhibit D Furthermore, Sergio Taglapietra Nassri hereby represents that such authority has not been limited nor revoked in any manner whatsoever.

C. That Lessee wishes to enter into this Lease in order to lease the Leased Premises from the Lessor under the terms and conditions herein set forth.

Having stated the foregoing, the parties agree on the following:

ARTICLES:

ARTICLE 1.          LEASE.

1.1 Subject to the terms and conditions set forth herein, the Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to lease from Lessor the Leased Premises.  Lessee shall also have the right to (i) the exclusive use of forty-eight (48) parking spaces located the parking area adjacent to the Building and (ii) the non-exclusive use together with other tenants in the Park of all common areas located in the Park.

1.2 Lessor represents and warrants that the Leased Premises is comprised of 23,238 usable square feet and the improvements located within the Leased Premises have been constructed in accordance with the specifications set forth in Exhibit G attached hereto and the plans and specifications prepared by Lessor dated April 5, 2005.  Lessor further represents and warrants that (i) the Building shall contain no structural defects or defective systems; (ii) the Building systems shall be in proper working order and condition and that the Building and the Leased Premises shall be in compliance with all applicable laws, ordinances, rules, regulations and codes; (iii) the use of the Leased Premises by Lessee for the purposes described in Article 3 are permissible under all applicable zoning codes, laws, rules and regulations; (iv) the Building is served by all utilities necessary for Lessee’s intended use of the Leased Premises as described in Article 3 and such utilities are adequate with respect to service and capacity for Lessee’s intended use of the Leased Premises as described in Article 3; and (v) the Building, the Leased Premises, and Lessor’s Work (as hereinafter defined) are free from all defects, patent, latent or otherwise.

ARTICLE 2.           OWNERSHIP OF THE LEASED PREMISES.

2.1 Lessor represents and warrants that Lessor is the sole owner and has clear and marketable title to the Building and the Leased Premises and the common areas contiguous thereto, and warrants that Lessee, upon Lessee’s payment of rent and compliance with Lessee’s obligations hereunder, Lessee shall have the quiet enjoyment of the Leased Premises.  Lessor and Lessee agree that, as provided by the Civil Code of the State of Baja California, this Lease shall survive any foreclosure of any lien or any mortgage on the Leased Premises and that any default in payment of any such lien or mortgage shall in no way prejudice the terms of this Lease, the rights of Lessee hereunder, or any extensions thereof. Any amendments to such mortgages or any new mortgages on the Leased Premises shall contain a provision acknowledging the existence and duration of this Lease and Lessee’s right to extend the term of this Lease pursuant to Article 21 hereof and the options to lease additional space as set forth in Articles 22 and 23 hereof.

2.2 Lessor represents that the rules and regulations, attached hereto as Exhibit E (the “Park Rules”) are legally binding against the Park and, thus, the Leased Premises.  Lessor and Lessee acknowledge the existence of the Park Rules and understand the binding nature of the same upon anyone claiming an interest in Lot 98.

ARTICLE 3.           USE OF THE LEASED PREMISES

The purpose for which the Lessee shall use the Leased Premises shall be as follows: general office use and the manufacture, warehousing, and distribution of aircraft related products and services, including, but not limited to, heat treating, forming, cutting, repair, engineering, sales, product demonstration, training of customers and employees, ancillary storage, parking of cars and all other uses incidental and related to a manufacturing, warehouse and office facility, and for no other purposes without the written consent of the Lessor, which consent shall not be unreasonably withheld or delayed.  During the Term (as hereinafter defined) of this Lease, the Lessee shall make its best efforts to not do or permit anything to be done on or about the Leased Premises, which shall in any way conflict with all applicable laws, statutes, ordinances, or governmental rules.

ARTICLE 4.           TERM OF THE LEASE.

4.1 The term of this Lease (the “Term”) shall commence on February 1, 2006 (“Lease Commencement Date”) and shall expire seventy-four (74) months thereafter.  The Leased Premises shall be delivered to Lessee on the Lease Commencement Date broom clean and free of personal property of others and Lessor shall have completed Lessor’s Work in accordance with the terms and provisions set forth in Exhibit G, attached hereto and incorporated herein by reference.

4.2 Lessee may terminate this Lease prior to the expiration of the Term, provided however, that Lessee previously fulfills each and all of the following conditions: (i) that Lessee serves and provides Lessor written notice thereof at least six months prior to the proposed date of termination; (ii) that Lessee together with the mentioned notice, delivers and pays to Lessor as consideration for such early termination, an amount equivalent to the sum of all monthly rental payments (based on the then current monthly rent) for the remaining period of the Lease Term discounted at a rate of 7%.

4.3 The parties agree that the Lessee may commence its occupation of the Leased Premises on December 20,2005 (the “Early Occupation Period”) with no obligation to pay rent to Lessor until such time as specified in Section 5.1 below.  Lessor shall provide Lessee with temporary office space to accommodate seven (7) employees of Lessee as needed by Lessee during the Early Occupation Period.

ARTICLE 5.           RENTAL AND TERMS AND CONDITIONS OF PAYMENT.

5.1 Commencing on April 1, 2006 (the “Rent Commencement Date”), Lessee shall pay rent on a monthly basis to Lessor, without any formal demand from Lessor, for the first year of the Lease Term, in an amount equal to the rate of $0.39 per square foot multiplied by the usable square feet of the Leased Premises as set forth in Article 1 (it being the intention of the parties that Lessee shall be entitled to a rental abatement for the months of February and March of 2006).  In addition to the rental rate set forth in this Section 5.1, Lessee shall also be responsible for the monthly maintenance fee as set forth in Section 8.3.  During the remaining five (5) years of the Term and any renewal terms, Lessee shall pay rent on a monthly basis in an amount calculated in accordance with Section 5.2 below.

5.2 On each anniversary of the Lease Commencement Date during the Term and any Extension Period, to the extent such option shall be exercised, monthly rent shall be increased at the rate of three percent (3%) over the monthly rent for the prior year and shall be as follows:

	Monthly Rental Payment
	(Without Maintenance Fee)
Year 1	$9,062.82
Year 2	$9,334.70
Year 3	$9,614.74
Year 4	$9,903.18
Year 5	$10,200.28
Year 6	$10,506.29

5.3 Lessee shall pay rent to Lessor at the address specified in Section 24 below in monthly installments, in advance, on or prior to the tenth (10th) day each calendar month, throughout the Term without deduction, offset, prior notice, or demand, in lawful money of the United States.

5.4 The Lessee shall pay the Value Added Tax which may be applicable to the monthly rent payment, and the Lessor shall issue the corresponding invoice simultaneously with such payment, containing all requirements of Fiscal Law, evidencing the payment of rent and the Value Added Tax by Lessor.

5.5 In the event Lessee does not pay rent on or prior to the tenth (10th) day of the month, Lessee shall pay Lessor interest on the unpaid amount at the per annum rate of eighteen percent (18%).  Such interest shall continue to accrue until such time payment has been made in full by Lessee.

ARTICLE 6.TAXES AND UTILITIES.

6.1 The Lessee shall, as of the Lease Commencement Date and during the Term of this Lease, pay and timely discharge all electrical service charges, natural gas service charges, if any, telephone service charges and water and sewer charges.  All license and permit fees and other Federal, State or Municipal charges imposed upon the Leased Premises shall be paid by Lessor during the Lease Term.  Notwithstanding anything to the contrary set forth herein, Lessor shall be responsible for the payment of all real estate property taxes assessed against the Leased Premises.

6.2 Lessor, at Lessor’s sole cost and expense, shall install or have installed all water, sewer and electrical and telephone lines for the general supply of water, sewer, electrical and telephone service to the Leased Premises, in accordance with all federal, state and local regulations, and shall cause the installation of the same to be accepted and approved by the Federal, State, or local authorities having jurisdiction over all streets abutting the Leased Premises.  Lessee shall contract and pay for all utilities it shall use.  Lessor, at Lessor’s sole cost and expense, shall have further installed all lighting fixtures, a power station and air conditioning in the Leased Premises for use by Lessee in accordance with Exhibit G.

6.3 It is agreed and understood by the parties that Lessor will use its best efforts to assist Lessee to contract all utility services necessary for Lessee’s operations in the Leased Premises.  Lessee shall contract for such utility services in Lessee’s name, with the understanding that the contracting fees and the fees for the supply of such utilities will be paid by Lessee.

ARTICLE 7.ASSIGNMENT-SUBLEASING

The Lessee shall not transfer, mortgage, pledge or otherwise encumber this Lease, or any interest herein, without the prior written consent of the Lessor, which consent shall not be unreasonably withheld or delayed.  Lessee shall have the right to sublease all or a portion of the Leased Premises or to assign this Lease with the prior written consent of the Lessor, but any such subletting or assignment shall not relieve Lessee or Guarantor (as hereinafter defined) of its obligations hereunder including those pertaining to the payment of rent, unless otherwise agreed in writing by the parties.  Notwithstanding anything to the contrary set forth herein, Lessee shall have the right, without the prior written consent of Lessor, to assign the Lease or sublet the Leased Premises to Guarantor or to any affiliate of Guarantor, to any successor of Guarantor resulting from a merger, consolidation or other corporate restructuring, to any entity under the common control of Guarantor, or to any partner or joint venturer of Guarantor.  Despite any such assignment or subletting, Lessee shall at all times remain liable for the payment of rent and for compliance with all of Lessee’s other obligations under the terms, provisions and covenants of this Lease.

ARTICLE 8.           MAINTENANCE AND REPAIRS; ENVIRONMENTAL MATTERS

8.1 Lessor, at Lessor’s sole cost and expense, shall be solely responsible for the prompt maintenance (including preventive maintenance) and repair of all structural components and systems of the Building, including, but not limited to, the roof and gutters, columns, floor slab, exterior walls, foundations, heating and air conditioning systems, plumbing systems, mechanical systems, electrical systems, sprinkler systems, sewer systems and paved areas on the land (i.e., parking lots, walkways, roadways and driveways).  It is agreed and understood by the Lessee that none of its employees, contractors, dependents or representatives may get on the roof for any work whatsoever without the prior authorization from the Lessor, which may not be unreasonably withheld.

8.2 Lessee shall be responsible to maintain the Leased Premises by providing proper janitorial services and making routine and ordinary repairs, restoration, and minor replacements to the Leased Premises that are not otherwise the responsibility of Lessor under Sections 8.1 and 8.3.  Lessor shall not be called upon to make any repairs caused by improper use or negligent acts of the Lessee, its employees, agents or visitors.

8.3 Lessor shall be responsbile for the maintenance and cleanliness of streets, common areas of the Park, as well as for 24-hour security and all other industrial park services, including, but not limited to, lawn and shrubbery, maintenance, parking lot maintenance, walkway maintenance, common area lighting, trash removal, exterior exterminating, exterior painting and roof repairs.  On or prior the tenth (10th) day of each month of the Term, Lessee shall pay to Lessor a monthly maintenance fee of one cent ($0.01 U.S.) per usable square foot of Leased Premises.  The usable square footage of the Leased Premises is set forth in Article 1.

8.4 Lessor shall be fully responsible for the expense and liability associated with any Hazardous Substances (as hereinafter defined) which are now present or which may in the future come to be located (whether by migration through soil or groundwater or otherwise) on or under Leased Premises or Lot 98, excepting only those Hazardous Substances which the Lessor can demonstrate are the result of an active spill by Lessee during Lessee’s operations at the Leased Premises.  In addition, Lessor hereby agrees to pay, discharge, indemnify, release, save and hold harmless Lessee and Lessee’s employees, directors, officers, shareholders, parent companies and agents and each of the foregoing parties’ respective successors and assigns (individually, a “Lessee Indemnitee” and collectively, the “Lessee Indemnities”) from and against all losses, claims, liabilities, damages (including without limitation incidental and consequential damages and lost profits), suits, proceedings, assessments or other actions which may be asserted against or incurred by a Lessee Indemnitee, arising out of or related to the actual or alleged presence or migration of Hazardous Substances on, under, from or into the Leased Premises or Lot 98.

8.5 For purpose of this Agreement, “Hazardous Substances” means any chemical, compound, material mixture, living organism or substance that is now or hereafter defined or listed in or otherwise classified or regulated in any way pursuant to, the  environmental laws of the City of Mexicali, State of Baja California, México as a “hazardous waste, “ hazardous substances,” “hazardous material,” “extremely hazardous waste,” “infectious waste,” “toxic substance,” “toxic pollutant” or any other formulation intended to define, list or classify substances by reason of deleterious properties, including without limitation, ignitability, corrosives, reactivity, carcinogenicity, or toxicity, such materials, including without limitation, oil, waste oil, petroleum, waste petroleum, polychlorinated biphenyls (PCBs), asbestos, radon, natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas).

ARTICLE 9.INSURANCE.

9.1 As of the Lease Commencement Date and throughout the Lease Term, Lessor, at Lessor’s sole cost and expense, shall insure the Leased Premises and the Building against any (i) loss or damage by fire; (ii) loss or damage from all other risks, hazards, or casualties covered by an “Extended Coverage Endorsement” in the State of Baja California, Mexico; and (iii) loss for flood; as well as such other risks as a reasonably prudent owner of similar industrial buildings in the locality where the Building is located would normally insurance against.  Insurance obtained by Lessor pursuant to the terms hereof shall provide for payment in the amount of the full insurable value (expressed in U.S. Dollars, but payable in Mexican Currency at the then present rate of exchange) of the Leased Premises, Building, and other improvements or infrastructure located in the Park. The “Extended Coverage Endorsement” shall include but not be limited to insurance against risks such as: lightning, explosion, hurricane and wind damage, hail, airplane and other vehicles, smoke, earthquakes, strikes, riots, civil disorders & vandalism. The insurance required to be provided by the Lessor under this Article 9 shall be purchased by the Lessor on an annual basis during the Term of this Lease, effective upon the Lease Commencement Date.  Lessor shall deposit certificates of such required insurance with Lessee prior to the Lease Commencement Date.  Said certificates shall evidence that the insurance is in force and state that such policy or policies have been endorsed to provide that they will not be cancelled or materially altered with respect to the Leased Premises except after thirty (30) days’ written notice to Lessee.  Lessee and Guarantor will be named as additional insureds and/or loss payees in any such policies, as appropriate.

9.2 Lessee, at its sole cost and expense, shall insure the contents of the Leased Premises, and maintain general public liability insurance against claims for personal injury, death or property damage occurring upon or about the Leased Premises, in an amount not less than One Million U.S. Dollars ($1,000,000.00).

9.3 The policies obtained by Lessee pursuant to paragraph 9.2 shall provide that no cancellation thereof shall be effective until Lessor has provided with at least thirty (30) days prior written notice.  In addition, within fifteen (15) days of the Lease Commencement Date, the Lessee shall provide the Lessor with certificates evidencing compliance with the requirements of this Article 9.

9.4 Rental Insurance:  During the Lease Term, as same may be extended, Lessor, at Lessor’s sole cost and expense, shall purchase a rent insurance policy which shall provide for the payment of rents during any period of reconstruction or repair of the Leased Premises during periods of rental abatement where the Lessee is unable to utilize the Leased Premises for Lessee’s intended purposes as described in Article 3.

9.5 Waiver of Subrogation.  The parties release each other, and their respective authorized representatives, from any claim for damage to any person or to the Leased Premises or to the fixtures, personal property, or improvements located in the Leased Premises caused by or as a result of any damage insured against under any insurance policies carried by the parties.  All policies of insurance maintained by Lessor and Lessee pursuant to the terms set forth herein shall provide that the insurance company waives all right to recovery by way of subrogation against either party in connection with any damage covered by any policy maintained by either Lessor or Lessee.  If, through reasonable efforts, a party hereto is unable to obtain such waiver of subrogation, such party shall name the other party as an additional insured under its policy in order to accomplish the intent of this provision.

ARTICLE 10.DESTRUCTION

10.1 In the event of damage to or destruction of the Building or any improvements within the Leased Premises, Lessor will promptly, and at Lessor’s sole cost and expense, make such repairs, restoration or rebuilding to the extent that is necessary to provide the Lessee with a premises of equal utility and design and construction quality to that which existed prior to such damage or destruction; and this Lease shall remain in full force and effect during the time such repairs, restoration or rebuilding are being effected.  During the period of reconstruction and repair, Lessee’s obligation to pay rent shall be abated in proportion to the amount of the Leased Premises rendered untenantable (utilizing the same per square foot rate used to calculate the regular monthly rent prior to the casualty) until the Leased Premises are repaired or restored.

10.2 In the event that such repairs, restoration or rebuilding cannot be accomplished within one hundred and fifty (150) days after the occurrence of the damage or destruction or in the event that Lessor fails to commence repair and restoration of any such damage or casualty within thirty (30) days of the occurrence of the damage or casualty, Lessee may, at its option and without further liability hereunder, terminate this Lease effective immediately upon written notice to the Lessor.  Notwithstanding the foregoing, if fifty-percent (50%) or more of the value of the improvements on the Leased Premises are lost due to such destruction or damage (a) during the last year of the original Lease Term or (b) during the last year of any extension elected by Lessee in accordance with Article 21 below; Lessor may elect to terminate this Lease effective immediately upon written notice delivered to the Lessee within thirty (30) days of such damage, unless otherwise negotiated with Lessee.

ARTICLE 11.SURRENDER

11.1 Lessee shall, on the last day of the Term of this Lease including all extensions thereof, surrender and deliver the Leased Premises into the possession and use of the Lessor without delay, in good order, condition and repair, except for normal wear and tear due to normal use and the passage of time, and except for damage caused by fire or other casualty.  For purposes hereof, the parties shall, within a term of one (1) month prior to the end of the Lease Term, effect a joint inspection of the Leased Premises in order to determine the condition of the Leased Premises.

11.2 All signs, inscriptions, canopies and installations of like nature made by Lessee shall be removed at or prior to the expiration of the term of this Lease.

11.3 All furniture, trade fixtures and business equipment installed by Lessee shall remain the property of the Lessee and may be removed by Lessee at any time during or at the end of the Lease Term.  Lessee shall, at its own expense, repair all damage to the Leased Premises resulting from the installation or removal of its furniture, trade fixtures and business equipment.  All furniture, trade fixtures, or business equipment no so removed will conclusively be deemed to have been abandoned by Tenant and may be appropriated sold, stored, destroyed, or otherwise disposed of by Lessor without notice to Lessee.

ARTICLE 12.HOLDOVER

In the event this Lease is not extended pursuant to Article 21 prior to the termination date, the Lessee shall, at the termination of the Lease by lapse of time or otherwise, yield up immediate possession of the Leased Premises to Lessor.  The failure of Lessee to relinquish the Leased Premises on such date will result in the Lessee being deemed a month-to-month tenant having the same obligations as those existing prior to the expiration except that monthly base rent shall equal the sum of one and one-half (1 ½) months’ rent (as calculated based on the rent paid during the last year of the Term, increased by three percent (3%) in accordance with Section 5.2) plus other charges payable pursuant to the terms of this Lease and such tenancy shall be subject to termination by either party upon one month’s prior written notice.

ARTICLE 13.LESSOR’S RIGHT TO PERFORM LESSEE’S COVENANTS.

If Lessee shall at any time fail to perform any one or more of its agreements made in this Lease, Lessor, after ten (10) days written notice to Lessee (or without notice in the case of an emergency) and without waiving or releasing Lessee from any of its obligations contained in this Lease, may but shall be under no obligation to perform any act to be performed by Lessee as provided in this Lease, and may enter upon the Leased Premises for that purpose and take all such actions thereon as may be necessary therefore.  All sums paid by Lessor and all costs and expenses incurred by Lessor in connection with the performance of any such obligation of Lessee shall be payable by Lessee to Lessor on demand upon presentment.

ARTICLE 14.LESSEE’S RIGHT TO PERFORM LESSOR’S COVENANTS.

If Lessor shall at any time fail to perform any one or more of its agreements made in this Lease, Lessee, after ten (10) days written notice to Lessor (or without notice in the case of an emergency) and without waiving or releasing Lessor from any of its obligations contained in this Lease, may but shall be under no obligation to perform any act to be performed by Lessor as provided in this Lease, and may take all such actions thereon as may be necessary therefore.  All sums paid by Lessee and all costs and expenses incurred by Lessee in connection with the performance of any such obligation of Lessor, shall be payable by Lessor to Lessee on demand upon presentment.

ARTICLE 15.ENTRY ON THE LEASED PREMISES BY LESSOR.

15.1 So long as Lessor complies with the terms of Sections 15.2 and 15.3 below, Lessee shall permit Lessor or its authorized representatives to enter the Leased Premises during Lessee’s usual business hours for the purpose of inspecting the same and performing any work therein that may be required of Lessor pursuant to the terms of Articles 8, 10 and 13 of this Lease, without interfering with Lessee’s activities within the Leased Premises.

15.2 Lessor shall have the right to enter the Leased Premises at all reasonable times during Lessee’s usual business hours for the purpose of showing the same to prospective purchasers of the Leased Premises and within a six months period prior to the expiration of this Lease, or any extension thereof, for the purpose of showing the same to prospective lessees, without interfering with Lessee’s activities.

15.3 Except in case of emergency, the Lessor shall at all times give twenty-four (24) hours advance written notice to the Lessee before entering the Leased Premises and the Lessee shall have the right to escort any representatives of the Lessor and prospective clients about the Leased Premises.

ARTICLE 16.           SECURITY DEPOSIT AND GUARANTIES.

16.1 Lessee shall deposit with Lessor the sum of Ten Thousand Dollars ($10,000.00)  as a “Security Deposit” within ten (10) days after the execution of this Lease. The Security Deposit shall be held by Lessor as security for the faithful performance by Lessee of all the terms of this Lease.  In the event of any default by Lessee in Lessee’s performance hereunder, Lessor may, but is not obligated to, apply said sum or any part thereof toward the curing of any such default and/or toward compensating Lessor for any loss or damage arising from such default.  Upon the expiration or earlier termination of the Lease and Lessee’s surrender of the Leased Premises, Lessor shall return the Security Deposit to Lessee no later than ten (10) calendar days after the termination of the Lease so long as Lessee is not in default under the Lease or otherwise liable to Lessor.

16.2 Lessee shall deliver to the Lessor, a guaranty from Leonard’s Metal, Inc., a subsidiary of LMI Aerospace, Inc. (“Guarantor”) for the payment of rent due hereunder.  The form of “Guaranty” is attached hereto as Exhibit F.  Such Guaranty shall be delivered to Lessor no later than ten (10) business days after the date of execution of this Lease.

ARTICLE 17.SUBORDINATION.

Lessee agrees, at the request of Lessor, to subordinate this Lease (including any extensions) to any mortgage or security interest placed upon the Leased Premises, provided that the holder of such mortgage or security interest agrees not to disturb the exclusive possession and other rights of Lessee under this Lease.  In the event of acquisition of title by said holder of such mortgage or security interest through foreclosure proceedings or otherwise, and as consideration for the Subordination Agreement of Lessee, the holder of such mortgage or security interest agrees to accept Lessee under this Lease and to perform the Lessor’s obligations hereunder and Lessee agrees to recognize the holder of such mortgage or security interest, or any other person acquiring title to the Leased Premises, as Lessor hereunder; provided, however that in no event shall the same relive Lessor of its obligations hereunder.  Lessor agrees to provide Lessee promptly after execution of this Lease with executed commercially reasonable non-disturbance agreements in favor of Lessee from any and all ground lessors, mortgage holders and other lien holders now in existence (or that come into existence at any time prior to the expiration of the Lease) in a form reasonably satisfactory to Lessee.  In the event Lessor fails to deliver to Lessee such executed non-disturbance agreements from all such parties within thirty (30) days after the date of this Lease (or within thirty days after the same come into existence during the term of the Lease), Lessee shall have the option to terminate this Lease effective immediately upon written notice to Lessor; and neither Lessee nor Lessor shall have any further liability or obligation under this Lease.  Lessee and Lessor agree to execute and deliver any other appropriate instruments necessary to carry out the agreements contained in this Article 17.

ARTICLE 18.EVENTS OF DEFAULT.

18.1 The occurrence of any one or more of the following events shall constitute an “Event of Default” of this Lease by Lessee:

(a) The failure by Lessee to make any payment of rent on or prior to the tenth (10th) of each month or any other payment required of Lessee under this Lease when due.  Upon such failure by Lessee to make its timely payment of rent, Lessor shall send a written statement to Lessee and Guarantor indicating the default and provide Lessee ten (10) calendar days to cure the default.  Lessee’s failure to cure the default described herein, or Guarantor’s failure to cure such default of Lessee, shall be considered an Event of Default without further notice, and Lessor may exercise its remedies as enumerated herein.  After Lessor has provided Lessee and Guarantor three such notices at any time during the Lease Term, Lessor shall be relieved of the notice obligations imposed upon it by this sub-paragraph (a) of Section 18.1, and Lessee shall no longer have the default cure rights enumerated herein;

(b)  Except as provided in sub-paragraph 18.1(a) above, the failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease, where such Event of Default shall continue for a period of thirty (30) calendar days after receipt by Lessee and Guarantor of written notice thereof from Lessor; provided, however, that if the nature of Lessee’s default is such that it cannot be cured solely by payment of money and more than thirty (30) calendar days may be reasonably required for such cure, then Lessee shall not be deemed to be in default if Lessee or Guarantor shall commence such cure within such thirty (30) calendar day period and thereafter shall diligently prosecute such cure to completion;

(c) (i) The making of any general arrangement or any assignment by the Lessee for the benefit of creditors;

(ii) The filing by or against Lessee of a petition to have Lessee adjudged an insolvent, or a petition of reorganization or arrangement under any law relating to insolvency (unless such petition is dismissed within ninety (90) days of filing);

(iii) The appointment, execution or other judicial seizure of all or substantially all of Lessee’s assets (unless such attachment, execution or judicial seizure is dismissed within ninety (90) days from the date in which this occurs.)

(iv) The attachment, execution or other judicial seizure of all or substantially all of Lessee’s assets (unless such attachment, execution or judicial seizure is dismissed within ninety (90) days from the date in which this occurs).

18.2 Upon any Event of Default, and except as otherwise provided herein, Lessor, in addition to other rights or remedies it may have, shall have the right to terminate this Lease ten (10) days after Lessee receives Lessor’s written notice of termination.

18.3 Lessor will be in default under the terms of this Lease if Lessor shall fail to perform or observe any of its obligations contained in this Lease, and such failure continues for a period of ten (10) days after Lessee shall have given Lessor written notice specifying such failure which may be cured solely by the payment of money, and thirty (30) days after Lessee shall have given Lessor written notice specifying such failure which may not be cured solely by the payment of money.  In the event of a default by Lessor which Lessor fails to cure after notice thereof, Lessee shall have all rights and remedies available to it under applicable law.  Lessee, may in its sole discretion, cure such nonperformance and offset against monthly rent payments due Lessor, such provable damages owing Lessee by Lessor.

ARTICLE 19.INDEMNIFICATION.

With regard to the Leased Premises, Lessor agrees to indemnify, defend and save Lessee, its agents, representatives and employees against, and hold Lessee, its agents, representative and employees harmless from any and all demands, claims, causes of action, fines, penalties, damages (including consequential damages), losses, liabilities, judgments, and expenses (including, without limitation, attorneys’ fees and court costs) for personal injury or property damage which may be made against the Lessee during the Lease Term, and which arise out of the negligent or tortious conduct of the Lessor, its servants, employees, agents, assignees, representative, licensees or invitees.  Lessee agrees to indemnify, defend and save Lessor, its agents, representatives and employees against and hold Lessor, its agents, representatives and employees harmless from and all demands, claims, causes of action, fines, penalties, damages (including consequential damages), losses, liabilities, judgments, and expenses (including, without limitation, attorneys’ fees and court costs) for personal injury or property damage which may be made against Lessor during the Lease Term, and which arise out of the negligence or tortious conduct of the Lessee, its servants, employees, agents, assignees, representatives, licensees or invitees.

ARTICLE 20.QUIET ENJOYMENT.

Lessor covenants that the Lessee shall, upon paying the rent and observing the other covenants and conditions contained herein, have peaceful and quiet enjoyment of the Leased Premises during the Lease Term, without hindrance, ejection or molestation by the Lessor, any person or persons claiming under the Lessor, or any other lessee of the Lessor.

ARTICLE 21.RENEWAL OF LEASE.

Lessee shall have the right to extend the Term of the Lease Agreement upon the terms, covenants, and conditions set forth herein, for one (1) additional period of five (5) years (“Extension Period”).  The monthly rent for each year of the Extension Period shall be calculated in accordance with Section 5.2.  The option shall be exercised at the sole discretion of the Lessee in writing, and shall be delivered to Lessor at least four (4) months prior to the expiration of the then current Lease Term.  It is agreed and understood by the Lessee that in the event the option for the Extension Period is exercised, Lessee shall deliver a Guaranty in favor of Lessor in a substantially similar form to the Guaranty attached hereto as Exhibit F executed by Leonard’s Metals, Inc. or such other related entity as agreed by the parties.

ARTICLE 22.OPTION FOR MODULE B

During the first year of the Term of the Lease, Lessee shall have an option to expand the Leased Premises to include Module B of the Building as shown on Exhibit C attached hereto (“Module B”) (it being the understanding of the parties that the new monthly rental payment shall be calculated by multiplying the rental rate set forth in Section 5.1 by the square footage of the Leased Premises taking into account the square footage of Module B).  After the first year of the Lease Term, Lessee shall have a right of first refusal for Module B (it being the intent of the parties that Lessee shall have the right to match any offer for ten (10) days after receipt of written notice from Lessor of a bonafide offer from a party unrelated to Lessor to lease Module B).  Should Lessee decide to exercise its right of first refusal on the additional module, Lessee shall provide Lessor with written notice of such decision within ten (10) days after Lessee’s receipt of notice of the initial offer from Lessor.  Should Lessee decide to exercise its option to lease Module B during the Term hereof, Lessor and Lessee shall mutually agree to either enter into either an amendment to this Lease or a new lease which redefines the Leased Premises to include Module B and sets forth the new monthly rental rate.  Notwithstanding the foregoing, any new lease or amendment to this Lease entered into between the parties pursuant to this Article 22 shall include language which sets forth a term or extends the Term for a period of at least five (5) years commencing on the execution date of the amendment or the new lease, which shall occur at least ninety (90) days after Lessor’s receipt of written notice from Lessee of Lessee’s desire to exercise its option to lease Module B.  It is agreed by the parties that, in the event the parties enter into a new lease pursuant to the terms of this Article 22, Lessee shall cause a guaranty, similar to the Guaranty granted to Lessor pursuant to Exhibit F hereto, be granted to Lessor.

ARTICLE 23.EXPANSION.

If Lessee requires more industrial space in addition to Module B or in the event Lessee does not exercise its option to lease Module B, Lessor agrees to use its best efforts to provide the additional space adjacent to the Leased Premises as depicted on Exhibit H attached hereto and incorporated herein (the “Adjacent Space”).  If the Adjacent Space cannot be delivered, Lessor shall provide another building (owned by Lessor) to provide the total industrial space required by Lessee.  If Lessee agrees to move into another building owned by Lessor, Lessor agrees to (i) reimburse Lessee for all moving expenses incurred by Lessee in connection with the move and (ii) pay for fifty percent (50%) of the tenant improvements to be constructed in the new space.  If Lessee decides to exercise its option to expand into the Adjacent Space or if parties agree on a new building to which Lessee can move its operations, the parties hereto shall either (i) execute an amendment to this Lease which redefines the Leased Premises to include the Adjacent Space or substitute the new building as the Leased Premises and recalculates rent by multiplying the rental rate set forth in Section 5.1 by the new square footage of the Leased Premises or (ii) enter into a new lease agreement under similar terms and conditions as those set forth herein.  Notwithstanding the foregoing, any new lease or amendment to this Lease entered into between the parties pursuant to this Article 23 shall include language which sets forth a term or extends the Term for a period of at least five (5) years commencing on the execution date of the amendment or the new lease or such other date as set forth therein.  It is agreed by the parties that in the event the parties enter into a new lease pursuant to the terms of this Article 23, Lessee shall cause a guaranty, similar to the Guaranty granted to Lessor pursuant to Exhibit F hereto, be granted to Lessor.

ARTICLE 24.NOTICES.

Whenever it shall be necessary or desirable for either of the parties to serve any notice of demand upon the other party pursuant to the provisions of this Agreement, such notice or demand shall be served personally, or by registered or certified mail, return receipt requested, sent to the addresses set forth hereunder, until otherwise directed in writing by the party which wishes to change its address:

Lessor:	INMOBILIARIA LA RUMOROSA, S.A. DE C.V. Av. Eucalipto y Venustiano Carranza 2399 Col. Rivera, Mexicali, B.C. Mexico
Lessee:	IVEMSA S.A. DE C.V. Circuito Internacional Sur # 21 Parque Industrial Nelson, Mexicali, B.C. México

ARTICLE 25.ENTIRE AGREEMENT.

This Agreement and its Exhibits contain all the agreements and conditions between the parties.  Therefore, the parties hereto agree that with the execution of this Agreement, any prior agreements have been duly fulfilled and complied with, except as set forth hereunder.

ARTICLE 26.AMENDMENTS.

This agreement may only be modified by a written agreement signed by the authorized representatives of the Lessor and Lessee.

ARTICLE 27.SEVERABILITY.

If any term or provision of this Lease shall be illegal, invalid or unenforceable under present or future laws effective during the Term of this Lease, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted by law.  It is the intention of the parties hereto that if any provision of this Lease is capable of two constructions, one of which would render the provision void and the other of which would render the provision valid, then the provision shall have the meaning that renders it valid.

ARTICLE 28.RECITALS.

The recitals of this Lease, shall be considered a part of this Agreement and shall be binding on all parties hereto.

ARTICLE 29.LANGUAGE.

This agreement shall only be executed and delivered in English.  Any translations of this Lease into Spanish for ease of reference shall be considered secondary to the executed English version and shall be of no force or effect in the event a dispute arises regarding the terms of this Lease. For all official purposes and in case of litigation only the English version shall be used, and at all times the English version shall control.

ARTICLE 30.GOVERNING LAW, JURISDICTION AND ARBITRATION.

30.1 This Agreement shall be governed by the laws of the Republic of Mexico and the State of Baja California.

30.2 The parties shall in first instance endeavor to resolve any dispute, controversy or claim arising out of, relating to, or in connection with, this Agreement, or the breach, termination or validity thereof (a "Dispute") by amicable negotiation among the parties.  The Guarantor shall be permitted to participate in any such negotiation.  Any party may commence such negotiations by giving notice (the "Dispute Notice") to the other party and the Guarantor that refers to this provision of the Agreement.

30.3 In the event negotiations are not successful within 30 days after the Dispute Notice, the Dispute shall be finally settled by arbitration. The arbitration shall be conducted in accordance with the UNCITRAL Rules in effect at the time of the arbitration except as they may be modified herein or by mutual agreement of the parties. The seat of the arbitration shall be the City of Mexicali and it shall be conducted in English. The arbitration shall be conducted by a sole arbitrator, who shall be selected by agreement of the parties and the Guarantor or, failing such agreement after 5 days' demand, in accordance with the UNCITRAL Rules.

30.4 The Guarantor shall be permitted to participate fully in the arbitration, with its own counsel if it so chooses.  The proceedings shall be confidential.

30.5 The arbitrator shall follow the terms of this Agreement, in preference to principles of equity or custom and practice, in rendering the arbitral decision and award.  The arbitral decision and award shall be in writing and shall be final and binding on the parties. The award may include an award of costs, including reasonable attorney's fees and disbursements. Judgment upon the award may be entered by any court having jurisdiction thereof or having jurisdiction over the parties or their assets.  Enforcement may be sought under the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

ARTICLE 31.REASONABLE CONSENT.

Except as limited elsewhere in this Lease, wherever in this Lease Lessor or Lessee is required to give its consent or approval to any action on the part of the other, such consent or approval shall not be unreasonably withheld or delayed.

ARTICLE 32.WAIVER.

No covenant, term, or condition or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed, and any waiver of the breach of any covenant, term or condition shall not be deemed to be a waiver of any other covenant, term or condition.  Acceptance by Lessor of any performance by Lessee after the time the same shall have become due shall not constitute a waiver by Lessor of the breach or default of any covenant, term, or condition, unless otherwise expressly agreed to by Lessor in writing.

ARTICLE 33.FORCE MAJEURE.

Neither Lessor nor Lessee shall be deemed to have failed or delayed in making any required repairs or replacements or performing any work or other obligation under this Lease, except the payment of rent pursuant to Article 5, if the party whose act is delayed is unable to make or is delayed in making any repair or performing work or such other obligation called for herein (i) by reason of strikes or labor troubles, (ii) by reason of governmental preemption in connection with a national emergency, (iii) by reason of fire, casualty or other acts of God or (iv) by reasons of any other cause whatsoever beyond said party’s reasonable control.  Said party shall in each instance exercise reasonable diligence to effect performance when such delaying condition is no longer present.

ARTICLE 34.SIGNAGE.

Lessee shall not place any exterior identification signs on the Building without the prior written consent of Lessor, which approval shall not be unreasonably withheld, conditioned or delayed.  Lessor reserves the right to place other signage on the property owned by Lessor within which the Leased Premises are located.  Lessor and Lessee agree that Guarantor shall have the right to have its name on (i) all Park directories, if any, (ii) all exterior doors leading into the Leased Premises, (iii) any monument signage now or hereafter located at the entrance to the Building or Park which has tenant names on it, and (iv) on the exterior of the Building in a form and manner mutually agreeable to both Lessor, Lessee, and Guarantor.  Lessee shall pay for the reasonable cost of such signage and the location and specifications for such signage shall be subject to the prior approval of Lessor, which approval shall not be unreasonably withheld, conditioned or delayed.

ARTICLE 35.EXHIBITS.

The following exhibits are attached hereto and become a part of this Lease:

1.	Exhibit A – Authority of Pablo Charvel Orozco
2.	Exhibit B – Master Parcel Legal Description
3.	Exhibit C – Master Parcel Drawing and Depiction of Leased Premises
4.	Exhibit D – Authority of Sergio Taglapietra Nassri
5.	Exhibit E – Rules and Regulations of Park
6.	Exhibit F – Guaranty
7.	Exhibit G - Finish Work
8.	Exhibit H – Adjacent Space

IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be executed and delivered as of the date first written above.

Lessor: INMOBILIARIA LA RUMOROSA, S.A. DE C.V	Lessee: IVEMSA S.A. DE C.V.
/s/ Pablo Charvel Orozco	/s/ Sergio Tagliapietra Nassri
By: Pablo Charvel Orozco	By: Sergio Tagliapietra Nassri
Title: Attorney-in-fact	Title: Attorney-in-fact
Place:Mexicali, B.C.Date: 1/02/2006	Place: Mexicali,B.C. Date:2006
WITNESSES:
/s/ Ricardo Medina	/s/ Rodolfo Andrade
Ricardo Medina	Rodolfo Andrade

EXHIBIT “F”

GUARANTY

WHEREAS, INMOBILIARIA LA RUMOROSA, S.A. DE C.V. (“hereinafter referred to as “COMPANY”) is the owner of certain real property described as a portion of lot 98 (ninety eight) of Colonia Rivera, of the city of Mexicali, Baja California, Mexico (hereinafter referred to as the “REAL PROPERTY”);

WHEREAS, IVEMSA S.A. DE C.V. (hereinafter referred to as “TENANT”), wishes to lease from the COMPANY the REAL PROPERTY (as referred to in the “Lease”) an industrial building built thereon by the COMPANY.

WHEREAS, this Guaranty is given by LEONARD’S METAL, INC., (hereinafter referred to as “GUARANTOR”), to induce COMPANY to enter into a Lease Agreement with TENANT, dated January 7th, 2006, (the “Lease”).

NOW THEREFORE, in consideration of the foregoing, it is agreed:

1.           OBLIGATION OF THE GUARANTOR. GUARANTOR unconditionally guarantees to COMPANY, its successors and assigns, the prompt, full and complete payment and performance to COMPANY of all the conditions, covenants, obligations, liabilities and agreements of the TENANT as set forth in the Lease dated January 7th, 2006 by and between COMPANY and TENANT or any extension thereof or amendment thereto (the Lease and extensions are collectively referred to herein as the “Lease”).  This Guaranty extends to and includes any and all interest due or to become due, together with all attorneys’ fees, cost and expenses of collection incurred by COMPANY in connection with any matter covered by this Guaranty or the Lease.

2.           TERM OF GUARANTY.  The liability of the GUARANTOR shall continue until payment is made and performance given pursuant to every obligation of the TENANT now due or hereafter to become due in accordance with the terms of the Lease, and until payment is made of any loss or damage incurred by COMPANY with respect to any matter covered by this Guaranty or the Lease, except to pay COMPANY’S attorneys’ fees, costs and expenses of collection incurred in proceeding against GUARANTOR hereunder.

This Guaranty shall be irrevocable.  Nothing contained herein shall impose upon GUARANTOR any greater or different liability than is or may be imposed on said TENANT under the Lease.

3.           CONSENT TO COMPANY’S ACTS.  GUARANTOR consents, without affecting GUARANTOR’S liability to COMPANY hereunder, that COMPANY may, without notice to or consent of GUARANTOR, upon such terms as it may deem advisable:

a.           Extend, in whole or in part, by renewal or otherwise, any time of payment or performance on the part of TENANT, provided for in the Lease.

b.           Release, surrender, exchange, modify or extend any period or duration, or any time for performance or payment impair on the part of TENANT, required by the Lease, and

c.           Settle or compromise any claim of COMPANY against TENANT or against any other person, firm or corporation whose obligation is held by COMPANY under the Lease.

GUARANTOR hereby ratifies and affirms any such extension, renewal, release, surrender, exchange, modification, impairment settlement or compromise and all such acts shall be binding upon GUARANTOR who hereby waives all defense, counterclaims or offsets which GUARANTOR might have solely by reason thereof.

4.           WAIVER OF GUARANTOR.  GUARANTOR waives:

a. Notice of acceptance of this Guaranty by COMPANY:

b. Notice of the failure of any person, firm or corporation to pay to COMPANY any indebtedness held by COMPANY as collateral security for any obligation of TENANT under the Lease, unless otherwise provided for in the Lease;

c. In its case, any defects in perfection of the assignment and pledge of the rents by failure to record the Lease or any instrument or assignment and pledge in the respective Public Registry of Property and Commerce under Mexican Law;

Notwithstanding the above, Company shall provide information to GUARANTOR regarding any notice of presentment, notice of nonperformance, notices of dishonor and notices of the existence, creation or incurring of new or additional indebtedness or obligations, demands for payment or performance or protest of any obligation of TENANT to COMPANY under the Lease, unless otherwise provided for in the Lease; allowing GUARANTOR to cure any breach on behalf of TENANT prior to initiation of any action by COMPANY against either TENANT and/or COMPANY.

5.           REPRESENTATIONS BY GUARANTOR.  GUARANTOR represents and warrants that at the time of execution and delivery of this Guaranty nothing exists to impair the effectiveness of the liability of GUARANTOR to COMPANY hereunder, or the immediate taking effect of this Guaranty as sole agreement between the GUARANTOR and COMPANY with respect to guaranteeing all of TENANT’S obligations to COMPANY under the Lease.

GUARANTOR further represents and warrants that GUARANTOR is authorized to execute and deliver this Guaranty and that the person executing this Guaranty is authorized to execute the same for and on behalf of GUARANTOR.

6.           REMEDY OF COMPANY.  In the event of any default on the part of TENANT as defined in the Lease, COMPANY will proceed in the first instance against TENANT, to collect any obligation assumed by TENANT under the Lease, and thereafter GUARANTOR or any other person, firm or corporation but without first resorting to any property at any time held by COMPANY and without first resorting to any property at any time held by COMPANY as security.

7.           MODIFICATION OF AGREEMENT.  The whole of this Guaranty is herein set forth and there is no verbal or other written agreement affecting the terms hereof.  This Guaranty can be modified only by written instrument signed by the GUARANTOR and the COMPANY.

8.           NON-WAIVER BY COMPANY.  The liability of GUARANTOR under this Guaranty shall not be affected by the insolvency of COMPANY or TENANT, at any time or by the acceptance by COMPANY of security, notices, acceptance, drafts or checks or by assignment, foreclosure of the other dispositions thereof by COMPANY presenting or providing for allowance any secured unsecured claim or demand or by COMPANY’S acceptance of any plan or reorganization, settlement, compromise, dividend, payment or distribution, and GUARANTOR shall not be entitled to claim any right in or benefit by reason of any such plan or reorganization, settlement, compromise, dividend, payment or distribution, or in or by reason of any security held by COMPANY, or the proceeds or other disposition thereof, unless and until all of said obligation, liabilities and indebtedness, together with interest, attorney’s fees and costs due to COMPANY under this Guaranty or under the Lease, shall have been paid in full.  Nothing contained in this Agreement shall alter any of the rights or remedies of COMPANY against TENANT.  GUARANTOR authorizes COMPANY, prior without notice or demand and without affecting the liability of GUARANTOR hereunder, from time to time to:

a. Renew, compromise, extend, accelerate, or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof under the Lease, including increase or decrease of any amounts due thereunder or any rate of interest specified therein provided that such renewal, compromise, extension, acceleration or other change is made pursuant to the terms of the Lease;

b. Take and hold security for the payment of this GUARANTY or indebtedness guaranteed and exchanged, enforced, waived, release any such security;

c. Apply such security and direct the order or manner of sale thereof as COMPANY in its discretion may determine; and

d. COMPANY may assign this Guaranty in whole or in part provided that GUARANTOR shall remain liable for their obligations hereunder unless released therefrom by COMPANY or its successors and provided further COMPANY authorizes such assignment and release in writing.

9.           APPLICABLE LAW.  This Guaranty is made in the State of Missouri, USA, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with the laws of such State.  It is hereby expressly understood and agreed by the parties that in the event a dispute should arise as to the performance of the obligations pursuant to this Guaranty, any action relating to this Guaranty shall be instituted and prosecuted in the courts of the County of St. Louis in the State of Missouri, USA, and each party hereby submits to such Jurisdiction and waives the right to change the venue.

10.           MISCELLANEOUS PROVISIONS.  GUARANTOR agrees to pay to COMPANY attorney’s fees and all other costs and expenses which may be incurred by the COMPANY in the collection or efforts to collect the indebtedness owed by TENANT to COMPANY pursuant to the Lease or in the collection or efforts to collect or enforcement of the sums due under this Guaranty, provided that if GUARANTOR is the prevailing party in any action or proceeding to enforce this Guaranty or collection of amounts allegedly due hereunder, COMPANY shall pay GUARANTOR a reasonable attorney’s fee and other costs and expenses which may be incurred by GUARANTOR.  The paragraph heading of this Guaranty are not part of this Guaranty and shall have no effect upon the construction of interpretation of any part hereof and are inserted herein for convenience only.  In the event that any provision hereof or any portion of any provision hereof shall be deemed to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other portion of said provision or any provision herein.  All remedies herein conferred upon COMPANY shall be cumulative and no one exclusive of any other remedy conferred herein or by law or equity.  Time is of the essence in the performance of each and every obligation herein imposed.

GUARANTOR represents and warrants that it has all requisite power and authority to enter into this Guaranty and that neither the execution or delivery of this Guaranty or the consummation hereof nor the performance of the terms hereof will conflict with or result in a breach of the terms, conditions or provision of or constitute a default under or result in the creation of any lien pursuant to any other agreement or instrument under which GUARANTOR is obligated.

11.           ACKNOWLEDGMENT OF ASSIGNMENT.  In the event this Guaranty is assigned to a bank or other lending institution the, GUARANTOR shall furnish to such assignee a letter stating that the GUARANTOR shall acknowledge receipt of notice of any assignment by COMPANY of this Guaranty; that this Guaranty is in full force and effect, that no change to this Guaranty as originally executed have been made; that the GUARANTOR will not enter into any modification of this Guaranty without first obtaining prior written approval thereof from said assignee; that said assignee may rely solely upon the Guaranty with respect to the assignee’s right to receive the rents and performance of TENANT’S other obligations in accordance with the terms of the Lease; and that all payments made thereafter shall be made to the assignee at such times not in conflict with those permissible under the Lease.

12.           NOTICE OF DEFAULT.  Notwithstanding any provision to the contrary herein expressed or implied, no claim of default on the part of TENANT or on part of GUARANTOR shall be made hereunder unless and until notice of such default has been given to TENANT as provided in the Lease and copy thereof mailed to GUARANTOR by first class certified mail, postage prepaid at the following address:

Leonard’s Metal, Inc.

c/o LMI Aerospace, Inc.

2600 Mueller Road

St. Charles, MO 63301

Attn:  Mr. Michael Biffignani

13.           SUCCESSOR BOUND.  This Guaranty is binding jointly and severally upon GUARANTOR and its legal representatives and successors and shall inure to the benefit of COMPANY, its legal representatives, successor and assignees.

14.           TENANT ACKNOWLEDGMENT.  In connection with Tenant’s performance of its obligations under the Lease, Tenant acknowledges and agrees to (i) undertake all acts or omissions as may be directed by Guarantor, in Guarantor’s sole discretion, so long as such acts or omissions do not conflict with applicable laws, rules or regulations; (ii) obtain the written consent of Guarantor prior to exercising any option for additional space or right of renewal set forth in the Lease; (iii) indemnify and hold Guarantor harmless for all claims, demands, losses, liabilities, costs, expenses, obligations and damages which arise or result from or relate to Tenant’s negligence or willful misconduct and/or Tenant’s breach of the Lease.

IN WITNESS WHEREOF, the parties have signed this Agreement on January 7th, 2006.

GUARANTOR
LEONARD’S METAL, INC.
By:		/s/ Mike Biffignani
Name:		Mike Biffignani
Title:		CIO
COMPANY
INMOBILIARIA LA RUMOROSA, S.A.DEC.V.
By:	/s/Paflo Charvel
	PAFLO CHARVEL
Its:	Legal Representative

EX-10.3

Exhibit 10.3

LEASE

BY AND BETWEEN

ACQUIPORT DFWIP, INC.,

A DELAWARE CORPORATION,

AS LANDLORD

AND

PRECISE MACHINE PARTNERS, L.L.P.,

A TEXAS LIMITED LIABILITY PARTNERSHIP,

AS TENANT

MULTI-TENANT INDUSTRIAL NET LEASE

REFERENCE PAGES

BUILDING:			Trinity Boulevard
LANDLORD:			Acquiport DFWIP, Inc., a Delaware corporation
LANDLORD’S ADDRESS:			c/o RREEF Management Company, 1406 Halsey Way, Suite 110, Carrollton, TX 75007
WIRE INSTRUCTIONS AND/OR ADDRESS FOR RENT PAYMENT:			Acquiport DFWIP, Inc., 75 Remittance Drive, Suite 1125, Chicago, IL 60675-1125
LEASE REFERENCE DATE:			May 19, 2008
TENANT:			Precise Machine Partners, L.L.P., a Texas limited liability partnership
TENANT’S NOTICE ADDRESS:
	(a)	As of beginning of Term:	14813 Trinity Boulevard, Fort Worth, TX 76155
	(b)	Prior to beginning of Term (if different):	2215 River Hill Road, Irving, TX 75061
PREMISES ADDRESS:			14813 Trinity Boulevard, Fort Worth, TX 76155
PREMISES RENTABLE AREA:			Approximately 21,032 sq. ft. (for outline of Premises see Exhibit A)
USE:			General office and the storage, distribution, fabrication, machining, finishing, and assembly of aircraft components (some of which may be sold for non-aircraft use)
SCHEDULED COMMENCEMENT DATE:			July 1, 2008
TERM OF LEASE:			Approximately five (5) years, two (2) months and zero (0) days beginning on the Commencement Date and ending on the Termination Date. The period from the Commencement Date to the last day of the same month is the “Commencement Month.”
TERMINATION DATE:			The last day of the sixty-second (62nd) full calendar month after (if the Commencement Month is not a full calendar month), or from and including (if the Commencement Month is a full calendar month), the Commencement Month

ANNUAL RENT and MONTHLY INSTALLMENT

OF RENT (Article 3):

Period		Rentable Square Footage	Annual Rent Per Square Foot	Annual Rent	Monthly Installment of Rent
from	through
7/1/08	8/31/08	21,032	$-0-	$-0-	$-0-
9/1/08	8/31/11	21,032	$4.50	$94,644.00	$7,887.00
9/1/11	8/31/13	21,032	$4.80	$100,953.60	$8,412.80

INITIAL ESTIMATED MONTHLY INSTALLMENT OF RENT ADJUSTMENTS (Article 4):	$2,681.58
TENANT'S PROPORTIONATE SHARE:	23.2%
SECURITY DEPOSIT:	None
ASSIGNMENT/SUBLETTING FEE:	$1,000.00
REAL ESTATE BROKER DUE COMMISSION:	CB Richard Ellis and RREEF Management Company
TENANT'S SIC CODE:	3728
AMORTIZATION RATE:	Ten Percent (10%) per annum

The Reference Pages information is incorporated into and made a part of the Lease. In the event of any conflict between any Reference Pages information and the Lease, the Lease shall control. This Lease includes Exhibits A through F, all of which are made a part of this Lease.

LANDLORD: ACQUIPORT DFWIP, INC., a Delaware corporation		TENANT: PRECISE MACHINE PARTNERS, L.L.P., a Texas limited liability partnership
By:	_____________________________________	By:	_____________________________________
Name:	Anthony James	Name:	_____________________________________
Title:	Vice President	Title:	_____________________________________
Dated:	________________________________, 2008	Dated:	________________________________, 2008

TABLE OF CONTENTS

           
60;    Page

1.	USE AND RESTRICTIONS ON USE	1
2.	TERM	4
3.	RENT	5
4.	RENT ADJUSTMENTS	5
5.	INTENTIONALLY DELETED	9
6.	ALTERATIONS	9
7.	REPAIR	9
8.	LIENS	10
9.	ASSIGNMENT AND SUBLETTING	11
10.	INDEMNIFICATION	13
11.	INSURANCE	13
12.	WAIVER OF SUBROGATION	14
13.	SERVICES AND UTILITIES	14
14.	HOLDING OVER	14
15.	SUBORDINATION	15
16.	RULES AND REGULATIONS	15
17.	REENTRY BY LANDLORD	15
18.	DEFAULT	15
19.	REMEDIES	16
20.	TENANT'S BANKRUPTCY OR INSOLVENCY	19
21.	QUIET ENJOYMENT	20
22.	CASUALTY	20
23.	EMINENT DOMAIN	21
24.	SALE BY LANDLORD	22

25.	ESTOPPEL CERTIFICATES	:22
26.	SURRENDER OF PREMISES	22
27.	NOTICES	23
28.	TAXES PAYABLE BY TENANT	23
29.	INTENTIONALLY DELETED	23
30.	DEFINED TERMS AND HEADINGS	23
31.	TENANT'S AND LANDLORD'S AUTHORITY	24
32.	FINANCIAL STATEMENTS AND CREDIT REPORTS	24
33.	COMMISSIONS	24
34.	TIME AND APPLICABLE LAW	25
35.	SUCCESSORS AND ASSIGNS	25
36.	ENTIRE AGREEMENT	25
37.	EXAMINATION NOT OPTION	25
38.	RECORDATION	25
39.	CONDITION TO EFFECTIVENESS	25
40.	RENEWAL OPTION	25
41.	EXTERIOR SIGN	26
42.	LIMITATION OF LANDLORD'S LIABILITY	26

EXHIBIT A--FLOOR PLAN DEPICTING THE PREMISES

EXHIBIT A-1--SITE PLAN

EXHIBIT B -- INITIAL ALTERATIONS

EXHIBIT C -- COMMENCEMENT DATE MEMORANDUM

EXHIBIT D -- RULES AND REGULATIONS

EXHIBIT E -- HAZARDOUS MATERIALS SCHEDULE

EXHIBIT F -- LOCATION OF ADDITIONAL PARKING SPACES

MULTI-TENANT INDUSTRIAL NET LEASE

REFERENCE PAGES

BUILDING:			Trinity Boulevard
LANDLORD:			Acquiport DFWIP, Inc., a Delaware corporation
LANDLORD’S ADDRESS:			c/o RREEF Management Company, 1406 Halsey Way, Suite 110, Carrollton, TX 75007
WIRE INSTRUCTIONS AND/OR ADDRESS FOR RENT PAYMENT:			Acquiport DFWIP, Inc., 75 Remittance Drive, Suite 1125, Chicago, IL 60675-1125
LEASE REFERENCE DATE:			May 19, 2008
TENANT:			Precise Machine Partners, L.L.P., a Texas limited liability partnership
TENANT’S NOTICE ADDRESS:
	(a)	As of beginning of Term:	14813 Trinity Boulevard, Fort Worth, TX 76155
	(b)	Prior to beginning of Term (if different):	2215 River Hill Road, Irving, TX 75061
PREMISES ADDRESS:			14813 Trinity Boulevard, Fort Worth, TX 76155
PREMISES RENTABLE AREA:			Approximately 21,032 sq. ft. (for outline of Premises see Exhibit A)
USE:			General office and the storage, distribution, fabrication, machining, finishing, and assembly of aircraft components (some of which may be sold for non-aircraft use)
SCHEDULED COMMENCEMENT DATE:			July 1, 2008
TERM OF LEASE:			Approximately five (5) years, two (2) months and zero (0) days beginning on the Commencement Date and ending on the Termination Date. The period from the Commencement Date to the last day of the same month is the “Commencement Month.”
TERMINATION DATE:			The last day of the sixty-second (62nd) full calendar month after (if the Commencement Month is not a full calendar month), or from and including (if the Commencement Month is a full calendar month), the Commencement Month

ANNUAL RENT and MONTHLY INSTALLMENT

OF RENT (Article 3):

Period		Rentable Square Footage	Annual Rent Per Square Foot	Annual Rent	Monthly Installment of Rent
from	through
7/1/08	8/31/08	21,032	$-0-	$-0-	$-0-
9/1/08	8/31/11	21,032	$4.50	$94,644.00	$7,887.00
9/1/11	8/31/13	21,032	$4.80	$100,953.60	$8,412.80

INITIAL ESTIMATED MONTHLY INSTALLMENT OF RENT ADJUSTMENTS (Article 4):	$2,681.58
TENANT'S PROPORTIONATE SHARE:	23.2%
SECURITY DEPOSIT:	None
ASSIGNMENT/SUBLETTING FEE:	$1,000.00
REAL ESTATE BROKER DUE COMMISSION:	CB Richard Ellis and RREEF Management Company
TENANT'S SIC CODE:	3728
AMORTIZATION RATE:	Ten Percent (10%) per annum

The Reference Pages information is incorporated into and made a part of the Lease. In the event of any conflict between any Reference Pages information and the Lease, the Lease shall control. This Lease includes Exhibits A through F, all of which are made a part of this Lease.

LANDLORD: ACQUIPORT DFWIP, INC., a Delaware corporation		TENANT: PRECISE MACHINE PARTNERS, L.L.P., a Texas limited liability partnership
By:	_____________________________________	By:	_____________________________________
Name:	Anthony James	Name:	_____________________________________
Title:	Vice President	Title:	_____________________________________
Dated:	________________________________, 2008	Dated:	________________________________, 2008

LEASE

By this Lease Landlord leases to Tenant and Tenant leases from Landlord the Premises in the Building as set forth and described on the Reference Pages. The Premises are depicted on the floor plan attached hereto as Exhibit A. and the Building is depicted on the site plan attached hereto as Exhibit A-1. The Reference Pages, including all terms defined thereon, are incorporated as part of this Lease.

1.           USE AND RESTRICTIONS ON USE.

1.1           The Premises are to be used solely for the purposes set forth on the Reference Pages. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or unreasonably annoy or disturb them, or allow the Premises to be used for any improper, immoral, unlawful, or objectionable purpose, or commit any waste. Tenant shall not do, permit or suffer in, on, or about the Premises the sale of any alcoholic liquor without the written consent of Landlord first obtained. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Premises and its occupancy and shall promptly comply with all governmental orders and directions for the correction, prevention and abatement of any violations in the Building or appurtenant land, caused or permitted by, or resulting from the specific use by, Tenant, or in or upon, or in connection with, the Premises, all at Tenant's sole expense. Landlord shall cause the parking and sidewalk areas which comprise a portion of the Building to comply with all governmental laws, ordinances, and regulations during the Term of this Lease. Tenant shall not do or permit anything to be done on or about the Premises or bring or keep anything into the Premises which will in any way increase the rate of, invalidate or prevent the procuring of any insurance protecting against loss or damage to the Building or any of its contents by fire or other casualty or against liability for damage to property or injury to persons in or about the Building or any part thereof.

1.2           (a) Tenant agrees that Tenant and its agents, employees, contractors, licensees, and invitees (collectively, the "Tenant Entities") shall not handle, use, manufacture, store or dispose of any flammables, explosives, radioactive materials, hazardous wastes or materials, toxic wastes or materials, or other similar substances, petroleum products or derivatives (collectively "Hazardous Materials") on, under, or about the Premises, without Landlord's prior written consent (which consent shall not be unreasonably withheld as long as Tenant demonstrates and documents to Landlord's reasonable satisfaction (i) that such Hazardous Materials (A) are necessary or useful to Tenant's business; and (B) will be used, kept, and stored in compliance with all applicable laws relating to any Hazardous Materials so brought or used or kept in or about the Premises; and (ii) that Tenant will give all required notices concerning the presence in or on the Premises or the release of such Hazardous Materials from the Premises). Tenant may handle, store, use or dispose of products containing small quantities of Hazardous Materials, which products are of a type customarily found in offices and households (such as aerosol cans containing insecticides, toner for copies, paints, paint remover, and the like), provided that Tenant shall handle, store, use and dispose of any such Hazardous Materials in a safe and lawful manner and shall not allow such Hazardous Materials to contaminate the Premises or the environment.

(b)           Tenant further agrees that Tenant will not permit any substance to come into contact with groundwater under the Premises. Any such substance coming into contact with groundwater shall, regardless of its inherent hazardous characteristics, be considered a Hazardous Material for purposes of this Lease.

(c)           (i) Notwithstanding the provisions of Paragraph (a), Tenant may handle, store, and use Hazardous Materials, limited to the types, amounts, and use identified in the Hazardous Materials Schedule attached as Exhibit E hereto, so long as such products do not contain hydrocarbons or chlorinated solvents, and so long as such Hazardous Materials are handled, stored, and used on the following conditions: (A) prior to the handling, storage, or use of any of such Hazardous Materials, Tenant shall provide to Landlord a Spill Prevention, Control and Countermeasures Plan, as defined under applicable federal law, which plan is subject to Landlord's prior written approval; and (B) all Hazardous Materials shall be stored, used, and handled within secondary containment devices approved by Landlord, and Tenant shall, at Tenant's sole cost and expense, seal the concrete flooring in any area in which such Hazardous Materials are stored, used, or handled, using a sealant approved by Landlord. If no Hazardous Materials Schedule is attached to this Lease, then this Paragraph (c) shall be of no force and effect. Tenant hereby certifies to Landlord that the information provided by Tenant pursuant to this Paragraph (c) is true, correct, and complete. Tenant covenants to comply with the use restrictions shown on the attached Hazardous Materials Schedule. Tenant's business and operations, and more especially its handling, storage, use and disposal of Hazardous Materials shall at all times comply with all applicable laws pertaining to Hazardous Materials. Tenant shall secure and abide by all permits necessary for Tenant's operations on the Premises. Tenant shall give or post all notices required by all applicable laws pertaining to Hazardous Materials. If Tenant shall at any time fail to comply with this Paragraph (c), Tenant shall immediately notify Landlord in writing of such noncompliance.

(ii) Tenant shall provide Landlord with copies of any Material Safety Data Sheets (as required by the Occupational Safety and Health Act) relating to any Hazardous Materials to be used, kept, or stored at or on the Premises, at least 30 days prior to the first use, placement, or storage of such Hazardous Material on the Premises. Landlord shall have 10 days following delivery of such Material Safety Data Sheets to approve or forbid, in its sole discretion subject to the limitation contained in Paragraph (a) above, such use, placement, or storage of a Hazardous Material on the Premises.

(iii) Tenant shall not store hazardous wastes on the premises for more than 90 days; "hazardous waste" shall have the meaning set forth in the Resource Conservation and Recovery Act of 1976, as amended. Tenant shall not install any underground or above ground storage tanks on the Premises. Tenant shall not dispose of any Hazardous Material or solid waste on the Premises. In performing any alterations of the Premises permitted by this Lease, Tenant shall not install any Hazardous Material in the Premises without the specific prior written consent of Landlord.

(iv) Any increase in the premiums for necessary insurance on the Building which arises from Tenant's use and/or storage of Hazardous Materials shall be solely at Tenant's expense. Landlord shall provide Tenant with written notice of any proposed increase in Landlord's insurance premiums, including applicable documentation from the insurer relating to such increase in premiums, that Landlord claims are related to Tenant's use and/or storage of Hazardous Materials at the Premises. Tenant shall procure and maintain at its sole expense such additional insurance as may be necessary to comply with any requirement of any Federal, State or local governmental agency with jurisdiction.

(d)           If Landlord, in its sole discretion, believes that the Premises or the environment have become contaminated with Hazardous Materials or similar materials that must be removed under applicable environmental laws, Landlord, in addition to its other rights under this Lease, may enter upon the Premises, after providing Tenant with written notice, and obtain samples from the Premises, including without limitation the soil and groundwater under the Premises, for the purposes of analyzing the same to determine whether and to what extent the Premises or the environment have become so contaminated. Tenant may not perform any sampling, testing, or drilling to locate any Hazardous Materials on the Premises without Landlord's prior written consent; provided, however, Tenant shall have the right to take confirmatory samples of soil and groundwater tested by Landlord, and Landlord will cooperate with Tenant in coordinating the sampling schedules of the environmental consultants involved in such sampling. Tenant shall reimburse Landlord for the costs of any inspection, sampling and analysis that discloses contamination for which Tenant is liable under the terms of this Section 1.2.

(e)           Without limiting the above, Tenant shall reimburse, defend, indemnify and hold each and all of the Landlord Entities (as hereinafter defined) harmless from and against any and all claims, losses, liabilities, damages, costs and expenses, including without limitation, loss of rental income, loss due to business interruption, and reasonable attorneys' fees and costs, arising out of and directly related to the use, manufacture, storage, or disposal of Hazardous Materials by Tenant or the Tenant Entities on, under or about the Premises including, without limitation, the costs of any required or necessary investigation, repair, cleanup or detoxification and the preparation of any closure or other required plans in connection herewith, whether voluntary or compelled by governmental authority. The indemnity obligations of Tenant under this clause shall survive any termination of this Lease. At Landlord's option, Tenant shall perform any required or necessary investigation, repair, cleanup, or detoxification of the Premises. In such case, Landlord shall have the right, in its sole discretion, to approve all plans, consultants, and cleanup standards, such approval not to be unreasonably withheld by Landlord. Tenant shall provide Landlord on a timely basis with (i) copies of all documents, reports, and communications with governmental authorities relating to Tenant's obligations under this Section 1.2, and (ii) notice and an opportunity to attend all meetings with regulatory authorities. Tenant shall comply with all notice requirements and Landlord and Tenant agree to cooperate with governmental authorities seeking access to the Premises for purposes of sampling or inspection. No disturbance of Tenant's use of the Premises resulting from activities conducted pursuant to this Paragraph (e) shall constitute an actual or constructive eviction of Tenant from the Premises. In the event that such cleanup extends beyond the termination of this Lease, Tenant's obligation to pay rent (including additional rent and percentage rent, if any) shall continue until such cleanup is completed and any certificate of clearance or similar document has been delivered to Landlord; provided, however, that Tenant shall not be obligated to pay rent for any period of cleanup delay if such delay was caused solely by Landlord ("Landlord Delay"). Rent during such holdover period shall be at market rent; if the parties are unable to agree upon the amount of such market rent, then Landlord shall have the option of (A) increasing the rent for the period of such holdover based upon the increase in the cost-of-living from the third month preceding the commencement date to the third month preceding the start of the holdover period, using such indices and assumptions and calculations as Landlord in its sole reasonable judgement shall determine are necessary; or (B) having Landlord and Tenant each appoint a qualified MM appraiser doing business in the area; in turn, these two independent MAI appraisers shall appoint a third MAI appraiser and the majority shall decide upon the fair market rental for the Premises as of the expiration of the then current term. Landlord and Tenant shall equally share in the expense of this appraisal except that in the event the rent is found to be within fifteen percent of the original rate quoted by Landlord, then Tenant shall bear the full cost of all the appraisal process. In no event shall the rent be subject to determination or modification by any person, entity, court, or authority other than as set forth expressly herein, and in no event shall the rent for any holdover period be less than the rent due in the preceding period.

(f)           Notwithstanding anything to the contrary contained herein, Tenant shall have no liability to Landlord for (i) any Hazardous Materials which are located at the Premises prior to Tenant taking possession of the Premises and have not been placed at the Premises by Tenant, its agents, employees or contractors, or (ii) any Hazardous Materials which are placed or disposed of in or about the Premises by Landlord, its employees, agents, or contractors.

(g)           It shall not be unreasonable for Landlord to withhold its consent to any proposed assignment or sublease if (i) the proposed assignee's or sublessee's anticipated use of the Premises involves the generation, storage, use, treatment or disposal of Hazardous Materials; (ii) the proposed assignee or sublessee has been required by any prior landlord, lender, or governmental authority to take remedial action in connection with Hazardous Materials contaminating a property if the contamination resulted from such assignee's or sublessee's actions or use of the property in question; or (iii) the proposed assignee or sublessee is subject to an enforcement order issued by any governmental authority with jurisdiction in connection with the use, disposal, or storage of Hazardous Materials.

(h)           Tenant's insurance, if any, insuring against claims of the type dealt with in this Section 1.2 shall be considered primary coverage for claims against the Building and the land on which the Building is located arising out of or under this Section 1.2.

(i)           In the event of (i) any transfer of Tenant's interest under this Lease; or (ii) the termination of this Lease, by lapse of time or otherwise, Tenant shall be responsible for compliance with any and all applicable federal, state or local laws concerning (A) the physical condition of the Premises, Building, or land on which the Building is located, to the extent that Tenant's operations have impacted the Premises, Building, or land on which the Building is located, resulting in violation of applicable federal, state or local laws, or (B) the presence of Hazardous Materials in or on the Premises, Building, or land on which the Building is located (for example, the New Jersey Environmental Cleanup Responsibility Act, the Illinois Responsible Property Transfer Act, or similar applicable state laws), including but not limited to any reporting or filing requirements imposed by such laws. Tenant's duty to pay rent shall continue until Tenant's obligations imposed by applicable environmental laws and regulations are satisfied in full and any certificate of clearance or similar document has been issued by the governmental authority with jurisdiction, excluding any period of Landlord Delay.

(j)           All consents given by Landlord pursuant to this Section 1.2 shall be in writing. If such consents are not given, then such consents will be deemed withheld.

1.3           Tenant and the Tenant Entities will be entitled to the non-exclusive use of the common areas of the Building as they exist from time to time during the Term, including the parking facilities, subject to Landlord's rules and regulations regarding such use. However, in no event will Tenant or the Tenant Entities park more vehicles in the parking facilities than Tenant's Proportionate Share of the total parking spaces available for common use. Tenant's Proportionate Share of the total parking spaces currently available for common use at the Building is thirty-two (32) parking spaces. In addition, Landlord shall allow Tenant to stripe, at Tenant's sole cost and expense, a portion of the loading area adjacent to the Premises, in the location shown on Exhibit F hereto, to provide approximately seventeen (17) additional automobile spaces for Tenant's exclusive use; Tenant shall also be entitled, upon Landlord's prior written approval of Tenant's plans and specifications therefor, to mark or otherwise designate such additional spaces for Tenant's exclusive use. The foregoing shall not be deemed to provide Tenant with an exclusive right to any parking spaces (except the additional striped spaces in Tenant's loading area) or any guaranty of the availability of any particular parking spaces or any specific number of parking spaces.

2.           TERM.

2.1           The Term of this Lease shall begin on the date ("Commencement Date") which shall be the later of the Scheduled Commencement Date as shown on the Reference Pages and the date that Landlord shall tender possession of the Premises to Tenant, and shall terminate on the date as shown on the Reference Pages ("Termination Date"), unless sooner terminated by the provisions of this Lease. Landlord shall tender possession of the Premises with all the work, if any, to be performed by Landlord pursuant to Exhibit B to this Lease substantially completed. The term "substantially completed", as used herein, shall mean that (a) the Leasehold Improvements have been completed except for minor punch list items which can be fully completed without material interference with Tenant's use of the Premises, and (b) such work has been sufficiently completed for the applicable governmental authority to issue a certificate of occupancy to Tenant for the Premises. Tenant shall deliver a punch list of items not completed within thirty (30) days after Landlord tenders possession of the Premises and Landlord agrees to proceed with due diligence to perform its obligations regarding such items. Tenant shall, at Landlord's request, execute and deliver a memorandum agreement provided by Landlord in the form of Exhibit C attached hereto, setting forth the actual Commencement Date, Termination Date and, if necessary, a revised rent schedule. Should Tenant fail to do so within thirty (30) days after Landlord's request, the information set forth in such memorandum provided by Landlord shall be conclusively presumed to be agreed and correct.

2.2           Tenant agrees that in the event of the inability of Landlord to deliver possession of the Premises on the Scheduled Commencement Date for any reason, Landlord shall not be liable for any damage resulting from such inability, but Tenant shall not be liable for any rent until the time when Landlord can, after notice to Tenant, deliver possession of the Premises to Tenant. No such failure to give possession on the Scheduled Commencement Date shall affect the other obligations of Tenant under this Lease, except that if Landlord is unable to deliver possession of the Premises within one hundred twenty (120) days after the Scheduled Commencement Date (other than as a result of strikes, shortages of materials, holdover tenancies or similar matters beyond the reasonable control of Landlord and Tenant is notified by Landlord in writing as to such delay), Tenant shall have the option to terminate this Lease unless said delay is as a result of: (a) Tenant's failure to agree to plans and specifications and/or construction cost estimates or bids; (b) Tenant's request for materials, finishes or installations other than Landlord's standard except those, if any, that Landlord shall have expressly agreed to furnish without extension of time agreed by Landlord; (c) Tenant's change in any plans or specifications; or, (d) performance or completion by a party employed by Tenant (each of the foregoing, a "Tenant Delay"). If any delay is the result of a Tenant Delay, the Commencement Date and the payment of rent under this Lease shall be accelerated by the number of days of such Tenant Delay.

2.3           In the event Landlord permits Tenant, or any agent, employee or contractor of Tenant, to enter, use or occupy the Premises prior to the Commencement Date, such entry, use or occupancy shall be subject to all the provisions of this Lease other than the payment of rent, including, without limitation, Tenant's compliance with the insurance requirements of Article 11. Said early possession shall not advance the Termination Date.

3.           RENT.

3.1           Tenant agrees to pay to Landlord the Annual Rent in effect from time to time by paying the Monthly Installment of Rent then in effect on or before the first day of each full calendar month during the Term, except that rent for the first full month for which rent is payable hereunder shall be paid upon the execution of this Lease. The Monthly Installment of Rent in effect at any time shall be one-twelfth (1/12) of the Annual Rent in effect at such time. Rent for any period during the Term which is less than a full month shall be a prorated portion of the Monthly Installment of Rent based upon the number of days in such month. Said rent shall be paid to Landlord, without deduction or offset and without notice or demand, at the Rent Payment Address, as set forth on the Reference Pages, or to such other person or at such other place as Landlord may from time to time designate in writing. If an Event of Default occurs, Landlord may require by notice to Tenant that all subsequent rent payments be made by an automatic payment from Tenant's bank account to Landlord's account, without cost to Landlord. Tenant must implement such automatic payment system prior to the next scheduled rent payment or within ten (10) days after Landlord's notice, whichever is later. Unless specified in this Lease to the contrary, all amounts and sums payable by Tenant to Landlord pursuant to this Lease shall be deemed additional rent.

3.2           Tenant recognizes that late payment of any rent or other sum due under this Lease will result in administrative expense to Landlord, the extent of which additional expense is extremely difficult and economically impractical to ascertain. Tenant therefore agrees that if rent or any other sum is not paid within five (5) days after such rent or other sum becomes due and payable pursuant to this Lease, a late charge shall be imposed in an amount equal to the greater of: (a) Fifty Dollars ($50.00), or (b) six percent (6%) of the unpaid rent or other payment. The amount of the late charge to be paid by Tenant shall be reassessed and added to Tenant's obligation for each successive month until paid. The provisions of this Section 3.2 in no way relieve Tenant of the obligation to pay rent or other payments on or before the date on which they are due, nor do the terms of this Section 3.2 in any way affect Landlord's remedies pursuant to Article 19 of this Lease in the event said rent or other payment is unpaid after date due.

4.           RENT ADJUSTMENTS.

4.1           For the purpose of this Article 4, the following terms are defined as follows:

4.1.1           Lease Year: Each fiscal year (as determined by Landlord from time to time) falling partly or wholly within the Term.

4.1.2           Expenses: All costs of operation, maintenance, repair, replacement and management of the Building (including the amount of any credits which Landlord may grant to particular tenants of the Building in lieu of providing any standard services or paying any standard costs described in this Section 4.1.2 for similar tenants), as determined in accordance with generally accepted accounting principles, including the following costs by way of illustration, but not limitation: water and sewer charges; insurance charges of or relating to all insurance policies and endorsements deemed by Landlord to be reasonably necessary or desirable and relating in any manner to the protection, preservation, or operation of the Building or any part thereof; utility costs, including, but not limited to, the cost of heat, light, power, steam, gas; waste disposal; the cost of janitorial services; the cost of security and alarm services (including any central station signaling system); costs of cleaning, repairing, replacing and maintaining the common areas, including parking and landscaping, window cleaning costs; labor costs; costs and expenses of managing the Building including management and/or administrative fees (which management fees shall not, for any calendar year during the initial Term of this Lease, exceed five percent (5%) of the gross receipts from the Building in such year); air conditioning maintenance costs; material costs; equipment costs including the cost of maintenance, repair and service agreements and rental and leasing costs; purchase costs of equipment; current rental and leasing costs of items which would be capital items if purchased; tool costs; licenses, permits and inspection fees; wages and salaries; employee benefits and payroll taxes; accounting and legal fees; any sales, use or service taxes incurred in connection therewith. In addition, Landlord shall be entitled to recover, as additional rent (which, along with any other capital expenditures constituting Expenses, Landlord may either include in Expenses or cause to be billed to Tenant along with Expenses and Taxes but as a separate item), Tenant's Proportionate Share of: (i) an allocable portion of the cost of capital improvement items which are reasonably calculated to reduce operating expenses; (ii) the cost of fire sprinklers and suppression systems and other life safety systems; and (iii) other capital expenses which are required under any governmental laws, regulations or ordinances which were not applicable to the Building at the time it was constructed; but the costs described in this sentence shall be amortized over the reasonable life of such expenditures in accordance with such reasonable life and amortization schedules as shall be determined by Landlord in accordance with generally accepted accounting principles, with interest on the unamortized amount at one percent (1%) in excess of the Wall Street Journal prime lending rate announced from time to time. Expenses shall not include the following:

(a)           original Building construction costs, including the cost of correcting defects in such construction, except that conditions resulting from ordinary wear and tear, use, or vandalism shall not be deemed defects for purposes of this exclusion;

(b)           marketing or advertising costs to solicit new tenants;

(c)           wages, salaries, or other compensation payable to any employee of Landlord above the grade of building manager or property manager;

(d)           repair, restoration, or maintenance costs occasioned by fire, windstorm, or other casualty or the exercise of the right of eminent domain, which are reimbursed by third parties (including insurers), exclusive of reasonable deductibles which shall be included in Expenses;

(e)           expenses in connection with services or benefits of a type that are not offered to Tenant, but which are offered to another tenant or occupant;

(f)           Landlord's general administrative overhead expenses and partnership or corporate accounting fees;

(g)           costs which are reimbursed by tenants of the Building (other than as part of their proportionate share of Expenses) and costs which are reimbursed by other third parties (including costs which are covered by a warranty, guarantee, or service contract);

(h)           payments of interest on long-term debt or amortization payments on any mortgage executed by Landlord covering the Building or rental payments under any ground or underlying leases (except to the extent the same may be made to pay or reimburse, or may be measured by, ad valorem taxes or insurance premiums);

(i)           costs of selling, syndicating, financing, mortgaging, or hypothecating any of Landlord's interest in the Building;

(j)           any interest or penalties due to late payment by Landlord of any Expenses;

(k)           depreciation or amortization of the Building or equipment in the Building except as provided herein,

(l)           except for the removal of reasonable quantities of Hazardous Materials used in the ordinary course of operation of a building, costs and disbursements relating to or arising from the handling, removal, treatment, or disposal of asbestos or other Hazardous Materials (as hereinafter defined) in the Building;

(m)           costs incurred in renovating or improving vacant space for tenants or prospective tenants of the Building;

(n)           any fines or penalties incurred due to violations by Landlord of any governmental rule or authority;

(o)           leasing commissions, attorneys' fees, costs, disbursements and other expenses incurred in connection with negotiations or disputes with tenants or leasing space to tenants or prospective tenants of the Building; or

(p)           the cost of any replacement of the entire roof and any maintenance, repair, or replacement of the structural portions of the foundation and exterior walls of the Building.

4.1.3           Taxes: Real estate taxes and any other taxes, charges and assessments which are levied with respect to the Building or the land appurtenant to the Building, or with respect to any improvements, fixtures and equipment or other property of Landlord, real or personal, located in the Building and used in connection with the operation of the Building and said land, any payments to any ground lessor in reimbursement of tax payments made by such lessor; all fees, expenses and costs incurred by Landlord in investigating, protesting, contesting or in any way seeking to reduce or avoid increase in any assessments, levies or the tax rate pertaining to any Taxes to be paid by Landlord in any Lease Year; and all taxes of whatsoever nature that are imposed wholly or in part in substitution for, or in lieu of, any of the taxes, charges, and assessments included in this definition of Taxes. Taxes shall not include any estate or inheritance tax, federal net income tax or sales or use tax, or tax imposed upon any transfer by Landlord of its interest in this Lease or the Building or any taxes to be paid by Tenant pursuant to Article 28. If, due to a change in a method of taxation, any tax shall be levied against Landlord wholly or in part in substitution for, or in lieu of, a tax otherwise recoverable under this Section 4.1.3, such other tax shall be deemed to be a Tax for the purposes of this Section 4.1.3 to the extent not reimbursable by Tenant to Landlord under Article 28 of this Lease. Landlord shall retain the sole right to participate in any proceedings to establish or contest the amount of Taxes to be paid in connection with the Building; provided, however, Landlord shall, in good faith, take all commercially reasonable action to minimize Taxes.

4.2           Tenant shall pay as additional rent for each Lease Year Tenant's Proportionate Share of Expenses and Taxes incurred for such Lease Year. Tenant shall remain obligated to pay Tenant's Proportionate Share of Expenses and Taxes for the two-month period during which no Monthly Installments of Rent are payable.

4.3           The annual determination of Expenses shall be made by Landlord and shall be binding upon Landlord and Tenant, subject to the provisions of this Section 4.3. During the Term, Tenant may review, at Tenant's sole cost and expense, the books and records supporting such determination in an office of Landlord, or Landlord's agent, during normal business hours, upon giving Landlord five (5) days advance written notice within sixty (60) days after receipt of such determination, but in no event more often than once in any one (1) year period, subject to execution of a confidentiality agreement acceptable to Landlord, and provided that if Tenant utilizes an independent accountant to perform such review it shall be one of regional standing which is reasonably acceptable to Landlord, is not compensated on a contingency basis and is also subject to such confidentiality agreement. If Tenant fails to object to Landlord's determination of Expenses within ninety (90) days after receipt, or if any such objection fails to state with specificity the reason for the objection, Tenant shall be deemed to have approved such determination and shall have no further right to object to or contest such determination. In the event that during all or any portion of any Lease Year or Base Year, the Building is not fully rented and occupied Landlord shall make an appropriate adjustment in occupancy-related Expenses for such year for the purpose of avoiding distortion of the amount of such Expenses to be attributed to Tenant by reason of variation in total occupancy of the Building, by employing consistent and sound accounting and management principles to determine Expenses that would have been paid or incurred by Landlord had the Building been at least ninety-five percent (95%) rented and occupied, and the amount so determined shall be deemed to have been Expenses for such Lease Year.

4.4           Prior to the actual determination thereof for a Lease Year, Landlord may from time to time estimate Tenant's liability for Expenses and/or Taxes under Section 4.2, Article 6 and Article 28 for the Lease Year or portion thereof. Landlord will give Tenant written notification of the amount of such estimate and Tenant agrees that it will pay, by increase of its Monthly Installments of Rent due in such Lease Year, additional rent in the amount of such estimate. Any such increased rate of Monthly Installments of Rent pursuant to this Section 4.4 shall remain in effect until further written notification to Tenant pursuant hereto.

4.5           When the above mentioned actual determination of Tenant's liability for Expenses and/or Taxes is made for any Lease Year and when Tenant is so notified in writing, then:

4.5.1           If the total additional rent Tenant actually paid pursuant to Section 4.4 on account of Expenses and/or Taxes for the Lease Year is less than Tenant's liability for Expenses and/or Taxes, then Tenant shall pay such deficiency to Landlord as additional rent in one lump sum within thirty (30) days of receipt of Landlord's bill therefor; and

4.5.2           If the total additional rent Tenant actually paid pursuant to Section 4.4 on account of Expenses and/or Taxes for the Lease Year is more than Tenant's liability for Expenses and/or Taxes, then Landlord shall credit the difference against the then next due payments to be made by Tenant under this Article 4, or, if the Lease has terminated, refund the difference in cash.

4.6           If the Commencement Date is other than January 1 or if the Termination Date is other than December 31, Tenant's liability for Expenses and Taxes for the Lease Year in which said Date occurs shall be prorated based upon a three hundred sixty-five (365) day year.

4.7           Notwithstanding anything contained herein or in this Lease to the contrary, it is understood and agreed that for purposes of calculating Tenant's Proportionate Share of Expenses (excluding Non-Controllable Expenses, as hereinafter defined) in any Lease Year in the initial Term of this Lease after calendar year 2008, the amount of Expenses (excluding Non-Controllable Expenses) shall be limited to the percentages of the actual amount of Expenses (excluding Non-Controllable Expenses) in calendar year 2008 set forth below:

Lease Year	% of the Actual Amount of Expenses (excluding Non- Controllable Expenses) in Calendar Year 2008
2009	103%
2010	106%
2011	109%
2012	113%
2013	116%

As used herein, the term "Non-Controllable Expenses" shall mean insurance premiums, utility charges, management fees, governmentally mandated charges (including sales tax), and the cost for snow removal and security services. Tenant's liability for Non-Controllable Expenses and Taxes in any given Lease Year shall not be similarly limited, and therefore, Tenant shall remain liable for the full amount of Tenant's Proportionate Share of Non-Controllable Expenses and Taxes in any Lease Year.

5.           INTENTIONALLY DELETED.

6.           ALTERATIONS.

6.1           Except for those, if any, specifically provided for in Exhibit B to this Lease, Tenant shall not make or suffer to be made any alterations, additions, or improvements, including, but not limited to, the attachment of any fixtures or equipment in, on, or to the Premises or any part thereof or the making of any improvements as required by Article 7, without the prior written consent of Landlord. When applying for such consent, Tenant shall, if requested by Landlord, furnish complete plans and specifications for such alterations, additions and improvements. Landlord's consent shall not be unreasonably withheld with respect to alterations which (i) are not structural in nature, (ii) are not visible from the exterior of the Building, (iii) do not affect or require modification of the Building's electrical, mechanical, plumbing, HVAC or other systems, and (iv) in aggregate do not cost more than $5.00 per rentable square foot of that portion of the Premises affected by the alterations in question.

6.2           In the event Landlord consents to the making of any such alteration, addition or improvement by Tenant, the same shall be made by using either Landlord's contractor or a contractor reasonably approved by Landlord, in either event at Tenant's sole cost and expense. If Tenant shall employ any contractor other than Landlord's contractor and such other contractor or any subcontractor of such other contractor shall employ any non-union labor or supplier, Tenant shall be responsible for and hold Landlord harmless from any and all delays, damages and extra costs suffered by Landlord as a result of any dispute with any labor unions concerning the wage, hours, terms or conditions of the employment of any such labor. In any event Landlord may charge Tenant a construction management fee not to exceed three percent (3%) of the cost of such work to cover its overhead as it relates to such proposed work, plus third-party costs actually incurred by Landlord in connection with the proposed work and the design thereof, with all such amounts being due five (5) days after Landlord's demand.

6.3           All alterations, additions or improvements proposed by Tenant shall be constructed in accordance with all government laws, ordinances, rules and regulations, using Building standard materials where applicable, and Tenant shall, prior to construction, provide the additional insurance required under Article 11 in such case, and also all such assurances to Landlord as Landlord shall reasonably require to assure payment of the costs thereof, including but not limited to, notices of non-responsibility, waivers of lien, surety company performance bonds and funded construction escrows and to protect Landlord and the Building and appurtenant land against any loss from any mechanic's, materialmen's or other liens. Tenant shall pay in addition to any sums due pursuant to Article 4, any increase in real estate taxes attributable to any such alteration, addition or improvement for so long, during the Term, as such increase is ascertainable; at Landlord's election said sums shall be paid in the same way as sums due under Article 4. Landlord may, as a condition to its consent to any particular alterations or improvements, require Tenant to deposit with Landlord the amount reasonably estimated by Landlord as sufficient to cover the cost of removing such alterations or improvements and restoring the Premises, to the extent required under Section 26.2.

7.           REPAIR.

7.1           Landlord shall have no obligation to alter, remodel, improve, repair, decorate or paint the Premises, except as specified in Exhibit B if attached to this Lease and except that Landlord shall repair and maintain, in good order and repair, the structural portions of the roof, foundation and walls of the Building. Landlord shall additionally repair and maintain the parking, driveways, and sidewalk areas which comprise a part of the Building. The cost of Landlord's repair and maintenance obligations under this Section 7.1 will be included as Expenses under Article 4 of this Lease. Landlord agrees that the mechanical, electrical, plumbing, and heating, ventilating, and air conditioning systems serving the Premises shall be in good working condition on the date that Landlord delivers possession of the Premises to Tenant. By taking possession of the Premises, Tenant accepts them as being in good order, condition and repair and in the condition in which Landlord is obligated to deliver them, except as set forth in the punch list to be delivered pursuant to Section 2.1. It is hereby understood and agreed that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant, except as specifically set forth in this Lease. Landlord shall not be liable for any failure to make any repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to Landlord by Tenant.

7.2           Tenant shall at its own cost and expense keep and maintain all parts of the Premises and such portion of the Building and improvements as are within the exclusive control of Tenant in good condition, promptly making all necessary repairs and replacements, whether ordinary or extraordinary, with materials and workmanship of the same character, kind and quality as the original (including, but not limited to, repair and replacement of all fixtures installed by Tenant, water heaters serving the Premises, windows, glass and plate glass, doors, exterior stairs, skylights, any special office entries, interior walls and finish work, floors and floor coverings, heating and air conditioning systems serving the Premises, electrical systems and fixtures, sprinkler systems, dock boards, truck doors, dock bumpers, plumbing work and fixtures, and performance of regular removal of trash and debris). Tenant as part of its obligations hereunder shall keep the Premises in a clean and sanitary condition. Tenant will, as far as possible keep all such parts of the Premises from deterioration due to ordinary wear and from falling temporarily out of repair, and upon termination of this Lease in any way Tenant will yield up the Premises to Landlord in good condition and repair, loss by fire or other casualty excepted (but not excepting any damage to glass). Tenant shall, at its own cost and expense, repair any damage to the Premises or the Building resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agents, employees, contractors, invitees, or any other person entering upon the Premises as a result of Tenant's business activities or caused by Tenant's default hereunder.

7.3           Except as provided in Article 22 and except to the extent caused by Landlord's gross negligence or willful misconduct, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or to fixtures, appurtenances and equipment in the Building. Except to the extent, if any, prohibited by law, Tenant waives the right to make repairs at Landlord's expense under any law, statute or ordinance now or hereafter in effect.

7.4           Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/ service contract with a maintenance contractor approved by Landlord for servicing all heating and air conditioning systems and equipment serving the Premises (and a copy thereof shall be furnished to Landlord). The service contract must include all services suggested by the equipment manufacturer in the operation/maintenance manual and must become effective within thirty (30) days of the date Tenant takes possession of the Premises. Should Tenant fail to do so, Landlord may, upon notice to Tenant, enter into such a maintenance/service contract on behalf of Tenant or perform the work and in either case, charge Tenant the cost thereof along with a reasonable amount for Landlord's overhead.

7.5           Landlord shall coordinate any repairs and other maintenance of any railroad tracks serving the Building and, if Tenant uses such rail tracks, Tenant shall reimburse Landlord or the railroad company from time to time upon demand, as additional rent, for its share of the costs of such repair and maintenance and for any other sums specified in any agreement to which Landlord or Tenant is a party respecting such tracks, such costs to be borne proportionately by all tenants in the Building using such rail tracks, based upon the actual number of rail cars shipped and received by such tenant during each calendar year during the Term.

8.           LIENS. Tenant shall keep the Premises, the Building and appurtenant land and Tenant's leasehold interest in the Premises free from any liens arising out of any services, work or materials performed, furnished, or contracted for by Tenant, or obligations incurred by Tenant. In the event that Tenant fails, within ten (10) days following the imposition of any such lien, to either cause the same to be released of record or provide Landlord with insurance against the same issued by a major title insurance company or such other protection against the same as Landlord shall accept (such failure to constitute an Event of Default), Landlord shall have the right to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be payable to it by Tenant within five (5) days of Landlord's demand.

9.           ASSIGNMENT AND SUBLETTING.

9.1 Tenant shall not have the right to assign or pledge this Lease or to sublet the whole or any part of the Premises whether voluntarily or by operation of law, or permit the use or occupancy of the Premises by anyone other than Tenant, and shall not make, suffer or permit such assignment, subleasing or occupancy without the prior written consent of Landlord, such consent not to be unreasonably withheld, and said restrictions shall be binding upon any and all assignees of the Lease and subtenants of the Premises. In the event Tenant desires to sublet, or permit such occupancy of, the Premises, or any portion thereof, or assign this Lease, Tenant shall give written notice thereof to Landlord at least sixty (60) days but no more than one hundred twenty (120) days prior to the proposed commencement date of such subletting or assignment, which notice shall set forth the name of the proposed subtenant or assignee, the relevant terms of any sublease or assignment and copies of financial reports and other relevant financial information of the proposed subtenant or assignee.

9.2           Notwithstanding any assignment or subletting, permitted or otherwise, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent specified in this Lease and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an Event of Default, if the Premises or any part of them are then assigned or sublet, Landlord, in addition to any other remedies provided in this Lease or provided by law, may, at its option, collect directly from such assignee or subtenant all rents due and becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant under this Lease, and no such collection shall be construed to constitute a novation or release of Tenant from the further performance of Tenant's obligations under this Lease.

9.3           In addition to Landlord's right to approve of any subtenant or assignee, Landlord shall have the option, in its sole discretion, in the event of any proposed subletting or assignment, to terminate this Lease, or in the case of a proposed subletting of less than the entire Premises, to recapture the portion of the Premises to be sublet, as of the date the subletting or assignment is to be effective. The option shall be exercised, if at all, by Landlord giving Tenant written notice given by Landlord to Tenant within thirty (30) days following Landlord's receipt of Tenant's written notice as required above. However, if Tenant notifies Landlord, within five (5) days after receipt of Landlord's termination notice, that Tenant is rescinding its proposed assignment or sublease, the termination notice shall be void and the Lease shall continue in full force and effect. If this Lease shall be terminated with respect to the entire Premises pursuant to this Section, the Term of this Lease shall end on the date stated in Tenant's notice as the effective date of the sublease or assignment as if that date had been originally fixed in this Lease for the expiration of the Term. If Landlord recaptures under this Section only a portion of the Premises, the rent to be paid from time to time during the unexpired Term shall abate proportionately based on the proportion by which the approximate square footage of the remaining portion of the Premises shall be less than that of the Premises as of the date immediately prior to such recapture. Tenant shall, at Tenant's own cost and expense, discharge in full any outstanding commission obligation which may be due and owing as a result of any proposed assignment or subletting, whether or not the Premises are recaptured pursuant to this Section 9.3 and rented by Landlord to the proposed tenant or any other tenant.

9.4           In the event that Tenant sells, sublets, assigns or transfers this Lease, Tenant shall pay to Landlord as additional rent an amount equal to seventy-five percent (75%) of the excess of any Increased Rent (as defined below) over the Costs Component (as defined below), when and as such Increased Rent is received by Tenant. As used in this Section, "Increased Rent" shall mean the excess of (i) all rent and other consideration which Tenant is entitled to receive by reason of any sale, sublease, assignment or other transfer of this Lease, over (ii) the rent otherwise payable by Tenant under this Lease at such time. For purposes of the foregoing, any consideration received by Tenant in form other than cash shall be valued at its fair market value as determined by Landlord in good faith. The "Costs Component" is that amount which, if paid monthly, would fully amortize on a straight-line basis, over the entire period for which Tenant is to receive Increased Rent, the reasonable costs incurred by Tenant for leasing commissions and tenant improvements in connection with such sublease, assignment or other transfer.

9.5           Notwithstanding any other provision hereof, it shall be considered reasonable for Landlord to withhold its consent to any assignment of this Lease or sublease of any portion of the Premises if at the time of either Tenant's notice of the proposed assignment or sublease or the proposed commencement date thereof, there shall exist any uncured default of Tenant or matter which will become a default of Tenant with passage of time unless cured, or if the proposed assignee or sublessee is an entity: (a) with which Landlord is already in negotiation; (b) is already an occupant of the Building unless Landlord is unable to provide the amount of space required by such occupant; (c) is a governmental agency; (d) is incompatible with the character of occupancy of the Building; (e) with which the payment for the sublease or assignment is determined in whole or in part based upon its net income or profits; or (f) would subject the Premises to a use which would: (i) involve increased personnel or wear upon the Building; (ii) violate any exclusive right granted to another tenant of the Building; (iii) require any addition to or modification of the Premises or the Building in order to comply with building code or other governmental requirements; or, (iv) involve a violation of Section 1.2. Tenant expressly agrees that for the purposes of any statutory or other requirement of reasonableness on the part of Landlord, Landlord's refusal to consent to any assignment or sublease for any of the reasons described in this Section 9.5, shall be conclusively deemed to be reasonable.

9.6           Upon any request to assign or sublet, Tenant will pay to Landlord the Assignment/Subletting Fee plus, on demand, a sum equal to all of Landlord's costs, including reasonable attorney's fees, incurred in investigating and considering any proposed or purported assignment or pledge of this Lease or sublease of any of the Premises, regardless of whether Landlord shall consent to, refuse consent, or determine that Landlord's consent is not required for, such assignment, pledge or sublease. Any purported sale, assignment, mortgage, transfer of this Lease or subletting which does not comply with the provisions of this Article 9 shall be void.

9.7           If Tenant is a corporation, limited liability company, partnership or trust, any transfer or transfers of or change or changes within any twelve (12) month period in the number of the outstanding voting shares of the corporation or limited liability company, the general partnership interests in the partnership or the identity of the persons or entities controlling the activities of such partnership or trust resulting in the persons or entities owning or controlling a majority of such shares, partnership interests or activities of such partnership or trust at the beginning of such period no longer having such ownership or control shall be regarded as equivalent to an assignment of this Lease to the persons or entities acquiring such ownership or control and shall be subject to all the provisions of this Article 9 to the same extent and for all intents and purposes as though such an assignment.

9.8 Notwithstanding anything to the contrary set forth herein, Tenant shall be permitted to assign this Lease, or sublet all or a portion of the Premises, to an Affiliate (as hereinafter defined) of Tenant without the prior consent of Landlord, if all of the following conditions are first satisfied:

(a) Tenant shall give Landlord at least thirty (30) days prior written notice of such assignment or subletting;

(b) No Event of Default (or event which, with notice or lapse of time or both, would constitute an Event of Default) has occurred and is continuing under this Lease;

(c) A fully executed copy of such assignment or sublease, the assumption of this Lease by the assignee or acceptance of the sublease by the sublessee, and such other information regarding the assignment or sublease as Landlord may reasonably request, shall have been delivered to Landlord;

(d) The Premises shall continue to be operated solely for the use specified in this Lease;

(e) Tenant shall pay all costs reasonably incurred by Landlord in connection with such assignment or subletting, including, without limitation, attorney's fees;

(f) Tenant's Affiliate remains an Affiliate of Tenant during the Term of this Lease; and

(g) LMI Aerospace, Inc. remains the guarantor of all obligations under this Lease.

As used herein, the term "Affiliate" shall mean an entity (i) which directly or indirectly controls Tenant, (ii) which is under the direct or indirect control of Tenant, (iii) which is under common direct or indirect control with Tenant, (iv) with which Tenant is merged or consolidated, or (v) which acquires all or substantially all of the assets or stock of Tenant. Control shall mean ownership of fifty-one percent (51%) or more of the voting securities or rights of the controlled entity.

Tenant acknowledges and agrees (and agrees at the time of such assignment or subletting to confirm) that in each instance described above, Tenant and any and all guarantors of Tenant's obligations under this Lease shall remain liable for the performance of the terms and conditions of this Lease despite such assignment or subletting.

10.           INDEMNIFICATION. None of the Landlord Entities shall be liable and Tenant hereby waives all claims against them for any damage to any property or any injury to any person in or about the Premises or the Building by or from any cause whatsoever (including without limiting the foregoing, rain or water leakage of any character from the roof, windows, walls, basement, pipes, plumbing works or appliances, the Building not being in good condition or repair, gas, fire, oil, electricity or theft), except that Landlord will indemnify and hold Tenant harmless from such claims to the extent caused by or arising from the gross negligence or willful misconduct of Landlord or its agents, employees or contractors or any breach or default on the part of Landlord in the performance of any covenant or agreement on the part of Landlord to be performed pursuant to this Lease. Tenant shall protect, indemnify and hold the Landlord Entities harmless from and against any and all loss, claims, liability or costs (including court costs and attorney's fees) actually incurred by any Landlord Entity by reason of (a) any damage to any property (including but not limited to property of any Landlord Entity) or any injury (including but not limited to death) to any person occurring in, on or about the Premises or the Building to the extent that such injury or damage shall be caused by or arise from any actual or alleged act, neglect, fault, or omission by or of Tenant or any Tenant Entity to meet any standards imposed by any duty with respect to the injury or damage; (b) the conduct or management of any work or thing whatsoever done by the Tenant in or about the Premises or from transactions of the Tenant concerning the Premises; (c) Tenant's failure to comply with any and all governmental laws, ordinances and regulations applicable to the condition or use of the Premises or its occupancy; or (d) any breach or default on the part of Tenant in the performance of any covenant or agreement on the part of the Tenant to be performed pursuant to this Lease. The provisions of this Article shall survive the termination of this Lease with respect to any claims or liability accruing prior to such termination.

11.           INSURANCE.

11.1           Tenant shall keep in force throughout the Term: (a) a Commercial General Liability insurance policy or policies to protect the Landlord Entities against any liability to the public or to any invitee of Tenant or a Landlord Entity incidental to the use of or resulting from any accident occurring in or upon the Premises with a limit of $1,000,000.00 per occurrence and $2,000,000.00 in the annual aggregate, or such larger amount as is commercially reasonable and which Landlord may prudently require from time to time, covering bodily injury and property damage liability and $1,000,000 products/completed operations aggregate; (b) Business Auto Liability covering owned, non-owned and hired vehicles with a limit of $1,000,000 per accident; (c) Worker's Compensation Insurance with limits as required by statute and Employers Liability with limits of $500,000 each accident, $500,000 disease policy limit, $500,000 disease--each employee; (d) All Risk or Special Form coverage protecting Tenant against loss of or damage to Tenant's alterations, additions, improvements, carpeting, floor coverings, panelings, decorations, fixtures, inventory and other business personal property situated in or about the Premises to the full replacement value of the property so insured; and, (e) Business Interruption Insurance with limit of liability representing loss of at least approximately six (6) months of income.

11.2           The aforesaid policies shall (a) be provided at Tenant's expense; (b) name the Landlord Entities as additional insureds (General Liability) and loss payee for purposes of Tenant's alterations, additions, improvements, carpeting, floor coverings, panelings, and fixtures (Property—Special Form); (c) be issued by an insurance company with a minimum Best's rating of "A-:VII" during the Term; and (d) provide that said insurance shall not be canceled unless thirty (30) days prior written notice (ten days for non-payment of premium) shall have been given to Landlord; a certificate of Liability insurance on ACORD Form 25 and a certificate of Property insurance on ACORD Form' 28 shall be delivered to Landlord by Tenant upon the Commencement Date and at least thirty (30) days prior to each renewal of said insurance.

11.3           Whenever Tenant shall undertake any alterations, additions or improvements in, to or about the Premises ("Work") the aforesaid insurance protection must extend to and include injuries to persons and damage to property arising in connection with such Work, without limitation including liability under any applicable structural work act, and such other insurance as Landlord shall require; and the policies of or certificates evidencing such insurance must be delivered to Landlord prior to the commencement of any such Work.

12.           WAIVER OF SUBROGATION. So long as their respective insurers so permit, Tenant and Landlord hereby mutually waive their respective rights of recovery against each other for any loss insured by fire, extended coverage, All Risks or other property insurance now or hereafter existing for the benefit of the respective party but only to the extent of the net insurance proceeds payable under such policies. Each party shall obtain any special endorsements required by their insurer to evidence compliance with the aforementioned waiver.

13.           SERVICES AND UTILITIES. Landlord acknowledges that water, gas, telephone, and electricity service is available at the Premises. Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler system charges and other utilities and services used on or from the Premises, together with any taxes, penalties, and surcharges or the like pertaining thereto and any maintenance charges for utilities. Tenant shall furnish all electric light bulbs, tubes and ballasts, battery packs for emergency lighting and fire extinguishers. If any such services are not separately metered to Tenant, Tenant shall pay such proportion of all charges jointly metered with other premises as determined by Landlord, in its sole discretion, to be reasonable. Any such charges paid by Landlord and assessed against Tenant shall be immediately payable to Landlord on demand and shall be additional rent hereunder. Tenant will not, without the written consent of Landlord, contract with a utility provider to service the Premises with any utility, including, but not limited to, telecommunications, electricity, water, sewer or gas, which is not previously providing such service to other tenants in the Building. Landlord shall in no event be liable for any interruption or failure of utility services on or to the Premises.

14.           HOLDING OVER. Tenant shall pay Landlord for each day Tenant retains possession of the Premises or part of them after termination of this Lease by lapse of time or otherwise at the rate ("Holdover Rate") which shall be One Hundred Fifty Percent (150%) of the greater of (a) the amount of the Annual Rent for the last period prior to the date of such termination plus all Rent Adjustments under Article 4; and (b) the then market rental value of the Premises as determined by Landlord assuming a new lease of the Premises of the then usual duration and other terms, in either case, prorated on a daily basis, and also pay all damages sustained by Landlord by reason of such retention. If Landlord gives notice to Tenant of Landlord's election to such effect, such holding over shall constitute renewal of this Lease for a period from month to month or one (1) year, whichever shall be specified in such notice, in either case at the Holdover Rate, but if the Landlord does not so elect, no such renewal shall result notwithstanding acceptance by Landlord of any sums due hereunder after such termination; and instead, a tenancy at sufferance at the Holdover Rate shall be deemed to have been created. In any event, no provision of this Article 14 shall be deemed to waive Landlord's right of reentry or any other right under this Lease or at law.

15.           SUBORDINATION. Without the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease shall be subject and subordinate at all times to ground or underlying leases and to the lien of any mortgages or deeds of trust now or hereafter placed on, against or affecting the Building, Landlord's interest or estate in the Building, or any ground or underlying lease; provided, however, that if the lessor, mortgagee, trustee, or holder of any such mortgage or deed of trust elects to have Tenant's interest in this Lease be superior to any such instrument, then, by notice to Tenant, this Lease shall be deemed superior, whether this Lease was executed before or after said instrument. Notwithstanding the foregoing, Tenant covenants and agrees to execute and deliver within ten (10) days of Landlord's request such further instruments evidencing such subordination or superiority of this Lease as may be required by Landlord, provided that Tenant shall be required to execute a subordination agreement for the benefit of the holder of a future deed of trust or mortgage only if the beneficiary or mortgagee thereunder executes a non-disturbance agreement in commercially reasonable form.

16.           RULES AND REGULATIONS. Tenant shall faithfully observe and comply with all the rules and regulations as set forth in Exhibit D to this Lease and all reasonable and non-discriminatory modifications of and additions to them from time to time put into effect by Landlord. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Building of any such rules and regulations.

17.           REENTRY BY LANDLORD.

17.1           Landlord reserves and shall at all times have the right, upon 24 hours' prior verbal notice (except in the event of an emergency or for supplying routine services requested by Tenant), to re-enter the Premises, to inspect the same, to show said Premises to prospective purchasers or mortgagees or, during the last nine (9) months of the Term, to prospective tenants, and to alter, improve or repair the Premises and any portion of the Building, without abatement of rent, and may for that purpose erect, use and maintain scaffolding, pipes, conduits and other necessary structures and open any wall, ceiling or floor in and through the Building and Premises where reasonably required by the character of the work to be performed, provided entrance to the Premises shall not be blocked thereby, and further provided that the business of Tenant shall not be interfered with unreasonably. Tenant shall be entitled to arrange for an authorized representative of Tenant to accompany Landlord on any such reentry. Landlord shall have the right at any time to change the arrangement and/or locations of entrances, or passageways, doors and doorways, and corridors, windows, elevators, stairs, toilets or other public parts of the Building and to change the name, number or designation by which the Building is commonly known. In the event that Landlord damages any portion of any wall or wall covering, ceiling, or floor or floor covering within the Premises, Landlord shall repair or replace the damaged portion to match the original as nearly as commercially reasonable but shall not be required to repair or replace more than the portion actually damaged. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned by any action of Landlord authorized by this Article 17.

17.2           For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in the Premises, excluding Tenant's vaults and safes or special security areas (designated in advance), and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency to obtain entry to any portion of the Premises. As to any portion to which access cannot be had by means of a key or keys in Landlord's possession, Landlord is authorized to gain access by such means as Landlord shall elect and the cost of repairing any damage occurring in doing so shall be borne by Tenant and paid to Landlord within five (5) days of Landlord's demand.

18.           DEFAULT.

18.1           Except as otherwise provided in Article 20, the following events shall be deemed to be Events of Default under this Lease:

18.1.1                       Tenant shall fail to pay when due any sum of money becoming due to be paid to Landlord under this Lease, whether such sum be any installment of the rent reserved by this Lease, any other amount treated as additional rent under this Lease, or any other payment or reimbursement to Landlord required by this Lease, whether or not treated as additional rent under this Lease, and such failure shall continue for a period of five (5) days after

written notice that such payment was not made when due, but if any such notice shall be given, for the twelve (12) month period commencing with the date of such notice, the failure to pay within five (5) days after due any additional sum of money becoming due to be paid to Landlord under this Lease during such period shall be an Event of Default, without notice.

18.1.2                      Tenant shall fail to comply with any term, provision or covenant of this Lease which is not provided for in another Section of this Article and shall not cure such failure within twenty (20) days (forthwith, if the failure involves a hazardous condition) after written notice of such failure to Tenant provided, however, that such failure shall not be an event of default if such failure could not reasonably be cured during such twenty (20) day period, Tenant has commenced the cure within such twenty (20) day period and thereafter is diligently pursuing such cure to completion, but the total aggregate cure period shall not exceed ninety (90) days.

18.1.3                      Tenant shall fail to vacate the Premises immediately upon termination of this Lease, by lapse of time or otherwise, or upon termination of Tenant's right to possession only.

18.1.4                      Tenant shall become insolvent, admit in writing its inability to pay its debts generally as they become due, file a petition in bankruptcy or a petition to take advantage of any insolvency statute, make an assignment for the benefit of creditors, make a transfer in fraud of creditors, apply for or consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws, as now in effect or hereafter amended, or any other applicable law or statute of the United States or any state thereof.

18.1.5                      A court of competent jurisdiction shall enter an order, judgment or decree adjudicating Tenant bankrupt, or appointing a receiver of Tenant, or of the whole or any substantial part of its property, without the consent of Tenant, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under the bankruptcy laws of the United States, as now in effect or hereafter amended, or any state thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof.

19.           REMEDIES.

19.1           Except as otherwise provided in Article 20, upon the occurrence of any of the Events of Default described or referred to in Article 18, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever, concurrently or consecutively and not alternatively:

19.1.1                      Landlord may, at its election, terminate this Lease or terminate Tenant's right to possession only, without terminating the Lease.

19.1.2                      Upon any termination of this Lease, whether by lapse of time or otherwise, or upon any termination of Tenant's right to possession without termination of the Lease, Tenant shall surrender possession and vacate the Premises immediately, and deliver possession thereof to Landlord, and Tenant hereby grants to Landlord full and free license to enter into and upon the Premises in such event and to repossess Landlord of the Premises as of Landlord's former estate and to expel or remove Tenant and any others who may be occupying or be within the Premises and to remove Tenant's signs and other evidence of tenancy and all other property of Tenant therefrom without being deemed in any manner guilty of trespass, eviction or forcible entry or detainer, and without incurring any liability for any damage resulting therefrom, Tenant waiving any right to claim damages for such re-entry and expulsion, and without relinquishing Landlord's right to rent or any other right given to Landlord under this Lease or by operation of law.

19.1.3                      Upon any termination of this Lease, whether by lapse of time or otherwise, Landlord shall be entitled to recover as damages, all rent, including any amounts treated as additional rent under this Lease, and other sums due and payable by Tenant on the date of termination, plus as liquidated damages and not as a penalty, an amount equal to the sum of: (a) an amount equal to the then present value of the rent reserved in this Lease for the residue of the stated Term of this Lease including any amounts treated as additional rent under this Lease and all other sums provided in this Lease to be paid by Tenant, minus the fair rental value of the Premises for such residue;

the value of the time and expense necessary to obtain a replacement tenant or tenants, and the estimated expenses described in Section 19.1.4 relating to recovery of the Premises, preparation for reletting and for reletting itself; and

the cost of performing any other covenants which would have otherwise been performed by Tenant.

19.1.4                      Upon any termination of Tenant's right to possession only without termination of the Lease:

19.1.4.1                      Neither such termination of Tenant's right to possession nor Landlord's taking and holding possession thereof as provided in Section 19.1.2 shall terminate the Lease or release Tenant, in whole or in part, from any obligation, including Tenant's obligation to pay the rent, including any amounts treated as additional rent, under this Lease for the full Term, and if Landlord so elects Tenant shall continue to pay to Landlord the entire amount of the rent as and when it becomes due, including any amounts treated as additional rent under this Lease, for the remainder of the Term plus any other sums provided in this Lease to be paid by Tenant for the remainder of the Term.

19.1.4.2                      Landlord shall use commercially reasonable efforts to relet the Premises or portions thereof to the extent required by applicable law. Landlord and Tenant agree that nevertheless Landlord shall at most be required to use only the same efforts Landlord then uses to lease premises in the Building generally and that in any case that Landlord shall not be required to give any preference or priority to the showing or leasing of the Premises or portions thereof over any other space that Landlord may be leasing or have available and may place a suitable prospective tenant in any such other space regardless of when such other space becomes available and that Landlord shall have the right to relet the Premises for a greater or lesser term than that remaining under this Lease, the right to relet only a portion of the Premises, or a portion of the Premises or the entire Premises as a part of a larger area, and the right to change the character or use of the Premises. In connection with or in preparation for any reletting, Landlord may, but shall not be required to, make repairs, alterations and additions in or to the Premises and redecorate the same to the extent Landlord deems necessary or desirable, and Tenant shall pay the cost thereof, together with Landlord's expenses of reletting, including, without limitation, any commission incurred by Landlord, within five (5) days,of Landlord's demand. Landlord shall not be required to observe any instruction given by Tenant about any reletting or accept any tenant offered by Tenant unless such offered tenant has a credit-worthiness acceptable to Landlord and leases the entire Premises upon terms and conditions including a rate of rent (after giving effect to all expenditures by Landlord for tenant improvements, broker's commissions and other leasing costs) all no less favorable to Landlord than as called for in this Lease, nor shall Landlord be required to make or permit any assignment or sublease for more than the current term or which Landlord would not be required to permit under the provisions of Article 9.

19.1.4.3                      Until such time as Landlord shall elect to terminate the Lease and shall thereupon be entitled to recover the amounts specified in such case in Section 19.1.3, Tenant shall pay to Landlord upon demand the full amount of all rent, including any amounts treated as additional rent under this Lease and other sums reserved in this Lease for the remaining Term, together with the costs of repairs, alterations, additions, redecorating and Landlord's expenses of reletting and the collection of the rent accruing therefrom (including reasonable attorney's fees and broker's commissions), as the same shall then be due or become due from time to time, less only such consideration as Landlord may have received from any reletting of the Premises; and Tenant agrees that Landlord may file suits from time to time to recover any sums falling due under this Article 19 as they become due. Any proceeds of reletting by Landlord in excess of the amount then owed by Tenant to Landlord from time to time shall be credited against Tenant's future obligations under this Lease but shall not otherwise be refunded to Tenant or inure to Tenant's benefit.

19.2           Upon the occurrence of an Event of Default, Landlord may (but shall not be obligated to) cure such default at Tenant's sole expense. Without limiting the generality of the foregoing, Landlord may, at Landlord's option, enter into and upon the Premises if Landlord determines in its sole discretion that Tenant is not acting within a commercially reasonable time to maintain, repair or replace anything for which Tenant is responsible under this Lease or to otherwise effect compliance with its obligations under this Lease and correct the same, without being deemed in any manner guilty of trespass, eviction or forcible entry and detainer and without incurring any liability for any damage or interruption of Tenant's business resulting therefrom and Tenant agrees to reimburse Landlord within five (5) days of Landlord's demand as additional rent, for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease, plus interest from the date of expenditure by Landlord at the Wall Street Journal prime rate.

19.3           Tenant understands and agrees that in entering into this Lease, Landlord is relying upon receipt of all the Annual and Monthly Installments of Rent to become due with respect to all the Premises originally leased hereunder over the full Initial Term of this Lease for amortization, including interest at the Amortization Rate. For purposes hereof, the "Concession Amount" shall be defined as the aggregate of all amounts forgone or expended by Landlord as free rent under the lease, under Exhibit B hereof for construction allowances (excluding therefrom any amounts expended by Landlord for Landlord's Work, as defined in Exhibit B), and for brokers' commissions payable by reason of this Lease. Accordingly, Tenant agrees that if this Lease or Tenant's right to possession of the Premises leased hereunder shall be terminated as of any date ("Default Termination Date") prior to the expiration of the full Initial Term hereof by reason of a default of Tenant, there shall be due and owing to Landlord as of the day prior to the Default Termination Date, as rent in addition to all other amounts owed by Tenant as of such Date, the amount ("Unamortized Amount") of the Concession Amount determined as set forth below; provided, however, that in the event that such amounts are recovered by Landlord pursuant to any other provision of this Article 19, Landlord agrees that it shall not attempt to recover such amounts pursuant to this Section 19.3. For the purposes hereof, the Unamortized Amount shall be determined in the same manner as the remaining principal balance of a mortgage with interest at the Amortization Rate payable in level payments over the same length of time as from the effectuation of the Concession concerned to the end of the full Initial Term of this Lease would be determined. The foregoing provisions shall also apply to and upon any reduction of space in the Premises, as though such reduction were a termination for Tenant's default, except that (i) the Unamortized Amount shall be reduced by any amounts paid by Tenant to Landlord to effectuate such reduction and (ii) the manner of application shall be that the Unamortized Amount shall first be determined as though for a full termination as of the Effective Date of the elimination of the portion, but then the amount so determined shall be multiplied by the fraction of which the numerator is the rentable square footage of the eliminated portion and the denominator is the rentable square footage of the Premises originally leased hereunder; and the amount thus obtained shall be the Unamortized Amount.

19.4           If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this Lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney or collection agency concerning or to enforce or defend any of Landlord's rights or remedies arising under this Lease or to collect any sums due from Tenant, Tenant agrees to pay all costs and fees so incurred by Landlord, including, without limitation, reasonable attorneys' fees and costs. TENANT EXPRESSLY WAIVES ANY RIGHT TO: (A) TRIAL BY JURY; AND (B) SERVICE OF ANY NOTICE REQUIRED BY ANY PRESENT OR FUTURE LAW OR ORDINANCE APPLICABLE TO LANDLORDS OR TENANTS BUT NOT REQUIRED BY THE TERMS OF THIS LEASE.

19.5           Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies provided in this Lease or any other remedies provided by law (all such remedies being cumulative), nor shall pursuit of any remedy provided in this Lease constitute a forfeiture or waiver of any rent due to Landlord under this Lease or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants contained in this Lease.

19.6           No act or thing done by Landlord or its agents during the Term shall be deemed a termination of this Lease or an acceptance of the surrender of the Premises, and no agreement to terminate this Lease or accept a surrender of said Premises shall be valid, unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants contained in this Lease shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants contained in this Lease. Landlord's acceptance of the payment of rental or other payments after the occurrence of an Event of Default shall not be construed as a waiver of such Default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more of the remedies provided in this Lease upon an Event of Default shall not be deemed or construed to constitute a waiver of such Default or of Landlord's right to enforce any such remedies with respect to such Default or any subsequent Default.

19.7           To secure the payment of all rentals and other sums of money becoming due from Tenant under this Lease, Landlord shall have and Tenant grants to Landlord a first lien upon the leasehold interest of Tenant under this Lease, which lien may be enforced in equity, and a continuing security interest upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the Premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord under this Lease shall first have been paid and discharged. Upon the occurrence of an Event of Default, Landlord shall have, in addition to any other remedies provided in this Lease or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Section 19.7 at public or private sale upon five (5) days' notice to Tenant. Tenant shall execute all such financing statements and other instruments as shall be deemed necessary or desirable in Landlord's discretion to perfect the security interest hereby created. To the extent Tenant receives financing secured by any or all of its personal property and such lender requires a subordination of Landlord's liens thereon, or if Tenant leases any equipment, Landlord agrees to execute and provide to such lender and/or equipment lessor a subordination agreement in Landlord's standard form.

19.8           Any and all property which may be removed from the Premises by Landlord pursuant to the authority of this Lease or of law, to which Tenant is or may be entitled, may be handled, removed and/or stored, as the case may be, by or at the direction of Landlord but at the risk, cost and expense of Tenant, and Landlord shall in no event be responsible for the value, preservation or safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all expenses incurred in such removal and all storage charges against such property so long as the same shall be in Landlord's possession or under Landlord's control. Any such property of Tenant not retaken by Tenant from storage within thirty (30) days after removal from the Premises shall, at Landlord's option, be deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale without further payment or credit by Landlord to Tenant.

19.9           If more than one (1) Event of Default occurs during the Term or any renewal thereof, Tenant's renewal options, expansion options, purchase options and rights of first offer and/or refusal, if any are provided for in this Lease, shall be null and void.

20.           TENANT'S BANKRUPTCY OR INSOLVENCY.

20.1           If at any time and for so long as Tenant shall be subjected to the provisions of the United States Bankruptcy Code or other law of the United States or any state thereof for the protection of debtors as in effect at such time (each a "Debtor's Law"):

20.1.1                      Tenant, Tenant as debtor-in-possession, and any trustee or receiver of Tenant's assets (each a "Tenant's Representative") shall have no greater right to assume or assign this Lease or any interest in this Lease, or to sublease any of the Premises than accorded to Tenant in Article 9, except to the extent Landlord shall be required to permit such assumption, assignment or sublease by the provisions of such Debtor's Law. Without limitation of the generality of the foregoing, any right of any Tenant's Representative to assume or assign this Lease or to sublease any of the Premises shall be subject to the conditions that:

20.1.1.1                      Such Debtor's Law shall provide to Tenant's Representative a right of assumption of this Lease which Tenant's Representative shall have timely exercised and Tenant's Representative shall have fully cured any default of Tenant under this Lease.

20.1.1.2                      Tenant's Representative or the proposed assignee, as the case shall be, shall have deposited with Landlord as security for the timely payment of rent an amount equal to the larger of: (a) three (3) months' rent and other monetary charges accruing under this Lease; and (b) any sum specified in Article 5; and shall have provided Landlord with adequate other assurance of the future performance of the obligations of the Tenant under this Lease. Without limitation, such assurances shall include, at least, in the case of assumption of this Lease, demonstration to the satisfaction of the Landlord that Tenant's Representative has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and administrative expenses to assure Landlord that Tenant's Representative will have sufficient funds to fulfill the obligations of Tenant under this Lease; and, in the case of assignment, submission of current financial statements of the proposed assignee, audited by an independent certified public accountant reasonably acceptable to Landlord and showing a net worth and working capital in amounts determined by Landlord to be sufficient to assure the future performance by such assignee of all of the Tenant's obligations under this Lease.

20.1.1.3                      The assumption or any contemplated assignment of this Lease or subleasing any part of the Premises, as shall be the case, will not breach any provision in any other lease, mortgage, financing agreement or other agreement by which Landlord is bound.

20.1.1.4                      Landlord shall have, or would have had absent the Debtor's Law, no right under Article 9 to refuse consent to the proposed assignment or sublease by reason of the identity or nature of the proposed assignee or sublessee or the proposed use of the Premises concerned.

21.           QUIET ENJOYMENT. Landlord represents and warrants that it has full right and authority to enter into this Lease and that Tenant, while paying the rental and performing its other covenants and agreements contained in this Lease, shall peaceably and quietly have, hold and enjoy the Premises for the Term without hindrance or molestation from Landlord subject to the terms and provisions of this Lease. Landlord shall not be liable for any interference or disturbance by other tenants or third persons, nor shall Tenant be released from any of the obligations of this Lease because of such interference or disturbance.

22.           CASUALTY.

22.1           In the event the Premises or the Building are damaged by fire or other cause and in Landlord's reasonable estimation such damage can be materially restored within one hundred eighty (180) days, Landlord shall forthwith repair the same and this Lease shall remain in full force and effect, except that Tenant shall be entitled to a proportionate abatement in rent from the date of such damage. Such abatement of rent shall be made pro rata in accordance with the extent to which the damage and the making of such repairs shall interfere with the use and occupancy by Tenant of the Premises from time to time. Within forty-five (45) days from the date of such damage, Landlord shall notify Tenant, in writing, of Landlord's reasonable estimation of the length of time within which material restoration can be made, and Landlord's determination shall be binding on Tenant. For purposes of this Lease, the Building or Premises shall be deemed "materially restored" if they are in such condition as would not prevent or materially interfere with Tenant's use of the Premises for the purpose for which it was being used immediately before such damage.

22.2           If such repairs cannot, in Landlord's reasonable estimation, be made within one hundred eighty (180) days, Landlord and Tenant shall each have the option of giving the other, at any time within ninety (90) days after such damage, notice terminating this Lease as of the date of such damage. In the event of the giving of such notice, this Lease shall expire and all interest of the Tenant in the Premises shall terminate as of the date of such damage as if such date had been originally fixed in this Lease for the expiration of the Term. In the event that neither Landlord nor Tenant exercises its option to terminate this Lease, then Landlord shall repair or restore such damage, this Lease continuing in full force and effect, and the rent hereunder shall be proportionately abated as provided in Section 22.1.

22.3           Landlord shall not be required to repair or replace any damage or loss by or from fire or other cause to any panelings, decorations, partitions, additions, railings, ceilings, floor coverings, office fixtures or any other property or improvements installed on the Premises by, or belonging to, Tenant. Any insurance which may be carried by Landlord or Tenant against loss or damage to the Building or Premises shall be for the sole benefit of the party carrying such insurance and under its sole control.

22.4           In the event that Landlord should fail to complete such repairs and material restoration within forty-five (45) days after the date estimated by Landlord therefor as extended by this Section 22.4, Tenant may at its option and as its sole remedy terminate this Lease by delivering written notice to Landlord, within fifteen (15) days after the expiration of said period of time, whereupon the Lease shall end on the date of such notice or such later date fixed in such notice as if the date of such notice was the date originally fixed in this Lease for the expiration of the Term; provided, however, that if construction is delayed because of changes, deletions or additions in construction requested by Tenant, strikes, lockouts, casualties, Acts of God, war, material or labor shortages, government regulation or control or other causes beyond the reasonable control of Landlord, the period for restoration, repair or rebuilding shall be extended for the amount of time Landlord is so delayed.

22.5           Notwithstanding anything to the contrary contained in this Article: (a) Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises when the damages resulting from any casualty covered by the provisions of this Article 22 occur during the last twelve (12) months of the Term or any extension thereof, but if Landlord determines not to repair such damages Landlord shall notify Tenant and if such damages shall render any material portion of the Premises untenantable or if the condition of the Premises prevents or materially interferes with Tenant's use of the Premises for the purpose for which it was being used immediately prior to such damage, Tenant shall have the right to terminate this Lease by notice to Landlord within fifteen (15) days after receipt of Landlord's notice; and (b) in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the Premises or Building requires that any insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this Lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon this Lease shall end on the date of such damage as if the date of such damage were the date originally fixed in this Lease for the expiration of the Term.

22.6           In the event of any damage or destruction to the Building or Premises by any peril covered by the provisions of this Article 22, it shall be Tenant's responsibility to properly secure the Premises and upon notice from Landlord to remove forthwith, at its sole cost and expense, such portion of all of the property belonging to Tenant or its licensees from such portion or all of the Building or Premises as Landlord shall request.

23.           EMINENT DOMAIN. If all or any substantial part of the Premises shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain, or conveyance in lieu of such appropriation, either party to this Lease shall have the right, at its option, of giving the other, at any time within thirty (30) days after such taking, notice terminating this Lease, except that Tenant may only terminate this Lease by reason of taking or appropriation, if such taking or appropriation shall be so substantial as to materially interfere with Tenant's use and occupancy of the Premises. If neither party to this Lease shall so elect to terminate this Lease, the rental thereafter to be paid shall be adjusted on a fair and equitable basis under the circumstances. In addition to the rights of Landlord above, if any substantial part of the Building shall be taken or appropriated by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, and regardless of whether the Premises or any part thereof are so taken or appropriated, Landlord shall have the right, at its sole option, to terminate this Lease. Landlord shall be entitled to any and all income, rent, award, or any interest whatsoever in or upon any such sum, which may be paid or made in connection with any such public or quasi-public use or purpose, and Tenant hereby assigns to Landlord any interest it may have in or claim to all or any part of such sums, other than any separate award which may be made with respect to Tenant's trade fixtures and moving expenses; Tenant shall make no claim for the value of any unexpired Term.

24.           SALE BY LANDLORD. In event of a sale or conveyance by Landlord of the Building, the same shall operate to release Landlord from any future liability upon any of the covenants or conditions, expressed or implied, contained in this Lease in favor of Tenant, and in such event Tenant agrees to look solely to the responsibility of the successor in interest of Landlord in and to this Lease. Except as set forth in this Article 24, this Lease shall not be affected by any such sale and Tenant agrees to attorn to the purchaser or assignee. If any security has been given by Tenant to secure the faithful performance of any of the covenants of this Lease, Landlord may transfer or deliver said security, as such, to Landlord's successor in interest and thereupon Landlord shall be discharged from any further liability with regard to said security.

25.           ESTOPPEL CERTIFICATES. Within ten (10) days following any written request which Landlord may make from time to time, Tenant shall execute and deliver to Landlord or mortgagee or prospective mortgagee a sworn statement certifying: (a) the date of commencement of this Lease; (b) the fact that this Lease is unmodified and in full force and effect (or, if there have been modifications to this Lease, that this Lease is in full force and effect, as modified, and stating the date and nature of such modifications); (c) the date to which the rent and other sums payable under this Lease have been paid; (d) the fact that there are no current defaults under this Lease by either Landlord or Tenant except as specified in Tenant's statement; and (e) such other matters as may be requested by Landlord. Landlord and Tenant intend that any statement delivered pursuant to this Article 25 may be relied upon by any mortgagee, beneficiary or purchaser, and Tenant shall be liable for all loss, cost or expense resulting from the failure of any sale or funding of any loan caused by any material misstatement contained in such estoppel certificate. Tenant irrevocably agrees that if Tenant fails to execute and deliver such certificate within such ten (10) day period Landlord or Landlord's beneficiary or agent may execute and deliver such certificate on Tenant's behalf, and that such certificate shall be fully binding on Tenant.

26.           SURRENDER OF PREMISES.

26.1           Tenant shall arrange to meet Landlord for two (2) joint inspections of the Premises, the first to occur at least thirty (30) days (but no more than sixty (60) days) before the last day of the Term, and the second to occur not later than forty-eight (48) hours after Tenant has vacated the Premises. In the event of Tenant's failure to arrange such joint inspections and/or participate in either such inspection, Landlord's inspection at or after Tenant's vacating the Premises shall be conclusively deemed correct for purposes of determining Tenant's responsibility for repairs and restoration.

26.2           All alterations, additions, and improvements in, on, or to the Premises made or installed by or for Tenant, including, without limitation, carpeting (collectively, "Alterations"), shall be and remain the property of Tenant during the Term. Upon the expiration or sooner termination of the Term, all Alterations shall become a part of the realty and shall belong to Landlord without compensation, and title shall pass to Landlord under this Lease as by a bill of sale. At the end of the Term or any renewal of the Term or other sooner termination of this Lease, Tenant will peaceably deliver up to Landlord possession of the Premises, together with all Alterations by whomsoever made, in the same conditions received or first installed, broom clean and free of all debris, excepting only ordinary wear and tear and damage by fire or other casualty. Notwithstanding the foregoing, if Landlord elects by notice given to Tenant at least ten (10) days prior to expiration of the Term, Tenant shall, at Tenant's sole cost, remove any Alterations, including carpeting, so designated by Landlord's notice, and repair any damage caused by such removal. Tenant must, at Tenant's sole cost, remove upon termination of this Lease, any and all of Tenant's furniture, furnishings, equipment, movable partitions of less than full height from floor to ceiling and other trade fixtures and personal property, as well as all data/telecommunications cabling and wiring installed by or on behalf of Tenant, whether inside walls, under any raised floor or above any ceiling (collectively, "Personalty"). Personalty not so removed shall be deemed abandoned by the Tenant and title to the same shall thereupon pass to Landlord under this Lease as by a bill of sale, but Tenant shall remain responsible for the cost of removal and disposal of such Personalty, as well as any damage caused by such removal. In lieu of requiring Tenant to remove Alterations and Personalty and repair the Premises as aforesaid, Landlord may, by written notice to Tenant delivered at least thirty (30) days before the Termination Date, require Tenant to pay to Landlord, as additional rent hereunder, the cost of such removal and repair in an amount reasonably estimated by Landlord.

26.3           All obligations of Tenant under this Lease not fully performed as of the expiration or earlier termination of the Term shall survive the expiration or earlier termination of the Term. Upon the expiration or earlier termination of the Term, Tenant shall pay to Landlord the amount, as estimated by Landlord, necessary to repair and restore the Premises as provided in this Lease and/or to discharge Tenant's obligation for unpaid amounts due or to become due to Landlord. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant, with Tenant being liable for any additional costs upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied.

27.           NOTICES. Any notice or document required or permitted to be delivered under this Lease shall be addressed to the intended recipient, shall be transmitted by fully prepaid registered or certified United States Mail return receipt requested, or by reputable independent contract delivery service furnishing a written record of attempted or actual delivery, and shall be deemed to be delivered when tendered for delivery to the addressee at its address set forth on the Reference Pages, or at such other address as it has then last specified by written notice delivered in accordance with this Article 27, or if to Tenant at either its aforesaid address or its last known registered office or home of a general partner or individual owner, whether or not actually accepted or received by the addressee. Any such notice or document may also be personally delivered if a receipt is signed by and received from, the individual, if any, named in Tenant's Notice Address.

28.           TAXES PAYABLE BY TENANT. In addition to rent and other charges to be paid by Tenant under this Lease, Tenant shall reimburse to Landlord, upon demand, any and all taxes payable by Landlord (other than net income taxes) whether or not now customary or within the contemplation of the parties to this Lease: (a) upon, allocable to, or measured by or on the gross or net rent payable under this Lease, including without limitation any margin tax pursuant to Chapter 171 of the Texas Tax Code (as the same may be amended, renewed, or replaced from time to time) imposed on Landlord and computed with respect to rents payable under this Lease, and any gross income tax or excise tax levied by a State, any political subdivision thereof, or the Federal Government with respect to the receipt of such rent; (b) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy of the Premises or any portion thereof, including any sales, use or service tax imposed as a result thereof; (c) upon or measured by the Tenant's gross receipts or payroll or the value of Tenant's equipment, furniture, fixtures and other personal property of Tenant or leasehold improvements, alterations or additions located in the Premises; or (d) upon this transaction or any document to which Tenant is a party creating or transferring any interest of Tenant in this Lease or the Premises. In addition to the foregoing, Tenant agrees to pay, before delinquency, any and all taxes levied or assessed against Tenant and which become payable during the term hereof upon Tenant's equipment, furniture, fixtures and other personal property of Tenant located in the Premises.

29.           INTENTIONALLY DELETED.

30.           DEFINED TERMS AND HEADINGS. The Article headings shown in this Lease are for convenience of reference and shall in no way define, increase, limit or describe the scope or intent of any provision of this Lease.

Any indemnification or insurance of Landlord shall apply to and inure to the benefit of all the following "Landlord Entities", being Landlord, Landlord's investment manager, and the trustees, boards of directors, officers, general partners, beneficiaries, stockholders, employees and agents of each of them. Any option granted to Landlord shall also include or be exercisable by Landlord's trustee, beneficiary, agents and employees, as the case may be. In any case where this Lease is signed by more than one person, the obligations under this Lease shall be joint and several. The terms "Tenant" and "Landlord" or any pronoun used in place thereof shall indicate and include the masculine or feminine, the singular or plural number, individuals, firms or corporations, and their and each of their respective successors, executors, administrators and permitted assigns, according to the context hereof. The term "rentable area" shall mean the rentable area of the Premises or the Building as calculated by the Landlord on the basis of the plans and specifications of the Building including a proportionate share of any common areas. Tenant hereby accepts and agrees to be bound by the figures for the rentable square footage of the Premises and Tenant's Proportionate Share shown on the Reference Pages; however, Landlord may adjust either or both figures if there is manifest error, addition or subtraction to the Building or any business park or complex of which the Building is a part, remeasurement or other circumstance reasonably justifying adjustment. The term "Building" refers to the structure in which the Premises are located and the common areas (parking lots, sidewalks, landscaping, etc.) appurtenant thereto. If the Building is part of a larger complex of structures, the term "Building" may include the entire complex, where appropriate (such as shared Expenses or Taxes) and subject to Landlord's reasonable discretion.

31.           TENANT'S AND LANDLORD'S AUTHORITY. If Tenant signs as a corporation, partnership, trust or other legal entity each of the persons executing this Lease on behalf of Tenant represents and warrants that Tenant has been and is qualified to do business in the state in which the Building is located, that the entity has full right and authority to enter into this Lease, and that all persons signing on behalf of the entity were authorized to do so by appropriate actions. Tenant agrees to deliver to Landlord, simultaneously with the delivery of this Lease, a corporate resolution, proof of due authorization by partners, opinion of counsel or other appropriate documentation reasonably acceptable to Landlord evidencing the due authorization of Tenant to enter into this Lease. Landlord hereby represents and warrants that it is the owner of the Building, that the entity executing this Lease on Landlord's behalf has full right and authority to enter into this Lease and that the person executing this Lease on such entity's behalf was authorized to do so.

Tenant hereby represents and warrants that neither Tenant, nor any persons or entities holding any legal or beneficial interest whatsoever in Tenant, are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury ("OFAC"); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: "List of Specially Designated Nationals and Blocked Persons." If the foregoing representation is untrue at any time during the Term, an Event of Default will be deemed to have occurred, without the necessity of notice to Tenant.

32.           FINANCIAL STATEMENTS AND CREDIT REPORTS. At Landlord's request, Tenant shall deliver to Landlord a copy, certified by an officer of Tenant as being a true and correct copy, of Tenant's most recent audited financial statement, or, if unaudited, certified by Tenant's chief financial officer as being true, complete and correct in all material respects. Tenant hereby authorizes Landlord to obtain one or more credit reports on Tenant at any time, and shall execute such further authorizations as Landlord may reasonably require in order to obtain a credit report.

33.           COMMISSIONS. Each of the parties represents and warrants to the other that it has not dealt with any broker or finder in connection with this Lease, except as described on the Reference Pages.

34.           TIME AND APPLICABLE LAW. Time is of the essence of this Lease and all of its provisions. This Lease shall in all respects be governed by the laws of the state in which the Building is located.

35.           SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 9, the terms, covenants and conditions contained in this Lease shall be binding upon and inure to the benefit of the heirs, successors, executors, administrators and assigns of the parties to this Lease.

36.           ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all agreements of the parties to this Lease and supersedes any previous negotiations. There have been no representations made by the Landlord or any of its representatives or understandings made between the parties other than those set forth in this Lease and its exhibits. This Lease may not be modified except by a written instrument duly executed by the parties to this Lease.

37.           EXAMINATION NOT OPTION. Submission of this Lease shall not be deemed to be a reservation of the Premises. Landlord shall not be bound by this Lease until it has received a copy of this Lease duly executed by Tenant and has delivered to Tenant a copy of this Lease duly executed by Landlord, and until such delivery Landlord reserves the right to exhibit and lease the Premises to other prospective tenants. Notwithstanding anything contained in this Lease to the contrary, Landlord may withhold delivery of possession of the Premises from Tenant until such time as Tenant has paid to Landlord the first month's rent as set forth in Article 3 and any sum owed pursuant to this Lease.

38.           RECORDATION. Tenant shall not record or register this Lease or a short form memorandum hereof without the prior written consent of Landlord, and then shall pay all charges and taxes incident such recording or registration.

39.           CONDITION TO EFFECTIVENESS. The effectiveness of this Lease is expressly conditioned upon the receipt by Landlord of a Continuing Lease Guaranty ("Guaranty") executed by LMI AEROSPACE, INC., a Missouri corporation, dated effective as of the date of this Lease, in form acceptable to Landlord. In the event that within ten (10) days after this Lease is fully executed by Landlord and Tenant, Landlord has not received the executed Guaranty, Landlord shall have the right to terminate this Lease upon written notice to Tenant.

40.           RENEWAL OPTION. Tenant shall have, at its option (each such option being referred to herein as a "Renewal Option"), the right to renew and extend this Lease for two consecutive terms of five (5) years each (each such renewal term being referred to herein as a "Renewal Term"). The first Renewal Term shall commence immediately upon the expiration of the initial Term and the second Renewal Term shall commence immediately upon the expiration of the first Renewal Term by Tenant's giving written notice thereof to Landlord no earlier than twelve (12) months, and no later than nine (9) months, prior to the expiration of the then existing initial Term or Renewal Term, as the case may be. Once Tenant shall exercise any Renewal Option, Tenant may not thereafter revoke such exercise, except as expressly set forth below. Tenant shall not have the right to exercise any Renewal Option at a time that an Event of Default (or an event which with notice and/or lapse of time could become an Event of Default) under this Lease has occurred. Tenant's failure to exercise timely a Renewal Option for any reason whatsoever shall conclusively be deemed a waiver of such Renewal Option and any future Renewal Option. At Landlord's option, Landlord may adjust the Annual Rent for any Renewal Term to an annual rate equal to the Fair Market Value Rate (as hereinafter defined) as of the commencement of such Renewal Term. As used in this Lease, "Fair Market Value Rate" shall mean the fair market value rental rate per square foot of rentable area per year in effect at the commencement of the applicable Renewal Term for comparable tenants taking comparable space in comparable conditions under comparable terms in comparable buildings in the same rental market (hereinafter called "Comparable Buildings"); provided, however, that in no event shall the Annual Rent for the first Renewal Tenn be less than the Annual Rent for the last twelve (12) months of the initial Term and in no event shall the Annual Rent for the second Renewal Term be less than the Annual Rent for the last twelve (12) months of the immediately preceding Renewal Term. It is also agreed and understood that the Fair Market Value Rate shall include: (a) rent; and (b) rental operating expenses, property tax, and utility and expense adjustments that are being included as part of the terms and conditions of industrial tenant leases for comparable tenants in Comparable Buildings as of the time of determination of the Fair Market Value Rate. Landlord shall advise Tenant within fifteen (15) days after Tenant exercises any Renewal Option of the Fair Market Value Rate which shall be in effect as of the commencement date of the respective Renewal Term. Tenant shall then have fifteen (15) days to notify Landlord of its acceptance or rejection of the Fair Market Value Rate for such Renewal Term. In the event Tenant fails to so notify Landlord within such fifteen (15) day period, Tenant shall be deemed to have accepted the Fair Market Value Rate proposed by Landlord. Notwithstanding the prohibition on Tenant's right to revoke its exercise of the Renewal Option, in the event Tenant and Landlord are unable to agree on the Fair Market Value Rate for any Renewal Term within sixty (60) days after Tenant exercises its Renewal Option for such Renewal Term, Tenant shall be deemed to have revoked the Renewal Option and such Renewal Option, together with any future Renewal Option, shall be deemed null and void and of no further force or effect. Tenant shall take the Premises "as is" for any Renewal Term and Landlord shall have no obligation to make any improvements or alterations to the Premises. Except as set forth in this Article, the leasing of the Premises for any Renewal Term shall be upon the same terms and conditions as the leasing of the Premises for the initial Term and shall be upon and subject to all of the provisions of this Lease. Any Renewal Option granted to Tenant under this Article shall be personal to Tenant and shall not be transferred, encumbered, or assigned by Tenant or in any manner transferred to, or exercised by, any subtenant of Tenant.

41.           EXTERIOR SIGN. Tenant shall have the right to design, fabricate, and install an exterior sign containing Tenant's name above the entrance to the Premises. Such sign must be professionally prepared in accordance with any and all applicable governmental laws, ordinances, and regulations. Landlord shall have the right to approve the design, size, and location of such sign, and Tenant shall submit sign plans and specifications to Landlord for prior written approval. Landlord's approval of the sign shall not, however, be construed as a representation or warranty of the compliance of such sign with applicable governmental laws, ordinances, and regulations. Any work relating to such sign, including the design, fabrication, and installation of such sign, shall be at Tenant's sole cost and expense.

42.           LIMITATION OF LANDLORD'S LIABILITY. Redress for any claim against Landlord under this Lease shall be limited to and enforceable only against and to the extent of Landlord's interest in the Building. The obligations of Landlord under this Lease are not intended to be and shall not be personally binding on, nor shall any resort be had to the private properties of, any of its or its investment manager's trustees, directors, officers, partners, beneficiaries, members, stockholders, employees, or agents, and in no case shall Landlord be liable to Tenant hereunder for any lost profits, damage to business, or any form of special, indirect or consequential damages.

LANDLORD: ACQUIPORT DFWIP, INC., a Delaware corporation		TENANT: PRECISE MACHINE PARTNERS, L.L.P., a Texas limited liability partnership
By:	_____________________________________	By:	_____________________________________
Name:	Anthony James	Name:	_____________________________________
Title:	Vice President	Title:	_____________________________________
Dated:	________________________________, 2008	Dated:	________________________________, 2008

EX-10.4

Exhibit 10.4

AGREEMENT

WHEREAS, Port Partnership, LLP (“the Partnership”) and LMI FINISHING, INC. (“Lessee”) are parties to (i) that certain Lease Agreement dated  as of the 6th day of September, 2002 ( the “Existing Lease”) and (ii) that certain Lease Agreement dated May 2, 2006 ( the “2006 Lease Agreement”), and

WHEREAS, the Partnership and Lessee desire that Lessee enter into a Lease Agreement with Port Partnership-I, LLP, (“Lessor”) for the Lease of a Building on Land hereafter described,

NOW THEREFORE, the Partnership, Lessor and Lessee for good and valuable consideration do hereby agree:

1.           Lessor and Lessee shall contemporaneously herewith, execute the attached Lease Agreement.

2.           That the 2006 Lease Agreement shall terminate upon satisfaction of all the conditions precedent identified in Article II, paragraph 1. (a), (b) and (c) and Article II, paragraph 2 of the attached Lease and all rentals, security deposits and other sums paid to the Partnership by Lessee pursuant thereto shall be returned to Lessee within ten (10) days thereafter.

3.           That upon the Commencement Date of the attached Lease Agreement, the Existing Lease shall terminate and (i) Lessee shall be entitled to a refund of Rent paid under the Existing Lease, pro rata, for the period from said Commencement Date to the last day of the month in which said Commencement Date occurs and (ii) the security deposit paid by Lessee under the Existing Lease shall be returned to Lessee in accordance with the terms thereof.

4.           If the attached Lease Agreement terminates pursuant to the terms of Article II, paragraph 1.(d) or Article II, paragraph 2 thereof, the May 2, 2006 Lease Agreement shall continue in full force and effect and be modified as provided in Article II, paragraph 1.(d) of the attached Lease Agreement by a separate amendment executed by the Partnership and Lessee.

Dated this ___ day of June, 2006

LESSEE:

LMI FINISHING, INC.,

By:_____________________________

Robert Grah, its President

[Signatures continued on following page.]

LESSOR:

PORT PARTNERSHIP-I, LLP, an Oklahoma limited liability partnership

_____________________________________

By: ___________________its ___________ Partner

THE PARTNERSHIP:

PORT PARTNERSHIP, LLP

______________________________________

By: ___________________its ___________ Partner

LEASE AGREEMENT

THIS LEASE AGREEMENT, entered into as of the ____ day of June, 2006, between PORT PARTNERSHIP-I, LLP, an Oklahoma limited liability partnership, hereinafter referred to as "Lessor," and LMI FINISHING, INC., an Oklahoma corporation, hereinafter referred to as "Lessee."

ARTICLE I

RECITALS

A.           Lessor intends to lease a certain parcel of unimproved real property located in Rogers County, Oklahoma and described on Exhibit “B” attached hereto (said real property is hereinafter referred to as the “Land” and the lease agreement to be entered into between Lessor and the owner of the Land is hereinafter referred to as the "Ground Lease").

B.           As of the date hereof, pursuant to that certain Lease Agreement dated as of the 6th day of September, 2002 (hereinafter referred to as the “Existing Lease”), Lessee leased from Port Partnership, LLP approximately 40,000 square feet in a building located at the Port of Catoosa, Oklahoma

C.           Lessor and Lessee desire to enter into this Lease Agreement to (i) provide the terms and conditions for the construction by Lessor of an approximately 80,000 square foot Building and other related improvements including, without limitation, a parking area serving said Building on the Land (said Building and other related improvements are hereinafter referred to collectively as the “Building Improvements”) and (ii) provide the terms and conditions for the termination of the Existing Lease upon Substantial Completion (as hereinafter defined) of the Building Improvements.

D.           That for and in consideration of the mutual agreements herein contained, Lessor leases and demises unto the Lessee, and Lessee accepts and leases from the Lessor the Land and the Building Improvements (hereinafter collectively called the "Demised Premises"). Except as otherwise expressly set forth in this Lease, in no event shall Lessor be liable for any defect in the Demised Premises or any part thereof, or for any limitations on its use; provided, however, Lessor does hereby assign unto Lessee all warranties and guarantees it shall receive from its contractor and contractor's supplier(s) with respect to the Demised Premises.  Notwith­standing the foregoing, if at any time hereunder Lessee is unable to conduct its business in the Demised Premises (due to any restriction imposed by the Ground Lease or by any public or quasi public authority having jurisdiction over Lessor, Lessee or the Demised Premises, as each may be reasonably determined by Lessee excluding, however, any restriction imposed upon Lessee by any applicable law, rule, regulation or restriction generally applicable to all Tenants at the Port of Catoosa), Lessee shall have the right to terminate this Lease upon ninety (90) days written notice thereof to Lessor, where upon any advance rental (and so much of any security deposit as Lessee shall be entitled to hereunder) shall be returned to Lessee within three (3) days of such termination, and thereafter neither party shall have any further liability to the other, except as may be expressly provided for to the contrary hereunder.  This Lease is made upon the following covenants, agreements, terms, provisions, conditions and limitations, all of which the parties hereto mutually warrant and agree to perform and observe:

ARTICLE II

CONDITIONS PRECEDENT

1.           The obligations of the Lessor and the Lessee hereunder shall be conditioned upon the following:

(a)           The receipt by the Lessor of a written commitment and the execution of loan documents implementing said commitment in an amount, form and upon terms satisfactory to Lessor from a lender or lenders obligating such lender(s) (hereinafter called “Lessor’s Lender(s)”) to provide Lessor with funds to construct the Building Improvements as hereinafter provided.

(b)           The consummation of the Ground Lease with the Port of Catoosa of the Land upon terms and conditions acceptable to Lessor.

(c)           Written approval of this Lease by the City of Tulsa-Rogers County Port Authority (the "Port Authority") and Lessor’s Lender(s).  Lessor shall use reasonable efforts to obtain such approvals and shall keep Lessee reasonably advised of the status thereof.

(d)           Should the foregoing events not have occurred on or before September 1, 2006, this Lease shall terminate thirty (30) days thereafter, all rentals, security deposits and other sums paid to Lessor by Lessee pursuant to this Lease shall be returned to Lessee within ten (10) days thereafter, and neither party shall have any further obligation or liability to the other under this Lease except as may be expressly provided for to the contrary hereunder, and provided that the Lease Agreement dated the 2nd day of May, 2006 (the “2006 Lease Agreement”) shall continue in full force and effect without any effect thereon by the termination of this Lease except that  the date of July 1, 2006 appearing in Article II, paragraph 1.(c) of the 2006 Lease Agreement shall be a date which is sixty (60) days after termination of this Lease under this paragraph (d).

(e) Upon satisfaction of the conditions set forth in paragraphs (a) through (c) of this paragraph 1 and paragraph 2 of this Article II, the 2006 Lease Agreement shall terminate and all rentals, security deposits and other sums paid to the lessor thereunder by Lessee pursuant thereto shall be returned to Lessee within ten (10) days thereafter.

2.           In addition to the conditions to the obligations of Lessor and Lessee hereunder contained in paragraph 1 of this Article II, the obligations of Lessee under this Lease are expressly conditioned on Lessor, at Lessor’s sole cost and expense, obtaining and delivering to Lessee, a Phase I Environmental Site Assessment of the Demised Premises (the “Assessment”) acceptable to Lessee, in Lessee's sole discretion.  If the Assessment reveals any matter that is unacceptable to Lessee, in its sole discretion, or if Lessor shall fail to deliver the Assessment to Lessee within twenty-one (21) days from the date hereof, Lessee shall have the right to terminate this Lease by written notice to Lessor.  Such notice of termination shall be delivered to Lessor the earlier of five (5) business days after Lessee’s receipt thereof or twenty-five (25) days from the date hereof.  If no notice of termination is received by Lessor, Lessee shall be deemed to have waived this condition precedent.  If Lessee elects to terminate this Lease, all rentals, security deposits and other sums paid to Lessor by Lessee pursuant to this Lease shall be returned to Lessee within ten (10) days thereafter, and neither party shall have any further obligation or liability to the other under this Lease except as may be expressly provided for to the contrary hereunder, and provided that the 2006 Lease Agreement shall continue in full force and effect without any effect thereon except as set forth in paragraph 1(d) of this Article II.

ARTICLE III

PROPERTY DESCRIPTION, USE AND CONSTRUCTION OF BUILDING IMPROVEMENTS

1.           Effective as of the Commencement Date (as hereinafter defined), Lessor does hereby lease to the Lessee the Demised Premises which shall consist of (i) the Land and (ii) the Building Improvements.

2.           The Lessee shall use the Demised Premises for warehousing and manufacturing aircraft components and all uses incidental thereto. The Demised Premises may be used by the Lessee for any other legal purpose or purposes in conformity with all laws, rules and regulations applicable to the Demised Premises, and the Ground Lease, provided that prior to using the Demised Premises for any other such purpose or purposes the Lessee shall obtain the prior written consent of Lessor (which will not be unreasonably withheld, delayed or conditioned) and the Port Authority.

3.           The Lessor, at Lessor’s sole cost and expense, shall cause to be constructed the Building Improvements, which shall include a one-story 80,000 square foot building to be constructed in substantial accordance with the plans and specifications therefor approved by Lessor and Lessee, a copy of which plans and specifications is attached to this Lease as Exhibit “A” (the “Approved Final Building Improvements Plans").

4.           Lessor shall obtain all permits necessary for the construction and installation of the Building Improvements.  Subject to any delay resulting from Force Majeure Events, Lessor shall cause the construction of the Building Improvements to be performed diligently and to completion.  The construction of the Building Improvements shall be performed in a first-class and workmanlike manner, using only new and good grades of materials and equipment, in accordance with (i) all applicable zoning and other ordinances, building codes and regulations, statutes, ordinances, codes, standards, regulations, rules, orders, decisions and requirements of all federal, state and local authorities including, without limitation, the Americans with Disabilities Act of 1990 and all regulations thereto issued by the U.S. Attorney General or other authorized agencies under the authority of the Americans with Disabilities Act of 1990, then in effect, as interpreted and applied by state and local governmental authorities having jurisdiction over the Premises, and (ii) the Approved Final Building Improvements Plans.

ARTICLE IV

THE GROUND LEASE

1.           A copy of the Ground Lease (which term shall also include the Primary Lease identified in the Ground Lease) is attached hereto and marked Exhibit "C."

2.           During the term of this Lease, and so long as no event of default has occurred and is continuing hereunder, the Lessor, except as otherwise provided in this Lease, grants to the Lessee all the rights of the Lessor under the Ground Lease to use the Land described in Exhibit "B" and all rights granted to the Lessor pursuant to the Ground Lease. Such grant, as limited by this Lease, is a part of the Demised Premises. This Lease is specifically made subject to all the terms and conditions of the Ground Lease.

3.           Lessee agrees to undertake and perform each and every act required of the Lessor to be performed by the terms of the Ground Lease, including but not limited to the timely payment of all rental and other charges and fees thereunder, and not to do or omit to do anything which will breach the terms thereof.  Lessor agrees not to do or omit to do anything which will breach the terms of the Ground Lease, and further agrees not to agree to any change in the terms of the Ground Lease or exercise or fail to exercise or waive or release any right, power or duty under the Ground Lease which will diminish the Lessee's right or increase its liability thereunder without the written consent of Lessee (including without limitation, the timely exercise of renewal and/or term extension rights). Lessor shall promptly provide Lessee with a copy (in accordance with Article XXV and also by facsimile) of all notices and correspondence relating to the Ground Lease which Lessor believes may adversely affect the rights of the Lessee in the Ground Lease granted hereby.

4.           Notwithstanding the grant to the Lessee pursuant to Paragraph 2 of this Article IV of the rights of the Lessor in the Ground Lease and subject to Lessor's covenants and obligations under Paragraph 2 of this Article IV, the Lessor reserves unto itself the following rights under the Ground Lease:

(a)           The right and power to cure any default under the Ground Lease, and Lessor shall thereupon give notice of such cure to the Lessee;

(b)           The exclusive right to exercise any right to renew or terminate the Ground Lease;

(c)           The exclusive right to assign, sell, transfer, convey, mortgage, encumber or hypothecate any part or all of its right, title and interest in the Ground Lease subject, however, to this Lease;

(d)           The exclusive right to amend, alter or modify in the manner provided in the Ground Lease any of the terms and conditions of the Ground Lease; and

(e)           The exclusive right to waive or release any right granted to Lessor as Lessee under the Ground Lease.

Provided that so long as Lessee is not in default hereunder beyond the expiration of all grace and/or cure periods applicable thereto under this Lease, the Lessor shall not exercise any right granted in this Paragraph in a manner that would diminish the Lessee's rights granted hereby or increase its obligations hereunder as reasonably determined by Lessee.

5.           Lessee shall conduct itself and its use of the Demised Premises in a manner consistent with that required of Lessor (as Lessee under the Ground Lease), and Lessee shall indemnify and hold the Lessor harmless from and against any and all loss, cost, expense or liability (including reasonable attorney's fees) that may arise from or be connected with the failure of the Lessee to do so (but only to the extent such failure does not arise due to the act or omission of Lessor).

6.           Each party agrees to give immediate notice (together with a facsimile copy thereof) to the other of any action taken or threatened by the Port Authority of which either party obtains any actual knowledge, whether by written notice or otherwise, which might terminate or purport to terminate the Ground Lease.

7.           If the Lessee shall fail to timely perform and undertake any acts or duties or shall fail to timely make any payments required of it to be done or paid under the Ground Lease and any such failure continues beyond the expiration of all grace and/or cure periods applicable thereto under the Ground Lease, the Lessor may undertake and perform such acts or duties or make such payments, and the reasonable cost thereof shall become additional rental due hereunder within fifteen (15) days after Lessor invoices Lessee therefor.

8.           If Lessor fails to timely perform and undertake any acts or duties or fails to make any payments required of it to be done or paid under the Ground Lease and any such failure continues beyond the expiration of all grace and/or cure periods applicable thereto under the Ground Lease, Lessee may, but shall not he obligated to, perform such acts or duties or make such payments, and Lessee may deduct the reasonable cost thereof from any future monetary obligation(s) of Lessee accruing hereunder.

9.           Lessor shall indemnify and hold Lessee harmless from and against any default under either the Ground Lease or the Primary Lease which: (A) precedes this Lease; and/or (B) arises from the demise and/or occupancy of the Demised Premises prior to the approval of the Port Authority (or the demising party under the Primary Lease) of this Lease.

10.           Notwithstanding anything herein to the contrary, Lessee shall not be bound to the following provisions of the Ground Lease: Article II (Lease Term); the obligation to make any improvements and Lessee shall not be required to remove any improvements at the end of the term hereof as contemplated in Section 4.2 (Improvements); Section 5.8 (Insurance); and Article VI (Termination), except Lessee shall not act or fail to act in any manner which would be a breach of the Ground Lease.

11.           Notwithstanding anything to the contrary contained in this Lease, Lessor agrees that:

(a)           Lessor shall indemnify and hold Lessee harmless from and against any and all loss, cost, expense or liability (including reasonable attorneys’ fees) incurred by Lessee that may arise from or be connected with any claim or demand made or action taken against Lessee by the lessor under the Ground Lease as a result of any act (including an act of negligence or willful misconduct) or omission of Lessor, its employees, contractors, agents or invitees except to the extent any such act or omission wasoccasioned in whole or in part by any act or omission of Lessee.

(b)           Lessee shall not be liable for the remediation of, or any loss, cost, damage or expense arising out of, any environmental condition existing at the Demised Premises prior to the Commencement Date.

(c)           Lessee shall not be liable for any of the obligations and liabilities of the lessee under the Ground Lease that arise under Sections 5.4, 5.5 or 5.7 of the Ground Lease except to the extent (and only to the extent) any of such obligations or liabilities arise out of Lessee’s use, occupancy, maintenance or repair of or alterations to the Demised Premises and such use, occupancy, maintenance, repair or alteration is in violation of applicable local, state or federal laws and regulations including, without limitation, environmental laws and regulations.  Lessor shall indemnify and hold Lessee harmless from and against any and all loss, cost, expense or liability (including reasonable attorneys’ fees) incurred by Lessee that may arise from or be connected with any claim or demand made or action taken against Lessee by the lessor under the Ground Lease pursuant to any of said Sections 5.4, 5.5 and 5.7 when Lessee has no liability under any of said Sections pursuant to the terms of this subparagraph (c).

(d)           Lessee shall not be responsible for paying the cost of any Site Assessment requested by the lessor under the Ground Lease pursuant to Section 5.6 of the Ground Lease unless such Site Assessment determines that there are Hazardous Materials or Hazardous Materials contamination (as said terms are used and defined in the Ground Lease) on the Demised Premises in violation of any environmental laws and regulations and the presence of such Hazardous Materials or Hazardous Materials contamination in violation of any environmental laws and regulations was occasioned by any act or omission of Lessee.

ARTICLE V

CONDITION OF DEMISED PREMISES

By taking possession of the Demised Premises, Lessee shall be deemed to have inspected same and to have accepted the Demised Premises in their "then" and "as is" condition.  Notwith­standing the foregoing, Lessor does hereby assign unto Lessee all warranties and guarantees it shall receive from its contractor and contractor's suppliers with respect to the Demised Premises and the construction and installation of the Building Improvements.

ARTICLE VI

TERM OF LEASE, CANCELLATION OF EXISTING LEASE

1.           Lessee is to have and to hold the Demised Premises under the terms and conditions herein stated for a period commencing with the Commencement Date (as hereinafter defined) and continuing thereafter for eighty-four (84) months plus the number of days between the Commencement Date and the first day of the month immediately succeeding the Commencement Date (the "Primary Term"). "Commencement Date" shall be 12:01 A.M. of the date immediately succeeding the date of Substantial Completion. "Substantial Completion" shall be midnight of the date upon which the contractor who undertakes the erection of the Building Improvements issues to the Lessor its statement that the Building Improvements are substantially complete in accordance with the Approved Final Expansion Improvement Plans.  The Building Improvements shall be deemed to be substantially complete when (i) there are no details of construction, mechanical adjustments or decoration, or other items that materially interfere with Lessee’s use of the Demised Premises remaining to be done and (ii) Rogers County, Oklahoma has issued all certificates of occupancy or other permits, if any, required by applicable law for Lessee to occupy the Building Improvements.

2.           Upon the Commencement Date, the Existing Lease shall terminate and (i) Lessee shall be entitled to a refund of Rent paid under the Existing Lease, pro rata, for the period from the Commencement Date to the last day of the month in which the Commencement Date occurs and (ii) the security deposit paid by Lessee under the Existing Lease shall be returned to Lessee in accordance with the terms thereof.

ARTICLE VII

RENTAL

1.           Lessee hereby covenants and agrees to pay to Lessor a net rental for the Primary Term (herein called the "Base Rental") over and above the other and additional payments to be made by Lessee as hereinafter provided. The total Base Rental for the Primary Term shall be the sum of Two Million Eleven Thousand Seven Hundred Thirty-Three and 00/100 Dollars ($2,011,733.00). Base Rental shall be paid in advance in monthly installments commenc­ing the first day of the third calendar month immediately succeeding the date of Substantial Completion to be paid in advance on or before the tenth (10th) day of each and every month thereafter through the Primary Term. Should the date of Substantial Completion be a date other than the first day of a month, then Lessee shall pay Lessor rent for the period from the date of Substantial Completion through and including the last day of the month in which Substantial Completion occurs in an amount equal to the amount obtained by multiplying (i) $24,533.33 by (ii) a fraction, the numerator of which is the number of days remaining in the month in which Substantial Completion occurs and the denominator of which is the number of days in the month in which Substantial Completion occurs. References herein to "Rent" shall mean Base Rental and any additional rent required to be paid hereunder.

2.           Installments of Base Rental shall be paid as follows:

(a)           For the two (2) calendar months commencing the first month immediately succeeding the date of Substantial Completion, the sum of Zero Dollars ($00.00) per month.

(b)           For eighty-two (82) months commencing the third calendar month immediately succeeding the date of Substantial Completion, the sum of Twenty Four Thousand Five Hundred Thirty-Three and 33/100 Dollars ($24,533.33) per month.

Installments of Rental for any month Lessee shall hold over after the expiration of the Primary Term shall be the sum of Thirty Six Thousand Four Hundred and No/100 Dollars ($36,800.00) per month.

ARTICLE VIII

PUBLIC UTILITY CHARGES

Lessee shall, at its sole cost and expense, pay, or cause to be paid, all charges for utilities furnished to the Demised Premises or to Lessee with respect to its operations thereon during the term of this Lease, and Lessee will indemnify Lessor and hold it harmless against any liability or damages for any such separately-metered charges incurred by Lessee.

ARTICLE IX

MAINTENANCE AND REPAIR OF THE DEMISED PREMISES

1.           Throughout the term of this Lease, the Lessee, at its sole cost and expense, will take good care of (i) the interior of the portion of the Building comprising a portion of the Demised Premises which shall expressly include, without limitation, windows, doors, lighting, utilities and utility conduits, plumbing and sanitary systems within said portion of the Demised Premises, HVAC systems and equipment serving solely the Demised Premises, security systems and all other improvements located in, on or about the Demised Premises, and the parking areas and the routes of ingress and egress located on the Demised Premises, and will make all necessary repairs thereto except as otherwise provided in Article XIX and condemnation alone excepted. When used in this Article, the term "repairs" shall include all necessary replacements and renewals, but shall in all cases, be exclusive of all Structural Components (as hereinafter defined) of the Demised Premises and the Building except to the extent damaged by the negligence or willful misconduct of Lessee, its agents, servants, employees or invitees and only to the extent not covered by insurance maintained by Lessee.  Lessee shall perform any lawn maintenance required with respect to any lawn area located on the Demised Premises.  As used in this Paragraph 1, the term “Structural Components” shall mean and refer to the roof, exterior siding, foundation, slab, vertical support columns and roof trusses of the Building.  Notwith­standing anything to the contrary contained in this Paragraph 1, Lessee’s obligations under this Paragraph 1 shall not include making (i) any repair or improvement necessitated by the negligence or willful misconduct of Lessor, its agents, employees, servants or contractors; or (ii) any repair or improvement caused by Lessor’s failure to perform its obligations under this Lease.  Lessor shall at its cost, perform all maintenance and repairs and make all replacements, additions and improvements required in order to keep and maintain in good condition, order and repair the Structural Components.  Except for the Structural Components, Lessor shall not be required to maintain or repair any portion of the Demised Premises.

2.           The necessity for and adequacy of repairs to the Demised Premises and the portions of the Building and other areas to be maintained by Lessor and Lessee pursuant to this Lease shall be measured by the then-prevailing standard for improvements of similar construc­tion and class at the Port of Catoosa, and such repairs shall conform to all applicable laws, rules, regulations and restrictions, including the Ground Lease.

3.           The Lessee shall keep the Demised Premises in a clean and orderly condition, free of dirt, unsightly vegetation, rubbish, snow, ice and unlawful obstructions.

4.           In case any dispute shall arise at any time between the Lessor and the Lessee as to the standard of care and maintenance of the Demised Premises, such dispute shall be determined by arbitration under the Oklahoma Uniform Arbitration Act, provided that if the requirement for making repairs or replacements is imposed by: (i) any governmental authority; (ii) any restrictive or affirmative covenants imposed upon the Land, or by or through the Ground Lease; or (iii) by or through the holder of any mortgage to which this Lease is subordinate, then such requirement for repairs or replacements as they relate to the portions of the Demised Premises that Lessee is responsible for maintaining and repairing under this Article IX shall be complied with by the Lessee as required by 1 - 3 above, and shall not be considered an arbitrable dispute as contem­plated by this Article. The Lessee, however, shall have the right to dispute or contest the validity, application or reasonableness of any requirement pursuant to 1 - 3 above, provided such contest or dispute does not breach or violate any of the terms of any such mortgage or the Ground Lease.

ARTICLE X

PAYMENT OF TAXES, ASSESSMENTS, ETC,

1.           Lessee shall pay all taxes, assessments, and other governmental charges of any kind or nature (collectively, "Taxes") which at any time during the term of this Lease may be assessed, levied or imposed by any governmental authority upon or with respect to the Demised Premises.  It is intended that the Taxes to be paid by Lessee hereunder shall include any taxes assessed against the Lessor to the extent that they are measured by the value of the Demised Premises or the value of the interest of the Lessor in the Ground Lease.   Lessor shall send Lessee a copy of any bill for Taxes and any other information accompanying such bill received by Lessor within ten (10) business days after Lessor receives such bill.  All other taxes and charges with respect to the conduct of the Lessee's business therein or any use or occupancy of the Demised Premises, or with respect to or arising from the lease of property pursuant to the Ground Lease, without regard to the person, firm, corporation or partnership against which any such taxes may be assessed shall be paid in full by the Lessee.

2.           Lessee shall timely pay all other charges, fees or assessments of the Port Authority (including Ground Rent and the Port Security charges) in respect of the Demised Premises or the use thereof by the Lessee.

3.           Lessee shall have the right to contest in good faith the amount or validity of any Taxes or assessments required of it to be paid hereunder and the validity of any legislative or administrative action or rule requiring the payment thereof. If such payment may legally be held in abeyance, Lessee may postpone payment thereof until the final determination of any such proceedings, anything herein to the contrary notwithstanding.

4.           Nothing contained in this Lease shall require a party hereto to pay any estate, inheritance, succession, or transfer tax of the other party hereto, nor to pay any taxes of any kind whatsoever which are based upon or measured by income of a party hereto.

ARTICLE XI

COMPLIANCE WITH LAW

1.           Lessee shall, during the Primary Term of this Lease, at its sole cost and expense, comply with all valid laws, ordinances, regulations, orders and requirements of any governmental authority which may be applicable to the Demised Premises, or the use, manner of use or occupancy thereof, and which are specifically attributable to the particular business conducted within the Demises Premises by Lessee whether or not the same involve only non-structural repairs, maintenance or alterations.

2.           Lessee shall have the right, by appropriate legal proceedings in the name of the Lessee or Lessor, or both, but at Lessee's sole cost and expense and without liability to Lessor, to contest the validity of any law, ordinance, order, regulation or requirement, which would impact Lessee's use or occupancy of the Demised Premises. Lessee may postpone compliance until final determination under such proceedings provided such postponement does not breach the Ground Lease or the terms of any mortgage to which this Lease is subordinate.

ARTICLE XII

INSURANCE

1.           From and after the Commencement Date of this Lease, Lessor shall maintain, at its expense, with insurers of recognized responsibility licensed to do business in the State of Oklahoma, a policy or policies of all risk extended coverage insurance covering the Building and all improvements appurtenant thereto providing coverage in such amount as Lessor, in its commercially reasonable judgment, deems sufficient to permit the repair and restoration of the Leased Premises to substantially the same condition as existed prior to the occurrence of any loss covered under such policy and providing protection against loss or damage by fire and such other risks of a similar or dissimilar nature, as are or shall be customarily covered with respect to buildings similar in construction, general location, use and occupancy to the Building, including, but not limiting the generality of the foregoing, flood, windstorm, hail, earthquake, explosion, vandalism, damage from vehicles, smoke damage and such other damage as may be deemed reasonably necessary by Lessor.  Lessee shall promptly reimburse Lessor for the cost of such insurance upon submission by Lessor to Lessee an invoice therefore.

2.           The Lessee shall, without diminishing any other obligation it may have under this Lease, cause to be maintained, at no cost or expense to the Lessor, commercial general liability and property damage insurance covering claims for personal injury or property damage with respect to Tenant’s activities and property in, on and about the Demised Premises.  Such insurance shall have limits of not less than Two Million Dollars ($2,000,000.00) general aggregate annually.  Lessor may request that the amount such insurance maintained by Lessee be increased from time to time during the term provided, however, that Lessor may not request such an increase any more frequently than once every three (3) years.

3.           All insurance provided by Lessee shall be effected under enforceable policies issued by insurers of recognized responsibility licensed to do business in the State of Oklahoma.  At least fifteen (15) days prior to the expiration date of any policy, a certificate evidencing the continuation of coverage shall be delivered by the Lessee to the Lessor.

4.           All policies of insurance contemplated by Paragraph 2 above, shall name the Lessor, the Lessee and such persons and entities as the Ground Lease or the holder of any mortgage on the Demised Premises may require as additional insureds or loss payees as their respective interests may appear. At the request of the Lessor, any insurance policy contemplated herein shall be made payable to the holders of any mortgage to which this Lease is at any time subordinate, as the interest of such holders may appear, pursuant to a standard clause for holders of mortgages.

5.           All policies provided by Lessee shall contain an agreement by the insurers:

(a)           that any loss shall be payable to the Lessor or the holders of any such mortgage, notwithstanding any act or negligence of the Lessee which might otherwise result in forfeiture of such insurance;

(b)           that such policies shall not be canceled except upon thirty (30) days' prior written notice to the Lessor, to all other insureds, and to the holders of any mortgage to whom loss may be payable; and

(c)           that the coverage afforded thereby shall not be affected by the performance of any work in or about the Demised Premises.

6.           If the Lessee provides any insurance required by this Lease in the form of a blanket policy, the Lessee shall furnish satisfactory proof that such blanket policy complies in all respects with the provisions of this Lease, and that the coverage thereunder is at least equal to the coverage which would be provided under a separate policy covering only the Demised Premises.

7.           Notwithstanding anything herein to the contrary, Lessor and Lessee each hereby releases the other, its officers, directors, partners, agents and employees, to the extent of the releasing party’s coverage under its insurance policies, from any and all liability for any loss or damage which may be inflicted upon the property of such party, notwithstanding that such loss or damage shall have arisen out of the negligence of the other party, its officers, directors, partners, agents or employees; provided, however, that this release shall be effective only with respect to occurrences occurring during such time as the appropriate policy of insurance of the party so releasing shall contain a clause to the effect that such release shall not affect the said policy or the right of the insured to recover thereunder.

ARTICLE XIII

INSTALLATION OF EQUIPMENT AND FIXTURES

Lessee shall have the right, at any time and from time to time during the term of this Lease, to install in and upon the Demised Premises, fixtures, machinery and equipment, and to make repairs thereto, replacements thereof, and additions thereto. Any fixtures, machinery and equipment so added shall be removed by the Lessee prior to the termination of this Lease. When such fixtures, machinery and equipment are so removed, the Lessee shall restore the Demised Premises to the same condition such premises were in prior to such installation. Lessor may, at its option, relieve Lessee from the obligation to remove any such fixtures, machinery or equipment, and any such fixtures, machinery and equipment not removed by Lessee shall become the property of Lessor.

ARTICLE XIV

ALTERATIONS AND IMPROVEMENTS BY LESSEE

1.           Lessee shall have the right, at any time and from time to time during the term of this Lease, to make at its sole cost and expense and without any right to receive reimbursement from the Lessor in respect thereof, any alterations or improvements or additions to the Demised Premises or any part thereof, subject, however, to the following conditions:

(a)           No alterations, additions or improvements shall be undertaken until Lessee shall have procured all permits, licenses and other authorizations required for the lawful and proper undertaking thereof.

(b)           Any such alteration, addition or improvement shall be made in a good and workmanlike manner and in compliance with all valid laws, governmental orders and building ordinances and regulations pertaining thereto, and shall be of a class and standard comparable to the class and standard of construction then utilized at the Port of Catoosa, but not less than the original standard and class of construction of the Demised Premises.

(c)           Lessee shall maintain, at its sole cost and expense, general public liability insurance and workmen's compensation insurance covering all persons employed in connection with such work and with respect to whom death or injury claims could be asserted against Lessor, Lessee or the Demised Premises.

(d)           All alterations, additions or improvements when completed shall be of such a nature as not to reduce or otherwise adversely affect the value of the Demised Premises, nor to diminish the general utility or change the general character of the Demised Premises, or which would violate any of the provisions of the Ground Lease.

(e)           No alterations, additions or improvements are to be made by Lessee without first submitting to the Lessor and the Port Authority the plans and specifications thereof, and without the written approval of the Lessor and the Port Authority of such plans and specifications. Lessor's approval of such plans and specifications shall not be unreasonably withheld, delayed or conditioned, and Lessor shall assist Lessee in obtaining the Port Authority's approval thereof.

(f)           All such alterations, additions and improvements shall be undertaken and completed in substantial conformity with the plans and specifications approved by the Lessor and the Port Authority.

(g)           All such alterations and improvements shall become and be the properly of the Lessor and shall be subject to all the terms and conditions of this Lease.

(h)           Two (2) copies of as built plans and specifications shall be delivered to Lessor within thirty (30) days after completion of each such alteration or improvement and such copies shall become the sole and exclusive property of Lessor.

ARTICLE XV

LIENS

Lessee agrees that it shall not create, permit or suffer an imposition of any lien, charge or encumbrance upon the Demised Premises, or upon any interest of the Lessor and Lessee in the Ground Lease or any part thereof, except liens, charges and encumbrances created by Lessor and the lien of any taxes and assessments not delinquent.  Should any such lien be asserted or filed, Lessee shall bond against or discharge the same in accordance with the requirements of Oklahoma Statutes Section 42-147.1 within thirty (30) days after written request by Lessor.  The provisions of this Article XV shall not apply to any mechanic’s, materialmen’s or other lien against the Demised Premises and/or Lessor’s interest therein for any labor, services, materials, supplies, machinery, fixtures or equipment furnished to the Demised Premises in connection with any work performed by or for Lessor, and Lessor does hereby agree to indemnify and defend Lessee against and save Lessee, the Demised Premises, and any portion thereof harmless from all losses, costs, damages, expenses, liabilities and obligations, including, without limitation, reasonable attorneys’ fees and expenses, resulting from the assertion, filing, foreclosure or other legal proceedings with respect to any such lien.

ARTICLE XVI

ASSIGNMENT, TRANSFER OR MORTGAGE OF LESSEE'S INTEREST

1.           Lessee shall not, without prior written consent of Lessor, which shall not be unreasonably withheld, delayed or conditioned, sublet all or a portion of the Demised Premises, or assign, transfer or mortgage this Lease or any interest therein. Lessee acknowledges that the Port Authority, pursuant to the Ground Lease, must also approve such assignment. Should Lessee sublet or assign this Lease, Lessee and its Guarantor shall nevertheless remain liable to the Lessor for the full payment of the Rent and Lessee's other obligations under this lease.

2.           Anything to the contrary contained herein notwithstanding, Lessee may transfer, assign, sublet, or change ownership of this Lease or Lessee's interest in and to the Demised Premises (a “Transfer”) without the prior written consent of Lessor to:

(a)           an affiliate, subsidiary or parent entity;

(b)           any entity it controls, is controlled by, or is under common control with;

(c)           any entity in which it has a majority interest or of which it is manager; or

(d)           any entity that succeeds to or obtains all or substantially all of its assets, whether by merger, consolidation, reorganization, sale or otherwise (each, a "Permitted Transferee"). Lessee shall promptly provide Lessor notice of such Transfer. Lessee shall be relieved of any obligations under the Lease arising after Transfer to a Permitted Transferee. Lessee may collaterally assign its leasehold interest as security to a reputable lender without the prior written consent of Lessor.

ARTICLE XVII

INDEMNIFICATION OF LESSOR

1.           Lessee hereby releases and discharges Lessor from, and shall fully protect, indemnify and keep, hold and save Lessor harmless from and against any and all costs, charges, expenses, penalties, damages and liability imposed for or arising from the violation of any law or regulations of the United States, the State of Oklahoma, and local authorities, or any of such entities' agencies and instrumentalities, occasioned by any act or omission of Lessee or its representatives, assigns, agents, servants, employees, licensees, invitees, and any other person or persons occupying the Demised Premises under Lessee; and Lessee shall further protect, fully indemnify and save forever harmless Lessor from and against any and all loss, liability, cost, damage and expense incident to injury (including injury resulting in death) of persons or damage to or destruction of properly incident to, arising out of the negligence or misconduct of Lessee (or Lessee's contractors, agents or invitee's) in connection with Lessee's use and occupancy or rights of use and occupancy of the Demised Premises (whether by omission or commission and irrespective of exclusive or non-exclusive rights therein) including, but not limited to, the operation of Lessee's business, the construction, erection, installation, existence, repair, maintenance, alteration and/or demolition of any improvements, facilities, and/or equipment or the conduct of any other activities, and which would not have arisen but for the exercise or pursuit by Lessee of the rights and privileges accorded by this Lease or the failure on Lessee's part in any respect to comply with the requirements of this Lease, except such loss caused by the act or negligence of the Lessor or its employees, contractors, agents or invitees, and further except such loss caused solely by the Port Authority.

2.           In the event that any action or proceeding shall be brought against Lessor by reason of any claim covered by this Article, Lessee, upon written notice from Lessor, will, at Lessee's sole cost and expense, resist or defend the same by counsel approved in writing by the Lessor, which approval shall not be withheld unreasonably.

ARTICLE XVIII

REMEDIES OF LESSOR

1.           The occurrence of any of the following shall constitute an event of default:

(a)           Lessee shall fail to pay any monies which are required to be paid by Lessee under this Lease and such failure shall continue for three (3) business days after Lessee's receipt of written notice thereof; or

(b)           Lessee shall default in the performance or compliance with any of the other terms or provisions of this Lease or the Ground Lease, and such default shall continue for a period of fifteen (15) days after Lessee's receipt of written notice thereof from Lessor or, in the case of any such default which cannot with due diligence be cured within fifteen (15) days, Lessee shall fail to proceed promptly after Lessee's receipt of such notice and with due diligence to cure such default and thereafter to prosecute the curing thereof with due diligence (it being intended that as to a default not susceptible of being cured with due diligence within fifteen (15) days, the time within which such default may be cured shall be extended for such period as may be necessary to permit the same to be cured with due diligence). Provided, however, no period herein granted to cure a default shall extend beyond a date five (5) days prior to the date that the Lessor under the Ground Lease or the holder of any mortgage or mortgages secured by the Demised Premises declares the default hereunder a default under such Ground Lease or mortgage and Lessor shall separately notify Lessee in writing of such five (5) day deadline at least five (5) days, and not more than thirty (30) days in advance of such five (5) day deadline; or

(c)           Lessee shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, composition, readjustment or similar relief under any present or future bankruptcy or other applicable law, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Lessee, or of all or any substantial part of its properties; or

If, within thirty (30) days after the filing of an involuntary petition in bankruptcy against Lessee or the commencement of any proceeding against Lessee seeking any reorganization, composition, readjustment or similar relief under any law, such proceeding shall not have been dismissed, or if within thirty (30) days after the appointment without the consent or acquiescence of Lessee or any trustee, receiver or liquidator of Lessee, or of all or any substantial part of its properties, such appointment shall not have been vacated or stayed on appeal or otherwise, or if within thirty (30) days after the expiration of any such stay, such appointment shall not have been vacated. For the purposes of this paragraph, in lieu of obtaining the dismissal, vacation or stay of any of the foregoing, Lessee may provide a reasonable bond or other securitization in favor of Lessor.

2.           Upon the occurrence of an event of default, the Lessor at any time thereafter may give written notice to the Lessee specifying such event of default and stating that this Lease shall expire on the date specified in such notice, which shall be at least thirty (30) days after Lessee's receipt of such notice, and upon the date specified in such notice, this Lease and all rights of the Lessee hereunder shall terminate.

3.           Upon the expiration of this Lease pursuant to paragraph 2 of this Article XVIII, the Lessee shall peacefully surrender the Demised Premises to Lessor, and the Lessor, upon or at any time after any such expiration, may, without further notice, re-enter the Demised Premises and repossess it by force, summary proceedings, ejectment, or otherwise, and may dispossess the Lessee and remove the Lessee and all other persons and property from the Demised Premises and may have, hold, and enjoy the Demised Premises and the right to receive all rental income therefrom.

4.           At any time after any such expiration, the Lessor may relet the Demised Premises or any part thereof, in the name of Lessor or otherwise, for such term (which may be greater or less than the period which would otherwise have constituted the balance of the term of this Lease) and on such conditions (which may include concessions or free rent) as the Lessor, in its reasonable discretion, may determine and may collect and receive the rents therefor. Lessor shall in no way be responsible or liable for any failure to relet the Demised Premises or any part thereof or for any failure despite its reasonable efforts to collect any rent due upon any such reletting.

5.           No such expiration of this Lease shall relieve the Lessee of its liabilities and obligations under this Lease, and such liability and obligations shall survive any such expiration. In the event of any such expiration, whether or not the Demised Premises or any part thereof shall have been relet, the Lessee shall pay to the Lessor the Base Rent and the additional rent, charges and expenses required to be paid by the Lessee up to the time of such expiration, and thereafter the Lessee, until the end of what would have been the term of this Lease in the absence of such expiration, shall be liable to the Lessor for, and shall pay to Lessor, as and for liquidated and agreed current damages for the Lessee's default:

(a)           the equivalent of the amount of the Base Rent, charges, expenses and additional rent which would be payable under this Lease by the Lessee if this Lease were still in effect, less

(b)           the net proceeds of any reletting effected pursuant to the provisions of Paragraph 4 of this Article XVIII, after deducting all the Lessor's expenses in connection with such reletting, including, without limitation, all reasonable repossession costs, advertising costs, brokerage commissions, legal expenses, attorney's fees, alteration costs, and expenses of preparation for such reletting.

The Lessee shall pay such current damages, herein called deficiency, to the Lessor monthly on the days on which the Base Rent, charges, expenses and additional rent would have been payable under this Lease if this Lease were still in effect, and the Lessor shall be entitled to recover from the Lessee each monthly deficiency as such deficiency shall arise.

6.           At any time after any such expiration, whether or not the Lessor shall have collected any monthly deficiency, the Lessor shall be entitled to recover from the Lessee and the Lessee shall pay to the Lessor, on demand, as and for liquidated and agreed final damages for the Lessee's default, an amount equal to the difference between the Base Rent, charges, expenses and additional rent reserved hereunder from the date of expiration for the unexpired portion of the Lease term and the then fair and reasonable rental value of the Demised Premises for the same period. In the computation of such damages, the difference between any Base Rent, charges, and expenses becoming due hereunder after the date of expiration and the fair and reasonable rental value of the Demised Premises for the period for which such Base Rent, charges and expenses were payable shall be discounted to the date of expiration at the rate of six percent (6%) per annum and to such sum shall be added all costs of Lessor in recovery thereof including, but not limited to, a reasonable attorney fee. If the Demised Premises or any part thereof is relet by the Lessor for the unexpired term of this Lease or any part thereof, before presentation of proof of such liquidated and agreed damages to any court or tribunal, the amount of rent reserved upon such reletting shall, at the option of the Lessor, be deemed prima facie to be the fair and reasonable rental value for the part or the whole of the Demised Premises so relet during the term of the reletting.

7.           In addition to any of the foregoing remedies available to the Lessor under this Article XVIII, the Lessor may pursue any other remedy or remedies available to Lessor at law or in equity, including, but not limited to, recovery of reasonable attorney's fees incurred by Lessor due to Lessee's breach hereof and its costs of any actions undertaken to enforce Lessor's rights hereunder. All remedies available to the Lessor hereunder may be pursued by the Lessor in one or more causes of action, and the Lessor shall not be required to elect the remedy or remedies it desires to pursue but may submit all remedies to the trier of fact for purposes of determining damage and recovery.

8.           The Lessee hereby expressly waives, so far as permitted by law, the service of any notice of intention to re-enter provided for in any statute or of the institution of legal proceedings to that end. The Lessee, for and on behalf of itself and all persons claiming through or under the Lease, also waives any right of redemption or re-entry or repossession or to restore the operation of this Lease in case the Lessee shall be dispossessed by a judgment or by order of any court or judge, or in case of re-entry or repossession by the Lessor, unless the Demised Premises has not been re-let at such time.

ARTICLE XIX

CASUALTY

1.           No destruction or damage to the Building or other improvements on the Demised Premises by fire, windstorm or any other casualty or occurrence whatsoever which materially adversely interferes with Lessee's conduct of its business within the Demised Premises shall entitle the Lessee to surrender possession of the Demised Premises, to terminate this Lease, to violate any of its provisions, or to cause any rebate or abatement in rent, charges, or expenses then due or thereafter becoming due under the terms hereof.

2.           Lessor shall promptly repair, at no cost to Lessee, any casualty contemplated by Paragraph 1 which may occur to the Demised Premises. However, should there occur any casualty which materially adversely interferes with Lessee's conduct of its business (as described in Paragraph 1 of this Article), Lessor may, within ninety (90) days after said casualty elect not to rebuild or repair the Demised Premises. Should Lessor make such election, this Lease shall terminate as of the expiration of said ninety (90) day period.  Notwithstanding anything to the contrary contained in this Article XIX, if Lessor does not elect to terminate this Lease and thereafter Lessor shall not have repaired such damage or destruction within one hundred twenty (120) days of such damage or destruction, upon the expiration of said one hundred twenty (120) day period, Lessee may give Lessor thirty (30) days’ notice that it elects to terminate this Lease.  Upon expiration of such thirty (30) day period, if Lessor has not completed such repairs, this Lease shall terminate and the Lessee shall receive a refund of the security deposit and an abatement of all rent and other sums paid by Lessee to Lessor hereunder from the date of such casualty event through the effectiveness of Lessee’s termination notice.

ARTICLE XX

RIGHT OF ENTRY

Lessor and its representatives may, upon reasonable prior notice to Lessee (which may be oral), enter the Demised Premises at any reasonable time during Lessee’s normal business hours when a representative of Lessee may accompany Lessor and/or its representatives, for the purpose of inspecting the Demised Premises, performing any work contemplated by this Lease to be performed by Lessor or which the Lessor elects to undertake made necessary by reason of the Lessee's default under the terms of this Lease, exhibiting the Demised Premises for sale, lease (provided that Lessor may only exhibit the Demised Premises for lease during the last twelve (12)  months of the Primary Term) or mortgage financing, or posting notice of non-responsibility under any mechanic's lien law.

ARTICLE XXI

SUBORDINATION TO GROUND LEASE AND MORTGAGE

This Lease shall be subject and subordinate at all times to the Ground Lease, the lien of any mortgage which may now or hereafter affect the Demised Premises, and to all renewals, modifications, amendments, consolidations, replacements and extensions thereof; provided, however, that with respect to any lease, lien, mortgage or other encumbrance which arises subsequent to the Commencement Date, the subordination of this Lease shall be expressly conditioned upon the prior receipt of a non-disturbance agreement in favor of Lessee, in a form approved by Lessee in Lessee's reasonable discretion. Subject to the foregoing, the Lessee will execute and deliver any instrument which may be reasonably required by the Lessor in confirmation of such subordination promptly upon the Lessor's request.

ARTICLE XXII

ESTOPPEL CERTIFICATE

1.           The parties agree that at any time, upon the request of the other party or its lender(s), the requesting party will execute and promptly deliver to the other, or any person or entity designated by the requesting party, a statement in writing stating and certifying in substance as follows:

(a)           That the Lessee is in possession of the Demised Premises, together with all rights and obligations attendant thereto pursuant to this Lease;

(b)           That there has been no modification of the rights, duties and obligations set forth in this Lease (unless there has been such modification, in which event a copy or copies thereof shall be furnished by the other party contemporaneously with furnishing said certificate);

(c)           That the other party has no knowledge of any default by either party of any of the rights, duties and obligations set forth in this Lease (or if there has been default, specifying each such default of which the other party shall have knowledge);

(d)           Such other matters as may reasonably be requested by the requesting party or its lender(s).

2.           The parties hereby warrant that any such statement as may be given hereunder may be relied upon by any party to whom such certificate is addressed.  The parties further specifically acknowledge that after delivery of such certificate that party will be estopped from asserting any claim or defense it may have which was known to that party prior to the date thereof and not specifically set forth therein, as against any person, firm, corporation, or other entity to whom such certificate is addressed.

ARTICLE XXIII

ENTIRETY

This Lease Agreement constitutes the entire understanding and agreement by and between the parties hereto and supersedes any and all prior negotiations, written or oral agreements, understandings, representations, warranties or statements at any time made or had by and between the parties hereto. Except as specifically provided by the terms of this Lease Agreement, there are no covenants, agreements, understandings, warranties, or representations by and between the parties hereto affecting any of the subject matters hereof or binding upon either of the parties hereto.

ARTICLE XXIV

QUIET ENJOYMENT SUBJECT TO

EASEMENTS, RIGHTS-OF-WAY AND RIGHTS OF USER

Lessor agrees that Lessee, upon paying all rental and all other charges herein provided for, and observing and keeping the covenants, agreements, terms and conditions of this Lease on its part 'to be performed, including compliance with the terms and conditions of the Ground Lease, shall lawfully and quietly hold, occupy and enjoy the Demised Premises during the term of this Lease, and subject to its terms without hindrance or molestation by Lessor, or by any other person or persons claiming under Lessor, except for the Ground Lease, the mortgagee under any mortgage to which this Lease is subordinate, those easements, rights-of-way and rights of users to which the Demised Premises, the Ground Lease and the property covered by the Ground Lease, are subject.

ARTICLE XXV

MISCELLANEOUS

1.           Any notices under this Lease shall be given by (i) mailing the same by registered or certified mail; or (ii) by hand delivery; to Lessor or Lessee, as the case may be, addressed as

(a) In the case of notice to Lessee: LMI FINISHING, INC. 3600 Mueller Road St. Charles, Missouri 63302-0900 Attention: Robert T. Grah Facsimile:(636) 916-2198

with a copy to:     Gallop, Johnson & Neuman, L.C. 101 S. Hanley, Suite 1700 St. Louis, Missouri 63105 Attention:  Sanford S. Neuman Facsimile:  (314) 615-6001

(b) In the case of notice to Lessor: PORT PARTNERSHIP-I, LLP P. O. Box 4648 Tulsa, Oklahoma 74159 Attention: Robert S. James Facsimile: (918) 582-6298  

with copy to:     James, Potts & Wulfers, Inc.     2600 Mid Continent Tower     401 S. Boston Avenue     Tulsa, Oklahoma 74103     Attention: David F. James     Facsimile: (918) 584-4521

Either party may, from time to time, change the foregoing address for notice by giving notice to the other party in the manner provided in this Paragraph 1. Notice shall be deemed received as of 12:00 noon the third business day following the day such notice was mailed (or upon delivery or refusal of delivery, if hand delivered) as above provided. Upon any notice being issued, a copy thereof shall be contemporaneously faxed to the parties at the numbers provided above.

2.           The parties agree that if it should ever be held by a court of competent jurisdiction that any one or more sections, clauses or provisions of this Lease are invalid or ineffective for any reason, any such section, clause or provision shall be deemed separate from the remainder of this Lease and shall not affect the validity and enforceability of such remainder.

3.           The covenants, terms, conditions and obligations set forth and contained in this Lease shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors and assigns.

4.           The article headings and captions contained herein are included for convenience only and shall not be considered a part hereof or affect in any manner the construction or interpretation of this Lease.

5.           The parties understand and agree that this Lease, its terms and conditions and any interpretations thereof, shall be governed by the laws of the State of Oklahoma.

6.           The parties will, at any time at the request of either one, execute duplicate originals of an instrument in recordable form which will constitute a short form or memorandum of lease, setting forth a description of the Demised Premises, the term of this Lease and any other portions hereof, except the rent provisions, that either party may request or as the applicable recording law may require.

7.           Except as otherwise specifically provided herein, all acts, duties or payments required of the Lessee to be made or done under this Lease shall be "timely" made or done if completed or made not less than five (5) days prior to the date the failure to make or do same would be a default under the Ground Lease or otherwise be a default or delinquency. Upon individual written request, satisfactory evidence of the performance of such acts, duties or payments shall be delivered to Lessor by Lessee contemporaneous with the performance thereof.

8.           Except as otherwise provided in Article XXII, Estoppel Certificate, waiver by any party of any breach or default of this Lease shall not be deemed a waiver of similar or other breaches or defaults, nor shall the failure of any party to take any action by reason of any such breach of default deprive such party of the right to take action at any time while such breach or default continues. The rights and remedies created by this Lease shall be cumulative and nonexclusive of those to which the parties may be entitled at law and equity. Right of exercise of all such rights and remedies is hereby reserved. The use and availability of one remedy shall not be taken to exclude or waive the right to use of another. In order to entitle any party to exercise any remedy reserved to it in this Lease, it shall not be necessary to give any notice, other than such notice as is herein expressly required.

9.           In the event either party initiates formal legal action in connection with the enforcement or interpretation of this Lease, the prevailing party in such action shall be entitled to reimbursement of reasonable attorneys' fees, expenses and costs of suit.

IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the day and year first above written.

"LESSOR"

PORT PARTNERSHIP-I, LLP

an Oklahoma limited liability partnership

By:_____________________________________

Its_________________________________

STATE OF  OKLAHOMA )

)ss.

COUNTY OF TULSA                          )

THE ABOVE AND FOREGOING instrument was acknowledged before me this ______ day of _________________, 2006, by __________________________________, ______________ , an _____________________, on behalf of the ___________________.

(SEAL)

________________________________________

Notary Public

My commission expires:

[Signatures continued on following page]

"LESSEE"

LMI FINISHING, INC. an Oklahoma corporation

By:_______________________________________

       Robert T. Grah

Its:________________________________________

STATE OF   ) 

  )ss.

COUNTY OF          )

THE ABOVE AND FOREGOING instrument was acknowledged before me this ______ day of _________________, 2006, by Robert T. Grah, ________, President of LMI Finishing, Inc., an Oklahoma corporation, on behalf of the corporation.

(SEAL)

________________________________________

Notary Public

My commission expires:

The performance of the obligations of the Lessee or any Permitted Transferee hereunder is Guaranteed by Lessee’s parent corporation, LMI Aerospace, Inc.

LMI AEROSPACE, INC.

By:_______________________________________

       Lawrence E. Dickinson

Its Chief Financial Officer

Exhibit C

CONTRACT NO. 24244

LEASE AGREEMENT

BETWEEN

THE CITY OF TULSA-ROGERS COUNTY PORT AUTHORITY

PORT PARTNERSHIP, L.L.P.

July 1, 2004

RECITALS			1
ARTICLE I.		PREMISES	1
	1.1	Leased Premises	1
	1.2	Use of Premises	1
	1.3	Building and Development Regulations	1
	1.4	Acceptance of Leased Premises in Present Condition	2
	1.5	Covenent to Build	2
ARTICLE II.		LEASE TERM	2
	2.1	Primary Lease Term	2
	2.2	Renewal Terms	2
	2.3	Assignment of Lease	2
ARTICLE III.		RENTALS	3
	3.1	Primary Term Rentals	3
	3.2	Additional Rentals	3
	3.3	Renewal Term(s) Rentals	4
ARTICLE IV.		IMPROVEMENTS	5
	4.1	Notice and Submission of Plans	5
	4.2	Improvements	5
	4.3	Utilities and Services	5
	4.4	Easements	5
	4.5	Access	6
	4.6	Signs	6
	4.7	Lien Claims	7
	4.8	Inspection and/or Repair of Premises	7
ARTICLE V.		OPERATIONS	7
	5.1	Pollution Control	7
	5.2	Compliance with Laws and Regulations	7
	5.3	Maintenance of Adjoining Grounds	8
	5.4	Indemnification	8
	5.5	Use Prohibition and Duties (Environmental)	8
	5.6	Site Assessments	9
	5.7	Environmental Indemnification	10
	5.8	Insurance	10
ARTICLE VI.		TERMINATION	11
	6.1	Termination	11
	6.2	Events of Default	11
	6.3	Cancellation	12
	6.4	Right of Re-entry	12
	6.5	Holding Over	13
	6.6	Waiver of Breach or Default Cumulative Remedies	13

ARTICLE VII		MISCELLANEOUS	13
	7.1	Examination of Lessee’s Records	13
	7.2	Lessor’s Leasehold Interest	13
	7.3	Reimbursement of Survey Expense	14
	7.4	Quiet Enjoyment	14
	7.5	Notices	14
	7.6	Nondiscrimination	14
	7.7	Navigability	14
	7.8	Substitution of Performance	14
	7.9	Exhibits and Attachments	15
	7.10	Authority	15
	7.11	Entire Agreement	15
	7.12	Captions	15
	7.13	Severability	15
	7.14	Successors and Assigns	15
	7.15	Governing Law	15
	7.16	Counterparts	15
EXECUTION BLANKS			16
ACKNOWLEDGEMENTS			17
EXHIBITS

AMENDED AND RESTATED

LEASE AGREEMENT

This Lease Agreement (“Lease”) is entered into effective July 1, 2004, between THE CITY OF TULSA-ROGERS COUNTY PORT AUTHORITY, an agency of the State of Oklahoma (“Lessor”), with offices at 5350 Cimarron Road, Catoosa, Oklahoma 74015, and Port Partnership, L.L.P. an Oklahoma limited liability partnership (“Lessee”). Lessor and Lessee are collectively referred to herein as the “Parties”.

W I T N E S S E T H:

A.           Lessor is the governing body for and the sole and principal operator of a water port terminal and related industrial park located in Rogers County, State of Oklahoma, referred to herein as the “Tulsa Port of Catoosa”. Lessor operates the Tulsa Port of Catoosa in part under a Master Lease Agreement with the City of Tulsa, Oklahoma, a municipal corporation (“City”).

B.           Lessor desires to lease certain lands and/or facilities, comprising a portion of the Tulsa Port of Catoosa, to industries involved in moving raw materials and finished products in water commerce and to such other industries as may be engaged in industrial activities.

C.           Lessee desires to lease a portion of the industrial park premises for the use and purposes set forth in this Lease.

NOW, THEREFORE, for and in consideration of the terms, covenants and conditions hereinafter set forth and contained, the Lessor and Lessee mutually contract and agree as follows:

ARTICLE I.  PREMISES

1.1           Leased Premises.  Lessor hereby leases, and lets unto Lessee and Lessee hereby leases and lets from Lessor a certain parcel and tract of land, together with certain easements, located at and within the Tulsa Port of Catoosa, comprising approximately 7.7 acres, together with improvements located thereon, all of which real and personal property is referred to collectively as the “Leased Premises” and is more fully described on Exhibit “A”, attached hereto and by this reference made a part of this Lease.

1.2           Use of Premises. The Leased Premises are to be occupied and used by Lessee for sublease to LMI Finishing, Inc., for a warehouse and distribution operation and to Oklahoma Installation Company for manufacturing of commercial and household surfaces and fixtures and the operation of services and conduct of business activities related and incident thereto. In the event Lessee for any reason desires hereafter to modify and/or change its use of the Leased Premises, the nature and terms of such modified use, if approved by Lessor, shall be reduced to a written agreement of the Parties and made a part of this Lease. Lessor agrees that it will not unreasonably withhold or delay its consent to any proposed compatible change in use. (The term’s of Lessor’s consent to sublease for both sublessees are hereby incorporated into this agreement and attached as Exhibit “D”.)

1.3           Building and Development Regulations. Lessee covenants that any, every and all uses of the Leased Premises hereunder shall comply with Lessor’s Building and Development Regulations and certain provisions of its Master Plan of Development (collectively the “Building and Development Regulations”), copies of which are attached hereto designated Exhibit “B” and by this reference made a part of this Lease. The Parties understand that the Building and Development Regulations may from time to time be amended and/or otherwise modified by Lessor. Lessor and Lessee agree that the Building and Development Regulations in effect on the date Lessee shall have submitted its improvement or premises utilization plans for approval, pursuant to the provisions of Section 4.1, shall control Lessee’s construction efforts and utilization of the Leased Premises (so long as such utilization is substantially similar to that initially approved in connection with this Lease).

1.4           Acceptance of Leased Premises in Present Condition. Lessee acknowledges that it has inspected the Leased Premises and accepts the same in its present condition “as is” and that all terms and conditions of this Lease are fully binding upon Lessee as if, and to the same extent that, the existing improvements had been made by Lessee as original lessee.

1.5           RESERVED

ARTICLE II.  LEASE TERM

2.1           Primary Lease Term. The primary term of this Lease (“Primary Term”) shall be for a period of 10 years from and after July 1, 2004 (“Commencement Date”), and terminating on June 30, 2014 unless otherwise terminated, renewed or extended pursuant to other terms of this Lease. The term of the Lease, which includes the Primary Term and all effective renewals and extensions, shall for convenience be referred to as the “Lease Term.”

2.2           Renewal Terms. Provided Lessee is not in default and this Lease is otherwise in full force and effect, Lessee is granted the option to renew this Lease upon the same terms and conditions (subject to adjustment of rentals as set forth in Section 3.3 and subject to modifications required to conform this Lease to the terms of Lessor’s then current form of lease agreement), for two (2) additional term(s) of ten (10) years each: such option to be exercisable upon the giving of written notice of intent to renew by Lessee to Lessor not earlier than 180 days and not later than 120 days prior to the expiration date of the then current primary or option term.

2.3           Assignment of Lease. Lessee shall not sublet, mortgage or pledge this Lease or any interest herein or in the Leased Premises or any part of the same or assign this Lease or any interests herein or portion hereof, nor shall any assignment of any interest(s) of Lessee herein by operation of law or by reason of Lessee’s bankruptcy become effective, without the prior written consent of the Lessor, which consent shall not be unreasonably withheld or delayed. No sublease or assignment arrangement conditionally consented to by Lessor shall be or become effective unless and until Lessee has delivered to Lessor a written assignment and assumption agreement by the sublessee or assignee in a form approved by Lessor, together with adequate assurance of sublessee’s or assignee’s ability to perform, accept, observe and be bound by each and all of the terms, provisions and stipulations of this Lease provided in a form acceptable to Lessor in the exercise of its sole discretion; and provided further, that any subletting or transfer shall not extend beyond the Primary Term or permitted extension(s) hereof, nor shall any subletting or transfer release or relieve Lessee of any obligations to Lessor hereunder. Written approval shall not be required with respect to any mortgages, assignments or pledges respecting any improvements for facilities constructed, erected, installed or maintained by Lessee upon the Leased Premises except as now or hereafter otherwise provided herein.

ARTICLE III. RENTALS

3.1           Primary Term Rentals. Lessee shall pay to Lessor lease rental during the Primary Term as follows:

(a)           RESERVED

(b)           Monthly Rentals. Commencing July 1, 2004, and continuing thereafter on the first day of each consecutive month of the Primary Term, Lessee shall pay to Lessor the sum of $2,781.63. Monthly rentals shall be adjusted during and after the Primary Term in accordance with the other provisions of the Lease.

(c)           RESERVED

3.2           Additional Rentals. In addition to the rentals provided in Section 3.1, and as additional rental charges, Lessee shall pay to Lessor the following sums:

(a)           Security. Lessor will contract to provide cooperatively financed and administered security services at Tulsa Port of Catoosa on behalf of its lessees, invitees, operators and users. Lessee agrees to pay its pro rata share of the costs of such security services based on a degree-of-risk formula established by Lessor for all of Lessor’s lessees. The Parties agree that no representations as to the adequacy of the security services are made by Lessor. Neither Lessor nor its officers, directors, agents, servants, representatives or employees shall be directly or indirectly liable to Lessee for any losses or damage to Lessee’s property or to the property of others for which Lessee may be liable, attributable to the acts of third parties. The agreed upon contributions to be paid by Lessee for security services shall be $246.40 per month, commencing the first day of the month next following the month in which Lessee physically occupies the Leased Premises or July 1, 2004, whichever occurs first, unless the Parties agree in writing for Lessee to commence security contributions at a later date. The agreed upon security cost may be modified by Lessor if the cost of providing the services either increases or decreases during the Lease Term.

(b)           Barge and Rail Charges. Lessor and Lessee recognize the importance of having reliable barge and railcar moving services readily available. Lessor and Lessee agree that this service is currently provided by Lessor and the initial barge or railcar placement costs are included in the rate prescribed by the barge owner or railroad. Lessor and Lessee agree, however, that charges for initial placements, as appropriate, and for any subsequent moves or shifting of a barge or railcar for the convenience of Lessee shall be paid by Lessee at the rates and in the manner established by the Port’s Operational Circular and, if done after established working periods, such moves or shifts shall be paid by Lessee at overtime rates established therefor.

(c)           Other Charges. Lessee shall also pay to Lessor, on the same payment dates provided in Subsection 3.1(b), all other sums and charges approved from time to time with the written concurrence of the Parties to be set forth and stated on Exhibit “C”, attached hereto and by this reference made a part of this Lease. Exhibit “C” may be amended and replaced from time to time by agreement of the Parties, evidenced by the signatures of their authorized representatives thereon. Lessee covenants to timely prepare and deliver to Lessor accurate and certified reports of events giving rise to other charges properly includable on Exhibit “C.”

(d)           Taxes. Lessee agrees to cause to be paid all taxes, levies, imposts and assessments which may be legally made upon or levied and/or assessed against the Leased Premises, any interests therein, and/or any improvements or property located thereupon before the same become delinquent. Lessee shall have the right, at its sole cost and expense and after having given Lessor prior written notice of its intent to do so, to contest by appropriate legal proceedings diligently conducted in good faith, the validity, amount or application, in whole or in part of such taxes, levies, imposts and/or assessments, provided (i) the proceedings will suspend the collection of the tax, levy, impost or assessment, (ii) neither the Leased Premises, nor any rent therefrom, nor any portion of either is in danger of seizure, forfeiture, sale, loss or similar consequences, and (iii) Lessee shall first furnish Lessor and the City with security which in Lessor’s opinion is adequate, satisfactory and sufficient to protect against loss, penalty, interest or costs incurred by reason of the contest.

3.3           Renewal Term(s) Rentals. Lease rentals covering each renewal period shall be negotiated by the Parties and reduced to writing as an addendum or addenda to this Lease at least 120 days prior to the commencement of each renewal term. Renewal period rentals shall be paid by Lessee to Lessor in accordance with the procedure for payment and adjustments set forth in Section 3.1. In the event the Parties hereto cannot agree upon the amount of the renewal term lease rentals, then at least 120 days prior to the expiration of the then existing term, the Parties shall make a bona fide effort to agree upon the then fair market value of the Leased Premises, exclusive of the value of any improvements made by Lessee thereon. If the Parties are unable to agree upon said value, then at least 105 days prior to the expiration of such term the following procedure for determining rental shall be followed:

(a)           A Board of Appraisers shall be appointed consisting of 1 member appointed by each of the Parties and a third member appointed by the first two appointees.

(b)           The Board of Appraisers shall thereupon, at least 15 days prior to the expiration of such term, determine the then fair market value of the Leased Premises, exclusive of the value of any. improvements made by Lessee thereon, and the valuation fixed by the Board of Appraisers shall be conclusive and bind the Parties.

Based upon the fair market value of the Leased Premises, whether determined by agreement or by Board of Appraisers, Lessee agrees to pay Lessor as rent for the next succeeding term hereof an amount equal to 8% per annum of such fair market value during said term, payable in the same manner as the installments during the Primary Term of this Lease and subject to the provision for future adjustment set forth in Subsection 3.1(c). If the Board of Appraisers shall not have determined the fair market value of the Leased Premises at the time of the commencement of the succeeding renewal term, Lessee may nevertheless continue this Lease in effect by paying provisional lease rentals equal to the lease rentals required during the immediately preceding term until such time as the Board of Appraisers makes its determination. Upon such determination Lessee shall, in order to continue this Lease in effect for the renewal period, within 30 days after receipt of notice of the determination, pay to Lessor the amount by which the rental calculation pursuant to the determination of the Board of Appraisers exceeds the provisional rental paid by Lessee retroactive to the first day of the renewal term. To the extent to which the provisional lease rentals paid by Lessee to Lessor exceed the amount of the determination of the Board of Appraisers, Lessee shall be entitled to credit the overpayment to the rentals next due under the Lease. Costs and expenses incident to an appraisal pursuant to this Section shall be borne equally by the Parties.

ARTICLE IV. IMPROVEMENTS

4.1           Notice and Submission of Plans. Prior to the commencement of any construction at or upon the Leased Premises, Lessee shall first cause Lessor to be given written notice of the nature and extent of any specific improvements and/or improvement projects proposed to be undertaken. Lessee shall submit to Lessor for review and approval all of its architectural plans and drawings of proposed facilities and/or improvements, together with such additional specifications as Lessor may reasonably request. Lessee may not commence to construct any proposed improvements until it has secured Lessor’s written approval which shall not be unreasonably withheld or delayed. Lessor’s approval shall be based on compliance with Lessor’s Building and Development Regulations (except as otherwise provided in Section 1.3), the terms of this Lease, and all other applicable rules and regulations of Lessor in effect at the time construction is commenced.

4.2           Improvements. Except as may otherwise be specifically provided in this Lease, all improvements, including structures, electric power and light, water, telephone, sanitary facilities, interior roadways, railways, spur tracks, sidings, turnouts and accessory structures from and to the Leased Premises, including all chattels, goods, tools, equipment and personal property, will be constructed, erected, installed and/or maintained as between the Parties, at the sole expense and risk of Lessee. Within a period of 60 days following the date of Lease termination, Lessee, at its sole cost and expense, shall remove all of the improvements it has constructed, installed on or attached to the Leased Premises and the Leased Premises shall be reasonably restored by Lessee to their original condition. At the election of Lessor, any and all property of the Lessee not timely removed by Lessee from the Leased Premises shall become the property of Lessor. Certain improvements, including but not limited to roadways, roadway material, parking areas, railways, rail switches and/or turnouts, rail and track material, shell, slag, gravel or concrete used to stabilize the soil, pavement, and underground utilities shall remain in place and become the property of Lessor and may not be removed by Lessee.

4.3          Utilities and Services. Except as may otherwise be specifically provided in this Lease, Lessee shall at its sole cost and expense provide for servicing the Leased Premises and all improvements thereon with water, sewer, gas, electricity, telephone or other utility services as may be required for the use and operation of the Leased Premises. Lessee shall be responsible for all costs and charges in connection with its utility installation and service and shall pay the same promptly as the charges accrue to protect, fully indemnify and hold Lessor harmless from and against any and all liability for such costs or charges.

4.4          Easements. Lessor agrees to grant to Lessee, when required by Lessee, nonexclusive easements over, across and through Lessor’s unleased property which it has the right to grant and which are reasonably necessary for the operation of Lessee’s facilities on the Leased Premises or reasonably required by Lessee, including but not limited to, the following:

(a)           Access to railroad lines and spurs, if any, located within the Leased Premises, together with the right to place railroad track switches or turnouts necessary to accommodate Lessee’s use of railroad trackage constructed and used by Lessee at or upon the Leased Premises. All tracks, lines, spurs, switches and turnarounds to be utilized by Lessee shall be identified on Exhibit “A” to be considered a part of the Leased Premises covered by this Lease. Lessee hereby grants to Lessor an easement and right to use for switching and/or storage of railcars any trackage constructed by Lessee, provided that such use by Lessor shall not interfere with Lessee’s use of such trackage.

(b)           Connection of water and sanitary sewer facilities as approved by the City of Tulsa Public Works Department along designated routes as shown on the Master Plan of Development and/or other relevant documents of Lessor for the Tulsa Port of Catoosa.

(c)           Connection of telephone, electric and gas lines, as approved by the appropriate utility companies, to those installed at or upon the Leased Premises.

(d)           Connection of streets and/or roads for vehicular traffic to roads immediately adjacent or near the Leased Premises, subject to Lessor’s prior approval of any proposed curb cuts and roadway improvements for the Leased Premises.

(e)           Location, placement and maintenance of production and/or handling pipelines connecting the Leased Premises to wharves and/or barge mooring dolphins, as may be necessary for Lessee’s activities and/or operations, to the extent the same are permitted and approved by Lessor and upon payment or arrangements for payment to Lessor of appropriate fees therefor.

Lessor shall have no obligation to furnish any easement which would in the exercise of its sole discretion interfere with the orderly development and/or utilization of Lessor’s Industrial Park and/or Terminal Area, in whole or in part, nor shall any easement exceed the height, depth or width reasonably necessary to permit the reasonable operation of Lessee’s facilities on the Leased Premises. Any and all easements in which rights shall be granted hereunder shall be described on and made a part of Exhibit “A” to this Lease to be included within the Leased Premises and the privileges extended to Lessee under this Lease.

4.5           Access. Lessor covenants that so long as Lessee is not in default under any of the terms and conditions of this Lease, Lessee shall have and enjoy the right of ingress and egress in and to the Leased Premises with a nonexclusive right to use any railroad, road, roadway or areas used in common by Lessor and/or its other lessees by, about or adjacent to the Leased Premises; subject, however, to the following provisions:

(a)           This Lease does not grant any tenancy in railroad, road, roadway or common area by, about or adjacent to the Leased Premises.

(b)           Lessor shall have the right to relocate any railroad, road, roadways or common areas or any portion thereof so long as the relocation does not deprive Lessee of access to the Leased Premises for railroad, vehicular, barge and/or utility facilities as are contemplated herein to be constructed by Lessee. Lessor shall have no liability to Lessee for any damage or loss incurred by Lessee as a result of any relocation which is not occasioned by the destruction, removal or relocation of any of Lessee’s facilitates or improvements.

(c)           Lessee shall not use the railroad, roads, roadways or common areas, or any portions thereof, in any way which would interfere with the use of the same by Lessor or any of its lessees, operators, invitees or users.

4.6           Signs. Lessee shall be entitled to erect, install and maintain on the Leased Premises identification and advertising signs appropriate to its business. All Lessee’s signs at all times shall be subject to the prior written approval of Lessor’s Port Director as to location, size, shape, color and content.

4.7           Lien Claims. Lessee covenants to unconditionally indemnify Lessor and the City, as fee owner of the Leased Premises, from and against and save them harmless from any and all lien claims of any nature whatsoever arising out of or in any manner connected with the construction, installation, erection, maintenance, repair, occupancy, use and/or operation of any improvements, facilities and/or equipment erected by Lessee or any third persons on or about the Leased Premises. Lessee further agrees that it shall, in the event any liens are filed encumbering the Leased Premises, effect their removal and/or satisfaction. Lessee shall have the right, at its sole cost and expense and after having given Lessor prior written notice of its intent to do so, to contest by appropriate legal proceedings diligently conducted in good faith, the amount, validity or application, in whole or in part, of any lien(s), provided (i) such proceedings shall suspend the collection of the lien(s), (ii) neither the Leased Premises nor any rent therefrom, or any portion of either, would be in danger of attachment, forfeiture, loss or similar consequence, and (iii) that Lessee shall first furnish Lessor and the City with the security which in Lessor’s opinion is adequate, satisfactory and sufficient to protect Lessor and the City from any loss, penalty, interest, cost or injury incurred by reason of the contest. Except as otherwise provided hereinabove, at Lessor’s request Lessee shall furnish Lessor with written proof of payment of any item which would or might constitute the basis for a lien on the Leased Premises or upon its interest in this Lease if not paid.

4.8           Inspection and/or Repair of Premises. Lessor shall at all reasonable times be permitted and allowed to enter the. Leased Premises to inspect the condition of the Lease Premises and Lessee’s operations and/or improvements to determine compliance with the terms of this Lease, and further, Lessor shall be permitted to make repairs and/or engage in maintenance necessary in respect to any facilities as it may have installed upon or about the Leased Premises. If the obligation to make repairs and/or to engage in maintenance is Lessee’s hereunder and Lessor elects to undertake to perform the same, then Lessee shall reimburse Lessor for the cost of charges therefor upon receipt of invoices therefor.

ARTICLE V. OPERATIONS

5.1           Pollution Control. Lessee agrees that it shall not pollute the air, water or ground at or upon the Leased Premises and/or in the vicinity of its operations or activities, and/or at or upon other premises as it may by these covenants have the right to use or occupy, whether or not in connection with others, in violation of applicable governmental statute, rule or regulation and/or in violation of standards and/or requirements as Lessor may from time to time reasonably and uniformly adopt in pursuit of governmental regulations. In this connection, Lessee shall obtain and maintain current all required permits, local, state and federal, needed to construct facilities and/or conduct the operations or activities contemplated under this Lease.

5.2           Compliance with Laws and Regulations. Lessee’s exercise of rights and/or privileges extended hereunder shall at all times be in full compliance with all applicable laws, rules and regulations, including safety regulations, of the State of Oklahoma, the United States and other governmental authorities now or hereafter having jurisdiction and/or any of their duly empowered agencies and/or instrumentalities. Lessee further agrees to comply with all applicable rules and regulations of Lessor pertaining to the Leased Premises and the Tulsa Port of Catoosa now in existence and hereafter promulgated for the general safety and convenience of Lessor, its various tenants, invitees, licensees and the general public, provided such rules and regulations shall not materially conflict with the provisions of this Lease. A copy of all Lessee’s building permits, Corps of Engineers and Coast Guard permits, licenses and similar authorizing documents shall be provided by Lessee to Lessor as and when reasonably requested by Lessor.

5.3           Maintenance of Adjoining Grounds. As part of the consideration for this Lease, Lessee agrees to regularly perform all “grounds maintenance” of the area between the Leased Premises and the pavement of any road, bed of any railroad or centerline of any rights-of-way within the boundaries of and abutting the Leased Premises. “Grounds maintenance” will include keeping areas clean, mowed, orderly and free from debris and waste materials. Lessor retains full rights to utilize the areas concerned, including the right to grant easements for utilities, installation of signs, etc., and Lessee shall not be deemed as having any tenancy in these areas. Any activities by Lessor in exercising its rights in such areas shall not provide a basis for Lessee’s claim for reimbursement. Lessor shall have the right to withdraw all or part of Lessee’s responsibility under this Section 5.3, if Lessor so desires and so informs Lessee in writing. In any instance in which construction of roads or railroads has been commenced but not completed within or adjacent to the Leased Premises, Lessee shall be responsible for ground maintenance of the areas between the Leased Premises and existing road and railroad improvements as have been or are in the process of being constructed in the adjoining rights-of-way therefor. If no road or railroad improvements shall exist, Lessee shall maintain the areas from the Leased Premises to the centerline of future roads and railroads as are shown on the Tulsa Port of Catoosa Master Development Plan, and as may be reflected in Exhibit “A”. Notwithstanding the requirements of this Section, Lessee shall not be required to undertake ground maintenance with respect to any areas between the Leased Premises and any road or railroad improvements or rights-of-way therefor in excess of a 50-foot distance from the Leased Premises.

5.4           Indemnification. Lessee hereby releases and discharges Lessor and the City from and shall fully protect, indemnify and keep, hold and save Lessor and the City harmless from and against any and all costs, including, but not limited to, clean-up costs, charges, expenses, penalties, damages (including contamination) and consequences imposed for or arising from the violation of any law or regulations of the United States, the State of Oklahoma, any local authorities, or any of such entities’ agencies and instrumentalities (collectively “Governmental Authorities”), occasioned, in whole or in part, by any act or omission of Lessee or its representatives, assigns, agents, servants, employees, licensees, invitees, and any other person(s) occupying under Lessee (except to the extent that any such costs are attributable to the negligent or willful act or omission of Lessor or the City, or their agents, servants, employees, licensees or invitees). Lessee shall further protect, fully indemnify and save forever harmless Lessor and the City from and against any and all liability, cost, damage (including clean-up costs and contamination) and expense, incident to injury (including injury resulting in death) of third parties or damage to or destruction of their property incident to, arising out of or in any way connected with Lessee’s use and occupancy or rights of use and occupancy of the Leased Premises (whether by omission or commission and irrespective of exclusive or nonexclusive rights therein) including, but not limited to, the operation of Lessee’s business, the construction, erection, installation, existence, repair, maintenance, alteration and/or demolition of any improvements, facilities and/or equipment or the conduct of any other activities, and which would not have arisen but for the exercise or pursuit by Lessee of the rights and privileges accorded hereby or the failure on Lessee’s part in any respect to comply with the requirements hereof, except as a loss occasioned by the negligent or willful act or omission of Lessor or the City or their representatives, agents, servants or employees.

5.5           Use Prohibition and Duties (Environmental). Lessee covenants and agrees that it will not use, generate, manufacture, produce, store, release, discharge or dispose of on, under or about the Leased Premises or transport to or from the Leased Property any Hazardous Materials, except in strict compliance with all applicable laws. “Hazardous Materials” shall mean (i) any “hazardous waste” as defined by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. . 6901, et seq.), as amended from time to time, and regulations promulgated thereunder; (ii) any “hazardous substance” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. , 9601, et seq.) (“CERCLA”), as amended from time to time, and regulations promulgated thereunder; (iii) asbestos; (iv) polychlorinated biphenyls; (v) underground storage tanks, whether empty, filled or partially filled with any substance; (vi) any substance the presence of which on the Leased Premises is prohibited by any applicable governmental requirements and regulations; and (vii) any other substance which by any governmental requirements requires special handling or notification of any federal, state or local governmental entity in its collection, storage, treatment or disposal. Lessee will keep and maintain the Leased Premises in compliance with, and shall not cause or permit the Leased Premises to be in violation of any governmental requirements and will not allow any other person or entity to do so. Lessee shall allow Lessor to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with violation of any governmental requirements and Lessee hereby agrees to pay any attorneys’ fees incurred by Lessor in connection therewith. Without Lessor’s prior written consent, which shall not be unreasonably withheld, Lessee shall not take any remedial action in response to the presence of any Hazardous Materials on, under, or about the Leased Premises, nor enter into any settlement, agreement, consent, decree or other compromise in respect to any claims regarding the presence of Hazardous Materials. Lessor’s consent may be withheld, without limitation, if Lessor, in its reasonable judgment, determines that remedial action, settlement, consent or compromise might impair the value of the Leased Premises; provided, however, that Lessor’s prior consent shall not be necessary in the event that the presence of Hazardous Materials in, on, under or about the Leased Premises either poses an immediate threat to the health, safety, or welfare of any individual or is of such a nature that an immediate remedial response is necessary, and it is not possible to obtain Lessor’s consent before taking such action. In such event Lessee shall notify Lessor as soon as practicable of any action so taken. Lessee agrees to (a) give notice to Lessor immediately upon its acquiring knowledge of the presence of any Hazardous Materials on the Leased Premises or of any hazardous substance contamination with a full description thereof, (b) promptly comply with any governmental requirement of removal, treatment or disposal of Hazardous Materials or hazardous substance contamination and provide Lessor with satisfactory evidence of compliance; and (c) provide Lessor, within 30 days after demand by Lessor, a bond, letter of credit or similar financial assurance evidencing to Lessor’s satisfaction that the necessary funds are available to pay the cost of removing, treating and disposing of Hazardous Materials or hazardous substance contamination and discharging any assessments which may be established on the Leased Premises as a result thereof.

5.6           Site Assessments. If Lessor shall have an objective reason to believe that there are Hazardous Materials or Hazardous Materials contamination, such reason being based upon a visible, apparent or documented condition of the Leased Premises or any contiguous Leased Premises, then Lessor (by its officers, employees and agents), at any reasonable time and from time to time, may first provide Lessee with notice of its concern and request that Lessee retain a qualified industrial hygienist approved by Lessor (the “Site Reviewers”) to perform a Phase I site assessment and a Phase II site assessment, as required or recommended in the Phase I report, (“Site Assessments”). If Lessee fails to deliver the requested Site Assessment to Lessor within a prompt, yet reasonable, period of time, then Lessor may contract for the services of Site Reviewers to perform Site Assessments. The Site Assessments on the Leased Premises will be reasonable in scope and based upon the suspected condition for the purpose of determining whether there exists on the Leased Premises any environmental condition which could reasonably be expected to result in any liability, cost or expense to the owner, occupier or operator of such Leased Premises arising under any state, federal or local law, rule or regulation relating to Hazardous Materials. The Site Assessments may be performed at any time(s), upon reasonable notice, and under reasonable conditions established by Lessee which do not impede the performance of the Site Assessments. Site Reviewers are authorized to enter upon the Leased Premises for such purposes. Site Reviewers are further authorized to perform both above and below the ground testing for environmental damage or the presence of Hazardous Materials on the Leased Premises and such other tests on the Leased Premises as may be necessary to conduct the Site Assessments in the reasonable opinion of the Site Reviewers. Lessee will supply to the Site Reviewers such historical and operational information regarding the Leased Premises as may be reasonably requested by the Site Reviewers to facilitate the Site Assessments and will make available for meetings with the Site Reviewers appropriate personnel having knowledge of such matters. On request, the results of any Site Assessments shall be made fully available to Lessee and Lessor. The cost of performing Site Assessments shall be paid by Lessee, and if incurred by Lessor shall be paid by Lessee to Lessor upon its demand. This monetary obligation shall constitute additional rental due on demand made by Lessor.

5.7           Environmental Indemnification. Regardless of whether any Site Assessments are conducted hereunder, Lessee shall defend, indemnify and hold harmless Lessor and the City from any and all liabilities (including strict liability), actions, demands, penalties, losses, costs or expenses (including without limitation attorneys’ fees and expenses, and remedial costs), suits, costs of any settlement or judgment and claims of any and every kind. whatsoever which may now or in the future (whether before or after the termination of this Lease) be paid, incurred or suffered by or asserted against Lessor or the City by any person or entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, or release from the Leased Premises of any Hazardous Materials or any Hazardous Materials contamination or arise out of or result from the environmental condition of the Leased Premises or the applicability of any governmental requirements relating to Hazardous Materials (including without limitation CERCLA or any federal, state or local so-called “Superfund” or “Superlien” laws, statute, law, ordinance, code, rule, regulation, order or decree). The representations, covenants, warranties and indemnifications contained in this Section shall survive the termination of this Lease.

5.8           Insurance. In pursuit, but not in derogation of or by way of substitution for Lessee’s obligations under Article V, Lessee shall at all times cause to be maintained at its sole cost and expense minimum insurance coverage and policies with the following prescribed terms:

(a)           Commercial General Liability Insurance with a combined single limit of $1,000,000 each occurrence and $2,000,000 annual aggregate, applicable to bodily injury and property damage, including pollution liability.

(b)           The Commercial General Liability Insurance shall be issued on an “occurrence” basis and shall include coverage for all operations of Lessee, including independent contractor’s coverage, blanket contractual liability and the policy will be endorsed to eliminate exclusion for work, construction or demolition within 50 feet of railroad trackage, broad form property damage, including completed operations, and, where applicable, property damage liability resulting from blasting or explosion, collapse or structural injury and/or subsurface operations. The policy shall not be modified to reduce the standard coverages provided under a Commercial General Liability policy form. The pollution liability endorsement may be on a “claims made” basis.

(c)           Lessor shall be designated as additional named insured under the policy required by Lessor.

(d)           As respects all insurance policies applicable to this Lease, Lessee shall, prior to the commencement of this Lease and upon the annual anniversaries, furnish to Lessor certificates of insurance evidencing the maintenance of all coverages required and the payment of premiums.

(e)           Lessor shall have the right to review Lessee’s insurance coverages, and/or to obtain upon request certified copies of the insurance policies, periodically, to insure full and adequate protection and to otherwise reasonably require additional and/or other forms of coverage, in accordance with current generally accepted coverages in the industry and/or within the Tulsa Metropolitan Area in respect to operations and/or activities similar to those of Lessee, whether similar in whole or in part. The cost of additional coverage and/or forms of coverage shall be borne by Lessee.

(f)           All policies of insurance shall require that Lessor and Lessee be given 30 days’ prior written notice of any modification, termination and/or cancellation of coverages.

(g)           All insurance policies shall be issued by an insurance company rated A (Excellent) or better and be included in financial size category VII, or better, in Best’s Insurance Guide, and be otherwise reasonably satisfactory to Lessor with respect to form and content. If Lessee refuses or neglects to secure and maintain insurance policies complying with the provisions of this Section, Lessor may, but shall not be required to, secure and maintain insurance policies, and Lessee shall reimburse Lessor for the cost thereof as additional rent, upon demand.

(h)           Lessee shall not use the Leased Premises in any manner which would increase the existing rates of insurance premiums paid by Lessor with respect to its operations and activities at the Tulsa Port of Catoosa and/or in the vicinity of the Leased Premises. If it nevertheless does so, then, at the option of the Lessor, the full amount of any resulting increase in premiums, to the extent allocable to the remaining rent for the year in which the increase is recognized, may be added to the amount of rentals specified herein and shall be paid by Lessee to Lessor commencing upon the monthly rental day next thereafter occurring.

ARTICLE VI. TERMINATION

6.1           Termination. Upon the termination of this Lease, however termination may be brought about, whether by expiration of the term hereof, or otherwise, Lessee shall quit and surrender the Leased Premises to Lessor in good condition, excepting only natural wear and tear from a reasonable use thereof and destruction of the Leased Premises by covered peril and subject to the provisions of Section 4.2.

6.2           Events of Default: The following shall be “events of default” under this Lease, and the terms “events of default” or “default” shall mean whenever they are used in this Lease, any one or more of the following events:

(a)           Failure or refusal of Lessee to pay or cause to be paid any lease rental, charges and/or assessments hereunder or any installment thereof when due and the continuance of such failure for a period of 10 days;

(b)           Failure by Lessee to perform any agreement, covenant, condition, obligation and/or undertaking herein contained and/or to observe or comply with any of the terms, provisions and conditions of this Lease;

(c)           In the event Lessee, before the expiration of this Lease, without the written consent of Lessor, vacates the Leased Premises or abandons possession of all or any portion thereof, or uses the same for purposes other than the purposes for which the Leased Premises are let hereunder, or ceases to use the Leased Premises for the purposes herein specified;

(d)           Issuance of execution against Lessee’s interest in this Lease or any legal process which by operation of law would cause Lessee’s interest in this Lease to pass to any person other than Lessee or its successor assignee pursuant to Section 2.3; and/or

(e)           Insolvency, assignment for the benefit of creditors, adjudication as a bankrupt or the appointment of a receiver for substantially all of the Lessee’s property and/or Lessee’s interest in this Lease.

6.3           Cancellation. Save and except for defaults occurring under Subsections 6.2 (a), (d) and (e), in which cases no notice of default shall be required of Lessor, if any default shall occur and continue unremedied or uncorrected for a period of 60 days after Lessor shall have given Lessee notice in writing specifying the default, then at the written option of Lessor this Lease and all Lessee’s interests and rights hereunder shall immediately cease and terminate. In the case of a default occurring under Section 6.2(b) which does not endanger or impair or threaten to endanger or impair Lessor or any of its lessees or operators or any of their facilities or operations and which is. remediable but will reasonably require in excess of 60 days to remedy, if Lessee shall, upon receipt of notice of default from Lessor, have notified Lessor of the probability of such delay and thereupon undertaken to remedy with due diligence and reasonable dispatch, then termination shall be stayed so long as, and only so long as, Lessee in good faith continues its best efforts to remedy with due diligence and reasonable dispatch.

6.4           Right of Re-entry. Upon the termination of this Lease, however such termination is brought about, whether by Lessor’s election to terminate under any one or more of the foregoing provisions, or otherwise, Lessor may immediately, or at any time thereafter, re-enter the Leased Premises without notice or demand and remove all persons and things therefrom with or without legal process and without prejudice to any of Lessor’s other legal rights, using such force as may be necessary or proper for the purpose. Any and all claims for damages by reason of Lessor’s re-entry or the form or manner of re-entry or the taking possession of the Leased Premises are hereby waived as also are all claims for damage by reason of any proceedings in the nature of execution, attachment, sequestration, forcible detainer or other legal action which Lessor may employ to recover possession of the Leased Premises or rentals and charges due. If upon Lessor’s re-entry there remains any personal property of Lessee or any person holding under or through it pursuant to Section 2.3, other than property as either or both shall hold as actual or constructive bailee(s), Lessor may take possession of the property and sell it at public or private sale without notice to Lessee, and this right to take and sell shall be a prior lien and claim against the property, subject, however, to any prior duly perfected third party encumbrance thereof Subject to any legal and priority encumbrances, Lessor may, without obligation to do so take possession of the property and hold it for the owners thereof or may place the same in a public garage or warehouse, all at the expense and risk of the owners thereof Lessee shall reimburse Lessor for any expenses it incurs in connection with removal and storage of property upon Lessor’s presentment of invoices therefor. If Lessor elects to take possession of the property and sell it, the proceeds of sale shall be applied first to the costs of the sale, second to the payment of the charges for storage, if any, and third to the payment of any other amounts which may then be due from Lessee to Lessor, with the balance, if any, to be paid to Lessee. Notwithstanding any re-entry upon default by Lessee or a termination of this Lease occasioned by reason thereof, the lease rentals due hereunder for the remainder of the then current lease term and such other charges and/or obligations, if any as may be otherwise payable under this Lease, shall be and become immediately due and payable and the liability of Lessee for the full amount provided herein shall not be extinguished for the balance of the term of this Lease. Lessee shall make good to Lessor any deficiency arising from a reletting of the Leased Premises at a lesser rental than that hereinbefore agreed upon. Lessee shall pay the rental deficiency each month as the amount thereof is ascertained by Lessor, upon the presentment of invoices therefor.

6.5           Holding Over. If Lessee shall, with the consent of the Lessor, hold over after the expiration or sooner termination of the term of this Lease, the resulting tenancy shall, unless otherwise mutually agreed, be for an indefinite period of time on a month-to-month basis. During any month-to-month tenancy, Lessee shall pay to Lessor the same rate of rental as set forth herein, unless a different rate shall be agreed upon, and Lessee shall be bound by all of the provisions of this Lease insofar as they may be pertinent.

6.6           Waiver of Breach or Default Cumulative Remedies. Waiver by either of the Parties of any breach or default of this Lease shall not be deemed a waiver of similar or other breaches or defaults, nor shall the failure of either of the Parties to take any action by reason of any such breach or default deprive that party of the right to take action at any time while the breach or default continues. The rights and remedies created by this Lease shall be cumulative and nonexclusive of those to which the Parties may be entitled at law and equity. The right to exercise all remedies is hereby reserved. The use and availability of one remedy shall not be taken to exclude or waive the right to use of another. In order to entitle either of the Parties to exercise any remedy reserved to it in this Lease it shall not be necessary to give any notice, other than notice expressly required.

ARTICLE VII. MISCELLANEOUS

7.1           Examination of Lessee’s Records. Lessor shall at all reasonable times be permitted to examine and/or audit and, to the extent necessary, duplicate Lessee’s books and records maintained with respect to its operations and activities hereunder and/or maintained in compliance with the terms and conditions of this Lease. In the event books and records are maintained at other than Lessee’s local office identified above, Lessee, upon the receipt of written notice by Lessor specifying the nature and extent of its intended inquiry and/or examination, agrees to immediately furnish Lessor with full, true and accurate copies of all its books and records as may be appropriate thereto.

7.2           Lessor’s Leasehold Interest. It is mutually understood and agreed by the Parties that: (i) Lessor has only a leasehold interest in the property covered by this Lease which has been granted to Lessor by the City, (ii) this instrument is a sublease and the Parties are sublessees and sublessors as the case may be, (iii) this Lease is subject to the terms and conditions of a lease from the City to Lessor, and (iv):

(a)           Lessor is authorized to enter into this Lease for the primary and renewal terms provided herein, pursuant to the terms of its lease with the City.

(b)           The lease between the City and Lessor dated June 22, 1971, has been modified subsequent to the date of its original execution.

(c)           This Lease is generally in accordance with the Master Plan of Development of the Port Authority, as amended, and as required in Article III of Lessor’s lease with the City.

7.3           RESERVED

7.4           Quiet Enjoyment. Lessor covenants that during the entire Lease Term and for so long as Lessee (i) shall make timely payment of rentals due hereunder and (ii) shall perform all covenants on its part to be performed, Lessee shall and may peaceably and quietly have, hold and enjoy the Leased Premises.

7.5           Notices. All notices under this Lease must be sent by United States mail, postage prepaid, addressed as follows, except that either Party may by written notice given as aforesaid change its address for subsequent notices to be given hereunder;

(a)           Lessor:

THE CITY OF TULSA-ROGERS COUNTY PORT AUTHORITY

5350 Cimarron Road

Catoosa, Oklahoma 74015

(b)           Lessee:

PORT PARTNERSHP

c/o David James

P.O. Box 14049

Tulsa, Oklahoma 74159

provided, however, that payments made by Lessee may be sent first class mail, postage prepaid, to Lessor at the address above given or paid in such other manner as Lessor may designate. Any and all notices given by either of the Parties hereto shall be deemed effective upon their receipt by the primary addressee, as set forth hereinabove.

7.6           Nondiscrimination. Lessee agrees that it shall not, with respect to its operations conducted on the Leased Premises, discriminate against any employee or applicant for employment because of race, color, religion, sex, age, national origin or handicap. Lessee shall take affirmative action to ensure that applicants are employed, and employees are treated during employment, without regard to race, color, religion, sex, age, national origin or handicap. Such action shall include, but not be limited to, the following: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship.

7.7           Navigability. The United States Corps of Engineers endeavors to maintain the water level in the Tulsa Port of Catoosa channel at 532 feet above mean sea level. Lessor assumes no responsibility for any increase or decrease in the water level caused by the raising or lowering of the water level in the Verdigris River, the backwater provided by said river in the channel, the erosion of water channel banks or sediment.

7.8           Substitution of Performance. If Lessee shall fail to do anything required to be done by it under the term(s) of this Lease, except to pay rent and other charges, Lessor may, after 30 days, written notice to Lessee, at Lessor’s sole option, do such act or thing on behalf of Lessee, and upon notification of the cost thereof to Lessor, Lessee shall promptly pay to Lessor the amount of that cost.

7.9           Exhibits and Attachments. All exhibits, attachments, riders and addenda referred to in this Lease, together with the exhibits listed hereinbelow, are incorporated into this Lease and made a part hereof by this reference for all intents and purposes.

Exhibit “A”:                                Leased Premises

Exhibit “B”:                                Building and Development Regulations

Exhibit “C”:                                Other Charges

Exhibit “D”:                                Consent to Subleases

7.10           Authority. Each of the Parties to this Lease represents to the other that it has taken all action necessary to authorize the execution, delivery and performance of this Lease and that it has executed and delivered all other documents as required herein and that its representative who has signed this Lease has all requisite power and authority to enter into this Lease and bind the party on whose behalf execution is provided. Each of the Parties to this Lease represents and warrants to the other that this Lease is the legal, valid and binding obligation of that Party, enforceable in accordance with its terms and performance of said Party does not require the consent of or approval of any other person, agency or court, and will not conflict with, result in the breach of any term of, or constitute a default under any material agreement or instrument to which that Party is party, or to which that Party is subject.

7.11           Entire Agreement. This Lease embodies the entire agreement between the Parties with respect to the leasing and use of the Leased Premises. There are no representations, terms, conditions, covenants or agreements between the Parties relating thereto which are not mentioned or contained herein. This Lease shall completely and fully supersede all other prior agreements, both written and oral, between the Parties pertaining to the Leased Premises including but not limited to the agreement dated August 1, 1983, as amended August 1, 2000. No party to any such prior agreement hereafter will have any rights thereunder, and shall look solely to this Lease for definition and determination of its rights, liabilities or responsibilities or relating to the matters set forth herein.

7.12           Captions. The article and section headings and captions contained herein are included for convenience only and shall not be considered a part hereof or affect in any manner of the construction or interpretation of this Lease.

7.13           Severability. The Parties agree that if it should ever be held by a court of competent jurisdiction that any one or more sections, clauses or provisions of this Lease are invalid or ineffective for any reason, any such section, clause or provision shall be deemed separate from the remainder of this Lease and shall not affect the validity and enforceability of such remainder.

7.14           Successors and Assigns. The covenants, terms, conditions and obligations set forth and contained in this Lease shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors and assigns.

7.15           Governing Law. The Parties understand and agree this Lease, its terms and conditions, and any interpretation thereof shall be governed by the laws of the State of Oklahoma.

7.16           Counterparts. This Lease may be executed in two or more counterparts, each of which when so executed shall be deemed an original, and which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Lease has been executed in multiple counterparts, each of which, for all purposes, shall be deemed an original and all of which shall evidence one agreement between the Parties.

	LESSOR:
	THE CITY OF TULSA-ROGERS COUNTY
	PORT AUTHORITY, a State Agency
[SEAL]	By:
		(Vice)Chairman
ATTEST:	APPROVED:
(Assistant) Secretary	By:
	Port Authority
	LESSEE:
	PORT PARTNERSHIP, L.L.P.
	an Oklahoma limited liability partnership
[SEAL]	By:
		Managing Partner
ATTEST:
(Assistant) Secretary
This Lease Agreement is approved and consented to as of April 4, 2005
	CITY:
	CITY OF TULSA, OKLAHOMA,
	a Municipal Corporation
[SEAL]	By:
		Mayor
ATTEST:	APPROVED:
	By:
City Clerk		City Attorney

STATE OF OKLAHOMA                  )
)
COUNTY OF ROGERS                        )
The foregoing instrument was acknowledged before me on March 17, 2005, by James B. Goodwin, Chairman of The City of Tulsa-Rogers County Port Authority, a State agency, on behalf of said agency.
	Notary Public

STATE OF OKLAHOMA )
)
COUNTY OF TULSA                          )
The foregoing instrument was acknowledged before me on March 15, 2005, by Raymond A. Miller, Jr., Managing Partner of Port Partnership, a Oklahoma LLP, on behalf of said Partnership.
	Notary Public
My commission expires:  04/02/2006
My commission number:  02004213

STATE OF OKLAHOMA                  )
)
COUNTY OF TULSA                          )
The foregoing instrument was acknowledged before me on April 4, 2005, by Bill LaFortune, Mayor of the City of Tulsa, a municipal corporation, on behalf of said corporation.
	Notary Public
My commission expires:  7-12-2008

EX-10.5

Exhibit 10.5

August 6, 2008

LMI Aerospace Inc. 

Att:Mr. Ronald S. Saks

 Mr. Phil Lajeunesse

 Mr. Bob Grah

PO Box 900

St. Charles, MO 63302

Re: Further Improvements & Combined Lease

Unit A 101 Coleman Blvd.

Savannah, GA. 31408

Gentlemen:

Per your request, please accept the following additional improvements & revised lease terms updating the agreement outlined in our letter of May 5, 2008. In addition to the improvements agreed to via the letter of May 5, 2008, Kole Warehouses Inc. agrees to make the following improvements to Unit A, 101 Coleman Boulevard:

*Paint warehouse walls. To include patch of holes & caulk of cracks in block walls

*Install two (2) new insulated roll-up doors at rear of warehouse

*Add concrete bumpers to rear loading ramp

*Add extra office. To include electrical, trim, lighting & paint to match

For consideration of the additional improvements as outlined above, LMI Aerospace Inc. agrees to the following revised lease rates commencing upon availability of the new addition & expiring on 12/31/2015:

*Years 1-3                                86,200 sq. ft. at $5.55

*Years 4-5                                86,200 sq. ft. at $5.65

*Years 6-7                                86,200 sq. ft. at $5.75

All other terms & conditions as outlined in the May 5, 2008, letter remain the same.

Agreed this ___ day of August 2008.   Witness: ________________________   Witness: ________________________ Kole Warehouses, Inc. By: ___________________________        Jeff Kole   LMI Aerospace, Inc. By: ____________________________        Vice President

The revised lease rate on the work as detailed in the plans and outlined above will commence upon occupancy of the new addition and would expire on 12/31/2015.

Years	1-3	86,200 sq. feet at $5.50
Years	4-5	86,200 sq. feet at $5.60
Years	6-7	86,200 sq. feet at $5.70

Additionally the charges for taxes, insurance and common area maintenance would be changed to $4,660.00 per month for the combined space. This charge may vary from year to year based on actual costs.

Agreed this 7th day of May 2008.   Witness: ________________________       Witness: ________________________ Kole Warehouses, Inc.   By: ___________________________        Jeff Kole   LMI Aerospace, Inc. By: ____________________________        Robert T. Grah, Vice President

1,000 Sq. Ft Corporate Office Space

462.50/00                      1-3 mo

470.84                           4-5 mo

479.17/00                      6-7 mo

STANDARD INDUSTRIAL LEASE AGREEMENT

THIS LEASE, made this ____ day of September 2003 by and between Kole Warehouses, Inc., a Georgia corporation, hereinafter referred to as "Landlord"; and Leonard's Metal, Inc., a Missouri corporation, hereinafter referred to as "Tenant";

WITNESSETH:

Premises 1. For and in consideration of the rents, covenants, agreements, and stipulations hereinafter set forth, to be paid, kept and performed by Tenant, Landlord hereby leases and rents to Tenant, and Tenant hereby leases and takes upon the terms and conditions hereinafter set forth, the property commonly known as 101 Coleman Blvd, Units E & F, Pooler, GA, and being more particularly described on Exhibit "A" hereto (hereinafter called the "Premises"). This Lease is subject to all encumbrances, easements, covenants and restrictions of record.

Term 2. To have and to hold for a term of three (3) years to commence five (5) days after Landlord has notified Tenant that the Initial Improvements as outlined in Exhibit C, Section 3 have been completed and the Premises are ready for occupancy and to end at midnight on the date which is thirty-six (36) months thereafter. Notwithstanding the foregoing, Tenant shall have rent-free reasonable access to the Premises prior to the term in order to install Tenant’s fixtures and otherwise make the Premises ready for Tenant’s occupancy, provided same does not unreasonably interfere with the Initial Improvements. Tenant shall have two (one year) options to renew this Lease Agreement on the same terms and conditions, except rent, upon ninety (90) days prior written notice to Landlord. Rent shall increase by two percent (2%) at the beginning of each renewal term.

Rental	3.	(a) Tenant shall pay to Landlord monthly rental of $10,320.00 due on the first day of each month, in advance, without offset or demand, commencing on September 1, 2003. All payments of rental shall be sent to Kole Warehouses, Inc., 1719 Abercorn Street, Savannah, Georgia 31401 , or such other address provided to Tenant by Landlord in accordance with the notice provisions hereof. Tenant has paid to Landlord $10,320.00 representing the first month's rent (for the month of September 2003) due hereunder. In the event Tenant fails to pay rental or any other payment called for under this Lease within ten (10) days of the due date (subject to the notice and cure provisions of Section 17), Tenant shall pay a late charge equal to five percent (5%) of the unpaid amount. Landlord and Tenant agree that such late charge is intended to compensate Landlord for additional administrative charges and other damages incurred by Landlord on account of such late payment and not as a penalty, but as liquidated damages therefor. Landlord and Tenant agree that the actual damages to be suffered by Landlord in such event shall be difficult, if not impossible to ascertain, and that such late charge is a reasonable estimate of such charges and damages.
		(b) Tenant has deposited $10,320.00 (the "Security Deposit") with Landlord to secure Tenant’s performance of its obligations hereunder. If Tenant defaults hereunder, then Landlord may, without prejudice to Landlord's other remedies, apply part or all of the Security Deposit to cure Tenant’s default. If Landlord so uses part or all of the Security Deposit, Tenant shall, within ten (10) days after written demand, pay Landlord the amount necessary to restore the Security Deposit to its original amount. Landlord shall not be required to pay any interest on said Security Deposit and Landlord may commingle the Security Deposit with other funds. If Landlord sells the Premises, the Security Deposit shall be transferred to the purchaser and Landlord shall be relieved of any further liability in relation to the Security Deposit provided the transferee has agreed (in a writing delivered to Tenant) to be bound by the terms hereof. Upon the termination of this Lease, Landlord may use the Security Deposit to cure any defaults of Tenant or to reimburse Landlord for expenses of repairing, restoring or cleaning the Premises beyond normal wear and tear (subject, however, to the provisions of Section 6 relating to certain HVAC equipment). In the event all or any portion of the Security Deposit remains after paying for such items, the remaining amount shall be returned to Tenant together with a complete accounting therefor, within thirty (30) days.

Utility Bills 4. Tenant shall place all utility bills in its name as appropriate to its business. Tenant shall pay all such bills, along with all charges and assessments pertaining to utilities serving the Premises, including, but not limited to, water and sewer, natural gas, electricity, fire protection (including sprinkler testing charges) and charges for trash removal. If Tenant does not pay such charges when due, Landlord may do so. Tenant shall pay the amount paid by Landlord-to-Landlord, as additional rental, within ten (10) days of written demand therefor by Landlord given in accordance with the notice provisions hereof.

Mortgagee's

Rights 5. Tenant’s rights as to the Premises shall be subject and subordinate to any mortgage or deed to secure debt which shall be self-operative. Nevertheless, Tenant agrees to execute and deliver such documentation as may be required by any such mortgagee to effect or memorialize any such subordination within ten (10) days of demand therefor. If requested, Tenant shall execute such mortgagee's form of subordination, non-disturbance and attornment agreement.

Repairs by

Tenant 6. Tenant shall not allow the Premises to fall out of repair or deteriorate. Specifically, Tenant, at its sole cost, shall keep and maintain the interior of the Premises, including all plate glass and exterior doors pertaining to the Premises in good repair (except the structural components of the building in which the Premises are situated, which shall be repaired, maintained and replaced by Landlord and further except any major component of the HVAC system that has “worn out”), including all systems pertaining to water, fire protection, drainage, sewer, electrical, heating, ventilation, air conditioning and lighting, but only to the extent same exclusively serve the Premises and are situated within the Premises. Major components of the HVAC system shall include the compressor, evaporation fan motor, heat exchanger or coils. Tenant agrees to return the Premises to Landlord in good operating condition upon the expiration or earlier termination of the term of this Lease, ordinary wear and tear and casualty damage excepted. Tenant shall not cause the Premises to become subject to any lien, charge or encumbrance whatsoever. Tenant shall have no authority, express or implied, to create any lien, charge or encumbrance upon the interest of the Landlord in the Premises. Tenant shall, at its sole cost, maintain a regularly scheduled preventive maintenance and service contract with a maintenance contractor acceptable to Landlord for the repair, maintenance and servicing of all heating and air-conditioning systems and equipment that exclusively serve the Premises. Upon written request by Tenant and at Tenant’s sole cost, Landlord will arrange for any repair which is Tenant’s responsibility pursuant to the terms of this Lease to be performed by Landlord's employees, agents or contractors. Tenant shall pay, as additional rent, the cost of such requested repair within ten (10) days of receipt of a bill therefor from Landlord.

Repairs by

Landlord 7. Except for damage caused by Tenant, its agents, employees, contractors and invitees, Landlord shall, in accordance with Exhibit C, keep in good repair the roof, all structural elements, mechanical systems (to the extent same do not solely serve the Premises and are not situated within the Premises, and exclusive of major HVAC components unless the same shall be deemed to have "worn out"), and all common areas of the building and land (including without limitation, all paving, driveways, parking lots, walks, lawn maintenance and landscaping) where the Premises are situated. Tenant shall promptly notify Landlord of the need for any repairs which are Landlord's responsibility hereunder, Landlord shall be under no duty to make any repairs hereunder unless Landlord receives notice of the need for such repairs; however, this sentence shall not affect Landlord's maintenance obligations.

Modifications/

Alterations to

the Premises 8. Tenant shall make no modifications, alterations or improvements to the Premises, cut any openings or penetrations in the roof or install any satellite or communications antennas or other structures without the prior written consent of Landlord, which consent shall not be unreasonably withheld, delayed or conditioned. Any modifications or alterations consented to by Landlord shall be completed in a good, workmanlike and lien-free manner in accordance with all applicable codes and regulations. Upon written request by Tenant and at Tenant’s sole cost, Landlord will arrange for any modification, alteration or improvement consented to by Landlord to be performed by Landlord's employees, agents or contractors. Tenant shall pay, as additional rent, the cost of such modification, alteration or improvement within ten (10) days of receipt of a bill therefor from Landlord.  

Return of

Premises 9. Tenant agrees to return the Premises to Landlord at the expiration or prior termination of this Lease broom clean and in the same condition and repair as when first received, natural wear and tear, damage by storm, fire, lightning, earthquake or other casualty excepted. Upon Landlord's written request, Tenant agrees to remove any alterations installed by or for Tenant after the commencement of the term of this Lease that Landlord determines are special purpose improvements that are not likely to be usable by a successor tenant. Tenant shall remove its personal property from the Premises at the expiration or prior termination of this Lease. Tenant shall repair any damage caused by any such removal.

Destruction of

/Damage to 

Premises 10. If the Premises are totally destroyed by storm, fire, lightning, earthquake or other casualty, this Lease shall terminate as of the date of such destruction and rental shall be abated as of such date. If the Premises are damaged, but not wholly destroyed by any of such casualties, rental shall abate in such proportion as use of the Premises has been destroyed, and Landlord shall restore the Premises to substantially the same condition as existed before such casualty as speedily as practicable, whereupon full rental shall recommence; provided, however, that if the damage shall be so extensive that the same cannot be reasonably repaired and restored within four (4) months from date of the casualty, then either Landlord or Tenant may terminate this Lease by giving written notice to the other party within thirty (30) days from the date of such casualty. In the event of such termination, rental shall be abated as of the date of such casualty. In no event shall Landlord be responsible for repairing or restoring any personal property of Tenant or any alterations or improvements made by or for Tenant, nor shall Tenant have any right to terminate this Lease if the casualty in question was caused by Tenant, its agents, employees, contractors or invitees.

Indemnity 11. Except for damage caused solely by Landlord's negligence or misconduct, Tenant agrees to indemnify, defend and save harmless Landlord against all claims, losses, liabilities, costs and expenses (including attorney's fees and costs of litigation) suffered by Landlord by reason of the use or occupancy of the Premises by Tenant. Unless caused solely by Landlord's negligence or misconduct, Landlord shall not be liable to Tenant’s employees, agents, contractors or invitees for any injury to a person or damage to property on or about the Premises, or any damage caused by the improvements becoming out of repair, the failure or cessation of any utility or by any leakage of gas, oil, water or steam or electricity emanating from the Premises. Landlord hereby indemnifies and agrees to defend and save harmless Tenant against all claims, losses, liabilities, costs and expenses (including attorneys fees and costs of litigation) suffered by Tenant by reason of (i) Landlord's breach of its obligations hereunder; and (ii) any pre-existing environmental conditions at the Premises or the land where the Premises are situated, including without limitation, those matters disclosed in the environmental site assessment furnished to, and approved by, Tenant prior to Tenant having entered the Premises. Landlord shall have its most recent environmental assessment updated immediately prior to Tenant’s taking occupancy of the Premises (and such updated assessment shall also be certified to Tenant), whereupon said assessment shall serve as the "baseline" to determine which environmental conditions pre-dated, and which conditions arose during, Tenant’s occupancy of the Premises.

Governmental

Orders 12. Tenant agrees, at its own expense, to promptly comply with all requirements of any applicable law, ordinance, statute or regulation applicable to the Premises or Tenant’s operations in the Premises provided that if the cost of any improvements, alterations or equipment required in connection with such compliance exceeds $1,000.00 during the term hereof, such excess costs shall be amortized over the useful life of the improvement, alteration or equipment, and only such portion thereof as is allocable to the remaining portion of the term hereof shall be charged to Tenant.

Condemnation 13. If the entire Premises or such portion thereof as will make the Premises unusable for the purpose herein leased shall be condemned by any legally constituted authority for any public use or purpose, or sold under threat of condemnation, then this Lease shall terminate as of the date of such condemnation or sale and rental shall be accounted for between Landlord and Tenant as of such date. In the event of a condemnation that does not result in the termination of this Lease, rental shall be abated in a fair and equitable manner and Landlord, to the extent of condemnation proceeds actually received by Landlord, shall restore the Premises to the extent practicable. All condemnation awards or sales proceeds in lieu thereof shall belong to Landlord; provided, however, Tenant shall be entitled to file a claim for loss of its personal property and moving expenses, provided the filing of such claim does not affect Landlord's condemnation claim.

Assignment 14. Tenant may not assign this Lease or any interest thereunder or sublet the Premises in whole or in part or allow all or a portion of the Premises to be used by a third party without the prior written consent of Landlord which consent shall not be unreasonably withheld, delayed, or conditioned. If Tenant is a corporation, partnership, limited liability company or other entity, the transfer of more than fifty percent (50%) of the ownership interests of Tenant or the transfer of a lesser percentage which results in a transfer of control of Tenant, whether in one transaction or a series of related transactions, shall constitute an assignment for purposes of this Lease, except that such a transfer of same to a company affiliated with Tenant shall not be violative of this Section. Any assignee (and if Landlord so elects, any subtenant) shall become liable directly to Landlord for all obligations of Tenant hereunder. No such assignment or sublease nor any subsequent amendment of the Lease shall release Tenant or any guarantor of Tenant’s obligations hereunder.

Hazardous

Substances 15. Landlord hereby represents and warrants to Tenant that no Hazardous Materials have been stored, handled, treated, released, or brought upon or disposed of, except in strict compliance with all applicable laws, ordinances regulations and that Hazardous Materials are currently present on the Premises or the parcel or parcels of land upon which the Premises are situated (except as has been disclosed in the environmental site assessment described in Section 11, above). Landlord hereby indemnifies, defends and saves Tenant harmless from any and all claims, judgments, damages, penalties, fines, costs (including, without limitation, fees of consultants, attorneys, experts and court costs), liabilities or losses in the event of the breach of the foregoing representation and/or warranty. Tenant covenants that, without first obtaining Landlord's written consent, that neither Tenant, nor any of its agents, employees, contractors or invitees shall cause or permit any Hazardous Materials to be stored, handled, treated, released or brought upon or disposed of on the Premises. Landlord hereby consents to the use in the Premises of the Hazardous Materials described on Exhibit B hereto. Tenant shall comply with any and all applicable laws, ordinances, rules, regulations and requirements respecting the storage, handling, treatment, release, disposal, presence or use of permitted Hazardous Materials in, on or about the Premises. As used herein, the term "Hazardous Materials" means asbestos, polychlorinated biphenyls, oil, gasoline or other petroleum based liquids, any and all materials or substances deemed hazardous or toxic or regulated by applicable laws, including but not limited to substances defined as hazardous under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601 et seq., the Resource Conservation and Response Act, as amended, 42 U.S.C. § 6901 et seq. (or any state counterpart to the foregoing statutes) or determined to present the unreasonable risk of injury to health or the environmental under the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601 et seq. Tenant shall indemnify, defend and hold Landlord harmless from and against any and all claims, judgments, damages, penalties, fines, costs (including without limitation, consultants' fees, experts' fees, attorney's fees and court costs), liabilities or losses resulting from the storage, handling, treatment, release, disposal, presence or use of Hazardous Materials in, on or about the Premises that occur during the term of this Lease. Without limiting the generality of the foregoing indemnity, in the event Landlord has a good faith reason to believe that the covenant set forth in this paragraph has been violated by Tenant, Landlord shall he entitled, at Tenant’s sole expense, to take such actions as Landlord deems necessary in order to assess, contain, delineate and/or remediate any contamination by such Hazardous Materials. Any sums expended by Landlord shall be reimbursed by Tenant, as additional rent, within thirty (30) days of demand therefor by Landlord which shall be accompanied by a copy of said report certified to Landlord and Tenant by its author. Upon the expiration or earlier termination of this Lease, Tenant, upon request by Landlord, shall cause to be performed such environmental studies of the Premises by an environmental consultant approved by Landlord as are necessary to determine whether any Hazardous Materials have been stored, handled, treated, released, brought upon or disposed of on the Premises during the term of this Lease in violation of the terms hereof. If Tenant fails to cause any such study to be performed, Landlord may do so, at Tenant’s expense. The obligations of this Paragraph 15 shall survive the expiration or earlier termination of this Lease.

Removal of

Fixtures 16. Provided Tenant is not then in default hereunder, Tenant may remove all fixtures and equipment which Tenant has placed in the Premises, provided Tenant repairs all damages to the Premises caused by such removal, but in no event shall Tenant remove heating, ventilating, air conditioning, plumbing, electrical and lighting systems and fixtures or dock levelers. In the event this Lease is terminated for any reason, any property remaining in or upon the Premises more than ten (10) days thereafter, at the option of Landlord, may either be deemed to become property of Landlord or Landlord may dispose of such property as Landlord deems proper with no obligation to Tenant.

Default;

Remedies	17.	In the event (i) any payment of rental or other sum due hereunder is not paid as and when due and Tenant fails to cure such default within ten (10) days after written demand from Landlord (but in no event shall Landlord be required to give more than two (2) such written notices in any twelve month period; thereafter a default shall exist if a payment is not paid as and when due); (ii) Tenant shall fail to comply with any term, provision, condition, or covenant of this Lease, other than an obligation requiring the payment of rent or other sums hereunder and shall not cure such failure within twenty (20) days after notice to the Tenant of such failure to comply, provided that such cure period shall be extended while Tenant is diligently pursuing a cure; or (iii) Tenant or any guarantor shall file a petition under any applicable federal or state bankruptcy or insolvency law or have any involuntary petition filed thereunder against it (which is not dismissed or bonded against within 90 days), then Landlord shall have the option to do any one or more of the following:
		(a) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord. Tenant agrees to indemnify Landlord for all loss, damage and expense that Landlord may incur solely and directly by reason of such termination; provided, however, that upon Tenant’s surrender of the Premises to Landlord, the lease termination shall be deemed to have been completed, and Tenant shall no longer be liable in any way to Landlord except with respect to any damage or environmental conditions caused by Tenant during prior to said termination.
		(b) Without terminating this Lease, terminate Tenant’s right of possession, whereupon rental shall continue to accrue and be owed by Tenant hereunder. Thereafter, at Landlord's option, Landlord may enter upon and relet all or a portion of the Premises (or relet the Premises together with any additional space) for a term longer or shorter than the remaining term hereunder and otherwise on terms satisfactory to Landlord. Tenant shall be liable to Landlord for the deficiency, if any, between Tenants's rent hereunder and all net sums received by Landlord on account of such reletting (after deducting all reasonable costs incurred by Landlord in connection with any such reletting, including without limitation, brokerage commissions and reasonable attorney's fees).
		(c) Pursue a dispossessory action against Tenant, in which event Tenant shall remain liable for all amounts owed hereunder, including amounts accruing hereunder from and after the date that a writ of possession is issued.
		(d) Perform any unperformed obligation of Tenant. Any sums expended by Landlord shall be repaid by Tenant, as additional rent, within ten (10) days of demand therefor by Landlord.

	Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedies herein provided or any other remedies provided by law. In the event Landlord places the enforcement of all or any part of this Lease in the hands of an attorney on account of Tenant’s default, Tenant agrees to pay Landlord's cost of collection, including reasonable attorney's fees, whether suit is actually filed or not.
	In the event of a default by Landlord that is not cured by Landlord within twenty (20) days of written notice thereof from Tenant, Tenant, may, but shall not be obligated to, cure same and deduct the reasonable costs thereof from any sums to be paid to Landlord hereunder; provided, however, that such cure period shall be extended while Landlord is diligently pursuing a cure of such default.
Entry by

Landlord 18. Landlord may post a sign stating that the Premises are "For Lease" or "For Sale" six (6) months prior to the termination of this Lease. Landlord may enter the Premises at reasonable hours during the term of this Lease to exhibit same to prospective purchasers (and during the last 3 months of the then-current term of the Lease) or tenants and to make repairs required of Landlord under the terms hereof, or to make repairs to Landlord's adjoining property, if any.

Estoppel

Certificates 19. Tenant agrees to furnish within ten (10) days of receipt of request from Landlord or Landlord's mortgagee a written statement certifying as to the then-current status of the Lease. Such estoppel certificate shall address matters of the type customarily included in estoppel certificates requested and obtained by institutional lenders and landlords. The notice and cure provisions of paragraph 17 shall not apply to Tenant’s obligations under this paragraph 19.

No Estate in
Land	20.	This Lease shall create the relationship of landlord and tenant between Landlord and Tenant; no estate shall pass out of Landlord; Tenant has only a usufruct, not subject to levy and sale, and not assignable by Tenant except as provided in Paragraph 14 above.

Holding Over 21. If Tenant remains in possession of the Premises after expiration of the term hereof, with Landlord's acquiescence and without any express written agreement of parties, Tenant shall be a month-to-month tenant upon all the same terms and conditions as contained in this Lease, except that the rental rate shall become one hundred fifteen percent (115%) the amount in effect at the end of the term, and there shall be no renewal of this Lease by operation of law. Such month-to-month tenancy is terminable upon thirty (30) days notice by either party to the other. Tenant waives any right that it may have to additional notice pursuant to applicable law. If Tenant remains in possession of the Premises after the expiration of the term hereof without Landlord's acquiescence, Tenant shall be a tenant at sufferance subject to immediate eviction. In such event, in addition to paying Landlord any damages resulting from such holdover, Tenant shall pay rental at the rate of one and one-half times the amount in effect at the end of the term of the Lease.

Miscellaneous 22. All rights, powers and privileges conferred hereunder upon parties hereto shall be cumulative but not restrictive to those given by law. No failure of either party to exercise any power given to any party hereunder, or to insist upon strict compliance by the parties with their respective obligations hereunder, and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of a party's right to demand exact compliance with the terms hereof. Time is of the essence of this Lease. Subject to the terms of paragraph 14 above, this Lease shall be binding upon and shall inure to the benefit of the respective successors and assigns of Landlord and Tenant. Tenant shall pay and be liable for all rental, sales and use taxes, and other similar taxes, if any, levied or imposed by any city, state, county or other governmental authority. Such payments shall be paid concurrently with the payment of rental or other sum due hereunder upon which the tax is based. This Lease contains the entire agreement of the parties hereto as to the Premises, and no representations, inducements, promises or agreements, oral or otherwise, between the parties, not embodied herein, shall be of any force or effect. If any term, covenant or condition of this Lease or the application thereof to any person, entity or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons, entities or circumstances other than those which or to which used may be held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Lease shall be valid and enforceable to the fullest extent permitted by law. The circulation of one of more drafts of this Lease shall not constitute a reservation of the Premises or an offer to lease the Premises to Tenant. Neither party shall be bound hereunder until such time as both parties have signed this Lease. In the event either party resorts to the employ of an attorney in connection with the interpretation or enforcement of this Lease, the successful party therein shall be entitled to recover its reasonable attorneys' fees, expenses and costs of suit for the other party.

Notices	23.	Any notice given pursuant to this Lease shall be in writing and sent by certified mail, return receipt requested, by hand delivery, by facsimile transmission or by reputable overnight courier to:
		(a) Landlord: Kole Warehouses, Inc., 1719 Abercorn Street, Savannah, Georgia 31401; Fax Number: 912-232-6770, or at such other address or to such other facsimile number as Landlord may designate in writing to Tenant.
		(b) Tenant: Leonard's Metal, Inc., attention: Robert T. Grah, Vice President, PO Box 900, St. Charles, MO 63302-0900; Fax Number: 636-949-1576, with copy to Sanford S. Neuman, Esq., at Gallop, Johnson & Neuman, L.C., 101 S. Hanley 16th floor, St. Louis, MO 63105, or at such other address or to such other facsimile number as Tenant may designate in writing to Landlord.
		Any notice sent in the manner set forth above shall be deemed sufficiently given for all purposes hereunder on the third business day after said notice is deposited in the mail if sent by certified mail, upon receipt if sent by hand delivery or reputable overnight courier, or if sent by facsimile, on the date such notice is transmitted (and a confirmation of successful transmission is generated by the sender's facsimile machine), provided a copy of such notice is sent within two (2) business days by regular mail to the recipient's address set forth above.

Brokerage 24. Each of Landlord and Tenant covenants and agrees to indemnify and hold the other harmless from any and all loss, liability, damage, claim, judgment, cost and expense (including without limitation attorney's fees and litigation costs) that may be incurred or suffered by the other because of any claim for any fee, commission or similar compensation with respect to this Lease, made by any broker, agent or finder claiming by, through or under the indemnifying party, whether or not such claim is meritorious.

Signs 25. Tenant may erect a building standard sign (as determined by Landlord) on or about the Premises subject to Landlord's approval of the sign and its location which approval shall not be unreasonably withheld, delayed, or conditioned. Prior to the expiration of the term of this Lease, Tenant shall remove any such sign and repair any damage to the building occasioned by the installation and/or removal of such sign.

Use of Premises 26. The Premises shall be used for warehousing, light assembly, light manufacturing, distribution, and general office use and no other purpose. The Premises shall not be used for any illegal purposes, nor in any manner to create any nuisance or trespass, vitiate Landlord's insurance or violate any restrictive covenants encumbering the building or Landlord's rules and regulations applicable thereto. Outside storage or outside manufacturing are prohibited without Landlord's consent; notwithstanding the foregoing, incidental temporary outdoor storage of pallets or dunnage by Tenant shall be permitted, and Landlord represents and warrants the foregoing uses of the property are not prohibited by any applicable statute, ordinance or regulation.

Insurance	27.	(a) Tenant will carry, at Tenant’s expense, all-risk insurance coverage on all equipment, inventory, fixtures, furniture, appliances and other personal property on the Premises. Tenant shall procure, maintain and keep in full force and effect at all times during the term of this Lease commercial general liability insurance with respect to the Premises and the conduct and operation of Tenant’s business therein, naming landlord and its mortgagees as additional insured parties, with limits of not less than $1,000,000 for death or bodily injury to one or more persons in a single occurrence and not less than $1,000,000 for property damage. Tenant shall increase limits to $2,000,000 for death or bodily injury to one or more persons in a single occurrence and $2,000,000 for property damage on or before January 31, 2004. Such general liability insurance policy shall contain a broad form contractual liability endorsement covering Tenant’s indemnities in favor of Landlord provided hereunder.
		(b) Landlord will carry "all risk" insurance coverage on the Premises in an amount deemed appropriate by Landlord. Tenant shall pay Landlord, as additional rent, its pro rata share of all sums paid by Landlord for such insurance coverage. Upon being notified by Landlord of said sums, Tenant will remit to Landlord said amount within thirty (30) days.
		(c) To the full extent permitted by law, Landlord and Tenant each waives all right of recovery against the other and its officers, employees, and agents for, and agrees to release the other and its officers, employees and agents from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage; provided, however, that the foregoing release by each party is conditioned upon the releasing party's insurer endorsing the releasing party's insurance policy so as to permit such waiver without affecting the coverage thereunder. If such endorsement is not obtained or maintained by either party, then such party's release shall be deemed to be rescinded until such endorsement is provided by such insurer.
		(d) All insurance required to be carried by Tenant shall be affected under enforceable policies issued by insurers approved by Landlord. At least fifteen (15) days prior to the expiration date of any policy procured by Tenant, the original renewal policy for such insurance shall be delivered by Tenant to Landlord. Within fifteen (15) days after the premium on any such policy shall become due and payable, Landlord shall be furnished with satisfactory evidence of its payment. The original policy or policies shall be delivered to landlord prior to the commencement of the term of this Lease. All such policies shall contain an agreement by the insurers that such policies shall not be canceled or materially modified without at least thirty (30) days prior written notice to the Landlord and to the holder of any mortgage to whom loss hereunder may be payable. If Tenant provides any insurance required by this Lease in the form of a blanket policy, Tenant shall furnish satisfactory proof that such blanket policy complies in all respects with the provisions of this Lease and that the coverage thereunder is at least equal to the coverage that would be provided under a separate policy covering only the Premises.

Ad Valorem 28. Tenant is leasing 28,800 square feet of a 151,290 square foot building. Tenant’s pro rata share is therefore nineteen percent (19%). Landlord will pay all ad valorem taxes and assessments levied against the building each year of the Lease term. Tenant shall pay Landlord, as additional rent, its pro rata share of sums paid by Landlord for ad valorem taxes and assessments during a base year of 2003, within thirty (30) days of Tenant’s receipt of a written invoice therefor. Tenant shall not be responsible for any increases in taxes during the initial term or the renewal periods described in Section 2, above.

Parking 29. Tenant and its employees, customers and invitees shall have a non-exclusive right to use in common with other tenants the parking areas designated by Landlord as serving the Premises. Such use shall be subject to rules and regulations as maybe prescribed by Landlord from time to time which shall not interfere with Tenant’s use of the Premises. Tenant shall not use more than its pro rata share of such parking spaces. In no event shall Landlord be responsible for enforcing Tenant’s parking rights against other tenants or third parties.

Exhibits	30.	The following exhibits are attached hereto and made a part hereof:
		Exhibit A
		Exhibit B
		Exhibit C

IN WITNESS WHEREOF, the parties have hereunto set their hands and seals, effective the day and year first above written.

___________________________________ Witness	LANDLORD: By: ________________________________ Title: _______________________________
___________________________________ Witness	TENANT: By: ________________________________ Title: _______________________________

EX-10.6

Exhibit 10.6

FIFTH AMENDMENT TO LEASE

This Fifth Amendment to Lease (“Fifth Amendment”) dated for reference purposes only September 15, 2008 is made at San Diego, California, between H. G. FENTON PROPERTY COMPANY, a California corporation [formerly known as H.G. FENTON COMPANY, a California corporation] (“Landlord”), and D3 TECHNOLOGIES, INC., a California corporation (“Tenant”) with reference to the following facts and circumstances:

RECITALS:

A.           Tenant and Landlord entered into that certain Lease dated March 24, 1997, which was subsequently amended by that certain First Amendment dated April 17, 2000, that certain Second Amendment dated October 16, 2000, that certain Third Amendment dated January 15, 2003, and that certain Fourth Amendment dated February 6, 2006, (hereinafter referred to as the “Lease”). Initially capitalized terms not otherwise defined in this Fifth Amendment shall have the same meanings as in the Lease.

B.           Tenant is currently in occupancy of the area known as 4838 Ronson Court, Suites A - L, San Diego, California 92111, for a total of 16,359 rentable square feet (the “Existing Premises”).

C.           The parties wish to (i) provide for an increase in the area of the Existing Premises, by adding thereto the area known as 4848 Ronson Court, Suite K, San Diego, California 92111, consisting of approximately 1,407 rsf (the “Expansion Premises”) as depicted on the attached Exhibit A [the entire area of Premises occupied by Tenant shall now contain 17,776 rsf] and (ii) specify the amount of monthly Base Rent to be paid by Tenant for the Existing & Expansion Premises. The parties also wish to make certain other modifications to the Lease.

D.           The Lease for the Existing Premises is scheduled to expire on March 31, 2009.

E.           The Lease for the Expansion Premises shall be for a period of forty-one (41) full calendar months, and shall expire on March 31, 2012 (the “Expansion Premises Expiration Date”).

NOW, THEREFORE, the parties agree that the Lease shall be amended as set forth herein.

1.           COMMENCEMENT DATE OF EXPANSION PREMISES. The Commencement Date for the Expansion Premises shall be November 1, 2008 (the “Expansion Premises Commencement Date”) upon which Landlord delivers the Expansion Premises in accordance with the applicable provisions of the Lease. Accordingly, the term “Delivery of the Premises” as used herein shall refer to the Premises known as 4848 Ronson Court, Suite K, San Diego, California 92111. The estimated date for Delivery of the Expansion Premises shall be October 1, 2008.

2.           EARLY POSSESSION OF EXPANSION PREMISES. Landlord acknowledges that Tenant may occupy the Expansion Premises prior to the Expansion Premises Commencement Date, to begin the Premises Refurbishment Work described in Section 5 below, and that such occupancy (“Early Possession”) shall be subject to all provisions of the Lease. Tenant shall not be required to pay monthly Base Rent for the Expansion Premises during the Early Possession period however Early Possession will be subject to the following:

a) Tenant’s full execution and delivery of this Fifth Amendment;

b) Landlord’s receipt of additional Security Deposit as detailed in Section 8 below; and

c) Landlord’s receipt of Tenant’s updated certificate of insurance for the Expansion Premises evidencing coverage for all insurance required in accordance with Section 11 of the Lease.

3.           EXPANSION PREMISES TERM. Landlord leases to Tenant and Tenant hires from Landlord for a term beginning on the Expansion Premises Commencement Date and ending on the Expansion Premises Expiration Date the Expansion Premises on all of the terms and conditions of the Lease; provided, however, that monthly Base Rent for the entire Premises shall be as set forth in Section 3 below.

The following table confirms the areas of the Premises:

 

Area of Premises	RSF
Existing Premises (4838 Ronson Court, Suites A - L)	16,359
Expansion Premises (4848 Ronson Court, Suite K)	1,407
Total Rentable Square Feet	17,776

4.           MONTHLY BASE RENT.  The following table sets forth the revised schedule of the monthly Base Rent (net of utilities and Operating Expenses) payable for both the Existing Premises and the Expansion Premises:

Month of Term	No. of Months Payable	Expansion Premises Base Rent	Existing Premises Base Rent	Total Monthly Base Rent
November 1, 2008 – March 31, 2009	5	$1,660.26	$18,574.32	$20,234.58
April 1, 2009 – March 31, 2010	12	$1,660.26		$1,660.26
April 1, 2010 – March 31, 2011	12	$1,726.67		$1,726.67
April 1, 2011 – March 31, 2012	12	$1,795.74		$1,795.74

5.           CONDITION OF THE PREMISES. Both the Existing Premises and the Expansion Premises have been previously improved in accordance with the applicable provisions of Section 3.3 and Exhibit B of the Lease. Tenant accepts the entire Premises in its current “as is” condition, and acknowledges that Landlord shall not be required to make any additional improvements in or to the Premises. Notwithstanding the foregoing, after the Expansion Premises Commencement Date, and subject to the provisions of this Section, Landlord shall make available to Tenant a credit up to a maximum amount of twenty thousand and 00/100 dollars ($20,000.00) [the Premises Refurbishment Credit”] which may be used by Tenant to refurbish or recondition existing improvements within the Premises [the “Premises Refurbishment Work”]. Any Premises Refurbishment Work shall be made in accordance with the applicable provisions of Section 8.6 of the Lease (Alterations and Additions). Upon completion of the Premises Refurbishment Work, Tenant shall submit to Landlord bona fide invoices evidencing the payment by Tenant for the Premises Refurbishment Work (material, labor, etc.). Within thirty (30) days after receipt of such invoices and any necessary waivers, releases or other documentation required by Landlord, Landlord shall reimburse Tenant, up to the maximum of the Premises Refurbishment Credit, for such cost and expenses incurred by Tenant.  All Premises Refurbishment Work shall be performed by Tenant in a workmanlike manner.  Tenant shall obtain any and all necessary permits (if any) required for the Premises Refurbishment Work.  All Premises Refurbishment Work, including reimbursement of the Premises Refurbishment Credit shall be completed prior to December 31, 2008.

6.           OTHER AREA DEPENDANT TERMS. On the Expansion Premises Commencement Date, pursuant to Section 1.12 of the Lease, Tenant’s Share of Excess Operating Expenses shall be 35.99% for Real Property Taxes and Other Operating Expenses.

7.           PARKING. As a result of the addition of the Expansion Premises, on the Expansion Premises Commencement Date, Tenant's parking spaces shall be increased to a total of fifty-three (53) parking spaces. All parking shall be on a non-reserved basis.

8.           SECURITY DEPOSIT. As a result of the addition of the Expansion Premises, upon Tenant’s execution of this Fifth Amendment, Tenant shall deliver to Landlord the additional amount of $1,660.26 as an increase in the Security Deposit to be held by Landlord in accordance with the provisions of Section 6 of the Lease. The total Security Deposit to be held by Landlord shall be $9,654.21.

9.           ADDITION OF GUARANTOR. The parties acknowledge that LMI AEROSPACE, INC., a Missouri corporation shall be added as Guarantor in accordance with the terms and conditions of the Guaranty Agreement attached as Exhibit B to this Fifth Amendment.

EXCEPT AS SPECIFICALLY AMENDED HEREIN, all other terms and conditions of the Lease shall remain in full force and effect between the parties hereto.

Landlord:
Date:	9/24/08	H.G. FENTON PROPERTY COMPANY, a California corporation
		By:           H.G. FENTON COMPANY
		Authorized Agent
		By:	/s/ Kevin D. Hill
			Kevin D. Hill, Vice President, Leasing
		By:	/s/ Michael Neal
			Michael P. Neal, President/CEO
Tenant:
Date:	22 Sep 08	D3 TECHNOLOGIES, INC., a California corporation
		By:	/s/ Edward Knowles
			Edward Knowles, CFO
		By:	/s/ Ryan Bogan
			Ryan Bogan
		[TWO (2) AUTHORIZED SIGNATURES REQUIRED]

EXHIBIT B

GUARANTY AGREEMENT

FOR VALUE RECEIVED, and in consideration for H. G. FENTON PROPERTY COMPANY, a California corporation (“Landlord”), entering into that certain STANDARD INDUSTRIAL LEASE dated September 15, 2008 (“Lease”) between Landlord and D3 TECHNOLOGIES, INC., a California corporation (“Tenant”), relating to the leased premises as more particularly described in the Lease (“Premises”), the undersigned LMI AEROSPACE, INC., a Missouri corporation (“Guarantor”) hereby guarantees to Landlord (i) the prompt payment in accordance with its terms of all rent due to Landlord under the Lease, and (ii) strict compliance by Tenant with the terms, covenants and conditions of the Lease. If more than one person or entity guaranties the obligations of Tenant under the Lease (whether by signing this Guaranty or otherwise), the liability of each guarantor (including Guarantor) shall be joint and several with that of each and every other person or persons guarantying the obligations of Tenant under the Lease.

Guarantor hereby waives the benefits and protection of the provisions of California CIVIL CODE §2819, and Guarantor hereby grants to Landlord full power and authority to: (i) change, alter, cancel, renew or extend the time for payment of rent due under the Lease or performance by Tenant of any other terms or conditions of the Lease as Landlord and Tenant may expressly or impliedly agree upon; or (ii) change, modify, extend or otherwise amend the Lease, including increasing the rental payable thereunder by Tenant; or (iii) otherwise deal with Tenant as Landlord may elect, without in any way diminishing, releasing or discharging the liability hereunder of Guarantor. Such liability shall be continuing and shall only be terminated by full compliance by Tenant with all the terms of the Lease.

Notice of acceptance of this Guaranty as well as all demands, presentations, notices of protest and notices of every kind or nature, including those of any action or non-action on the part of Tenant, Landlord or other party, are hereby fully waived by Guarantor. Upon any default of Tenant under the Lease, Landlord may, at its option, proceed directly and at once, without notice of such default, against Guarantor to collect and recover the full amount of the liability hereunder or any portion thereof without proceeding against Tenant or any other party or foreclosing upon, selling, or otherwise disposing of or collecting or applying any property, real or personal, Landlord may then have as security for the performance by Tenant under the Lease. Guarantor hereby waives the right to require Landlord to proceed against Tenant or to pursue any other remedy Landlord may have, waive the right to plead or assert any election of remedies Landlord may have, waives the pleading of any statute of limitations as a defense to the obligation hereunder, and waives any other defense arising by reason of any disability or other defenses of Tenant or by reason of the cessation from any cause whatsoever of the liability of Tenant.

If legal action is commenced by Landlord to enforce this Guaranty or any term or condition hereof, Guarantor agrees to pay to Landlord costs of collection and, as part of the costs incurred therein, such additional sums as the Court may adjudge reasonable as attorneys’ fees in said suit. No indulgence, forbearance or extensions of time of payment or performance permitted or granted to Tenant by Landlord shall in any way release Guarantor from liability or diminish Guarantor’s obligations hereunder.

In addition to all liens upon, and rights of set-off against the moneys, securities or other property of Guarantor given to Landlord by law, Landlord shall have a lien upon and a right of set-off against all moneys, securities and other property of Guarantor now or hereafter in the possession of Landlord, whether held in a general or special account, or for safekeeping or otherwise; and every such lien and right of set-off may be exercised without demand upon or notice to Guarantor. No lien or right of set-off shall be deemed to have been waived by any act or conduct on the part of Landlord, or by any neglect to exercise such right of set-off or to enforce such lien, or by any delay in so doing; and every right of set-off and lien shall continue in full force and effect until such right of set-off or lien is specifically waived or released by an instrument in writing signed by Landlord.

Any indebtedness of Tenant now or hereafter held by Guarantor is hereby subordinated to any indebtedness of Tenant to Landlord, and such indebtedness of Tenant to Guarantor if Tenant so requests shall be collected, enforced and received by Guarantor as trustee for Tenant and held as security for performance of the obligation of Tenant to Landlord, but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.

Landlord may without notice assign this Guaranty in whole or in part. No assignment of the Lease shall diminish, release, discharge or otherwise modify Guarantor’s liability under this Guaranty. Guarantor hereby waives any right it might otherwise have to require Landlord to apply any security deposit or other security that it may hold under the Lease to any default. So long as Landlord’s interest in the Lease is subject to a mortgage or deed of trust, no acquisition by Guarantor of Landlord’s interest under the Lease shall affect Guarantor’s obligations under this Guaranty, which shall remain in effect for the benefit of Landlord’s lender.

Date:  09/23/08	/s/ Ryan P. Bogan
	LMI AEROSPACE, INC., a Missouri corporation
	GUARANTOR

FOURTH AMENDMENT TO LEASE

This Fourth Amendment to Lease (“Fourth Amendment”) dated for reference purposes only February 6, 2006 is made at San Diego, California, between H.G. FENTON COMPANY, a California corporation (“Landlord”) and D3 TECHNOLOGIES, INC., a California corporation (“Tenant”) with reference to the following facts and circumstances.

RECITALS:

A.           Tenant and Landlord entered into that certain Lease dated March 24, 1997, which was subsequently amended by that certain First Amendment dated April 17 2000, that certain Second Amendment dated October 16, 2000 and that certain Third Amendment dated January 15, 2003 (hereinafter referred to as the “Lease”).  Initially capitalized terms not otherwise defined in this Fourth Amendment shall have the same meanings as in the Lease.

B.           Tenant is in occupancy of the area known as 4838 Ronson Court, Suite A, San Diego, California 92111, for a total of 12,537 rentable square feet (the “Existing Premises”).

C.           The parties wish to (i) provide for an increase in the area of the Existing Premises, by adding thereto the area known as 4838 Ronson Court, Suite L, San Diego, California 92111, consisting of approximately 3,822 rsf (“Expansion Premises”) as depicted on the attached Exhibit A [the entire area of Premises occupied by Tenant shall now contain 16,359 rsf]; (ii) specify the amount of monthly Base Rent to be paid by Tenant for the Existing & Expansion Premises and; (iii) extend the Term by an additional thirty-six (36) months (the “Extended Term’).  The parties also wish to make certain other modifications to the Lease.

D.           The Lease for the Existing Premises is scheduled to expire on March 31, 2006 (as extended by the parties). Tenant wishes to extend the Term of the Lease for an additional period of thirty-six (36) full calendar months, to now expire on March 31, 2009 (the “Extended Term”).

E.           The Lease for the Expansion Premises shall commence as set forth below and shall also expire on March 31, 2009. 

NOW THEREFORE, the parties agree that the Lease shall be amended as set forth herein.

1.           COMMENCEMENT DATE OF EXPANSION PREMISES.  The Commencement Date for the Expansion Premises shall be the date upon which Landlord delivers the Expansion Premises in accordance with the applicable provisions of the Lease and the attached Exhibit B.  Accordingly, the term “Delivery of the Premises” as used herein shall refer to the Premises known as 4838 Ronson Court, Suite L, San Diego, California  92111.  The estimated date for Delivery of the Expansion Premises shall be on or about April 1, 2006 (the “Expansion Premises Commencement Date”).

2.           EXPANSION PREMISES.  Landlord leases to Tenant and Tenant hires from Landlord for a term beginning on the Expansion Premises Commencement Date and ending on March 31, 2009, the Expansion Premises on all of the terms and conditions of the Lease; provided, however, that monthly Base Rent for the entire Premises shall be as set forth in Paragraph 3 below.

 The following table confirms the areas of the Premises:

Area of Premises	RSF
Existing Premises (4838 Ronson Court, Suite A)	12,537
Expansion Premises (4848 Ronson Court, Suite L)	3,822
Total Rentable Square Feet	16,359

3.           MONTHLY BASE RENT.  The following table sets forth the revised schedule of the monthly Base Rent payable for both the Existing Premises and the Expansion Premises:

Month of Term	No. of Months Payable	Expansion Premises Base Rent	Existing Premises Base Rent	Total Monthly Base Rent
April 1, 2006 – March 31, 2007	12	$4,395.30	$12,777.71	$17,173.01
April 1, 2007 – March 31, 2008	12	$4,571.11	$13,288.82	$17,859.93
April 1, 2009 – March 31, 2009	12	$4,753.95	$13,820.37	$18,574.32

4.           IMPROVEMENTS TO THE EXISTING AND EXPANSION PREMISES.  The Premises have been previously improved in accordance with the applicable provisions of Section 3.3 and Exhibit B of the Lease.  Tenant accepts the Premises in its “as is” condition, and acknowledges that Landlord shall not be required to make any additional improvements. Notwithstanding the foregoing, Tenant has requested that Landlord’s contractor, Design Build Tenant Improvements (“Contractor”), install certain improvements within the Premises (“Additional Improvements”) at Landlord’s sole cost and expense as set forth in Exhibit B attached to this Fourth Amendment.  (All improvements shall be performed using Landlord’s Building standard materials, colors and finishes.  Tenant shall be responsible for moving of all trade fixtures, furniture and equipment.)

5.           OTHER AREA DEPENDANT TERMS.  On the Expansion Premises Commencement Date, the Expense Stop in Section 1.14 of the Lease shall be changed to Base Year 2006 for the Extended Term, for purposes of calculating Excess Operating Expenses.  Pursuant to Section 1.12 of the Lease, Tenant’s Share of Excess Operating Expenses shall be 33.13% for Real Property Taxes and Other Operating Expenses.

6.           PARKING.  As a result of the addition of the Expansion Premises, on the Expansion Premises Commencement Date, Tenant’s parking spaces shall be increased to a total of forty-nine (49) parking spaces.  All parking shall be on a non-reserved basis.

7.           SECURITY DEPOSIT.  As a result of the addi6ton of the Expansion Premises, upon Tenant’s execution of this Fourth Amendment, Tenant shall deliver to Landlord the additional amount of $4,753.95 as an increase in the Security Deposit to be held by Landlord in accordance with the provisions of Section 6 of the Lease. The total Security Deposit to be held by Landlord shall be $7,993.95.

8.           CONDITIONS PRECEDENT.  The effectiveness of this Fourth Amendment and all rights to Tenant under this Agreement, are contingent upon Landlord executing a Lease with THE SOCIETY FOR COMPUTER SIMULATION, a California corporation for the property located at 4848 Ronson Court, Suite B, San Diego, California 92111.

EXCEPT AS SPECIFICALLY AMENDED HEREIN, all other terms and conditions of the Lease shall remain in full force and effect between the parties hereto.

Landlord:
Date:	2/22/06	H.G. FENTON COMPANY, a California corporation
		By:	/s/ Kevin D. Hill
			Kevin D. Hill, Vice President, Leasing
		By:	/s/ Michael Neal
			Michael P. Neal, President/CEO
Tenant:
Date:	2/17/06	D3 TECHNOLOGIES, INC., a California corporation
		By:	/s/ Edward Knowles
		By:	/s/ Ryan Bogan
		[TWO (2) AUTHORIZED SIGNATURES REQUIRED]

THIRD AMENDMENT TO LEASE

This Third Amendment to Lease (“Third Amendment”) dated for reference purposes only January 15, 2003 is made at San Diego, California, between H.G. FENTON COMPANY, a California corporation, formerly known as WESTERN SALT COMPANY, (“Landlord”), and D3 Technologies, Inc., a California corporation (“Tenant”) with reference to the following facts and circumstances.

RECITALS:

A.           Landlord and Tenant entered into that certain Lease dated March 24, 1997, which was subsequently amended by that certain First Amendment to Lease dated April 17, 2000, and that certain Second Amendment to Lease dated October 16, 2000 (collectively, the “Lease”) wherein Landlord leased to Tenant, and Tenant leased from Landlord, approximately 12,537 rentable square feet of space located in Landlord’s Building addressed at 4838 Ronson Court, Suite A, as more particularly described on Exhibit A attached to the Lease (“Premises”).  Initially capitalized terms not otherwise defined in this Third Amendment shall have the same meanings as in the Lease.

B.           This Lease expires on March 31, 2003.

C.           The parties wish to (i) extend the Term of the Lease for the Premises: (ii) specify the amount of monthly Base Rent to be paid by Tenant for the Premises.  The parties also wish to make certain other modifications to the Lease.

NOW, THEREFORE, the parties agree that the Lease shall be amended as set forth herein.

1.           EFFECTIVE DATE.  The effective date shall be April 1, 2003 (the “Effective Date”).

2.           EXTENSION OF TERM.  The Term of the Lease shall be extended twenty four (24) full calendar months to now expire on March 31, 2005 (the “Extended Term”).

3.           MONTHLY BASE RATE.  The following table sets forth the revised schedule of the monthly Base Rent payable for the Premises during the remaining Term:

Month of Term	No. of Months	Total Monthly Base Rent
April 1, 2003 – March 31, 2004	12 months	$11,659.41
April 1, 2004 – March 31, 2005	12 months	$11,910.15
April 1, 2005 – March 31, 2006 (Pursuant to Option to Extend)	12 months	$12,286.26

4.           OPTION TO EXTEND.  At the expiration of the Extension of Term, Tenant shall have the right to extend the Term for one (1) additional period of one (1) year with Sixty (60) days advanced written notice to Landlord.  The total monthly base rent for this Option to Extend will be $12,286.25.

5.           OPERATING EXPENSES.  Operating Expenses shall continue to be treated as set forth in Section 26 of the Lease.

6.           CONDITION OF THE PREMISES.  Tenant accepts the Premises in its current “as is” condition.  Landlord shall not be required to make any additional improvements or modifications in or to the Premises, except as set forth below.

(a)           The completion of the Additional Improvements by Landlord shall be deemed Landlord’s Work for all purposes of the Lease.

(b)           Landlord shall complete Additional Improvements, within thirty (30) days after Lease Commencement Date.  (All improvements shall be performed using Landlord’s Building standard materials, colors and finishes; Tenant shall be responsible for moving of all trade fixtures, furniture and equipment):

7.           ADDITIONAL IMPROVEMENTS TO BE COMPLETED BY LANDLORD.

(a) New carpet installed in the areas marked by an X and shaded areas per the attached Exhibit B.

[SIGNATURE BLOCK ON FOLLOWING PAGE]

8.           SECURITY DEPOSIT.  There shall be no increase in the amount of Tenant’s Security Deposit.

9.           NO OTHER CHANGES.  Except as specifically amended herein, all other terms and conditions of the Lease shall remain in full force and effect between the parties hereto.

Landlord:
Date:	2/5/03	H.G. FENTON PROPERTY COMPANY, a California corporation
		By:	/s/ Kevin D. Hill
			Kevin D. Hill, Leasing Director
		By:	/s/ Michael Neal
			Michael P. Neal, President/COO
Tenant:
Date:	1/31/03	D3 TECHNOLOGIES, INC., a California corporation
		By:	/s/ John J. Bogan
			John J. Bogan, President, CEO
		By:	/s/ Edward Knowles
			Edward Knowles, CFO

SECOND AMENDMENT TO LEASE

This Second Amendment to Lease (“Second Amendment”) dated for reference purposes only October 16, 2000 is made at San Diego, California, between H.G. FENTON COMPANY, a California corporation, formerly known as WESTERN SALT COMPANY, (“Landlord”), and D3 Technologies, Inc., a California corporation (“Tenant”) with reference to the following facts and circumstances.

RECITALS:

A.           Landlord and Tenant entered into that certain Lease dated March 24, 1997, which was subsequently amended by that certain First Amendment to Lease dated April 17, 2000 (collectively, the “Lease”) wherein Landlord leased to Tenant, and Tenant leased from Landlord, approximately 12,537 rentable square feet of space located in Landlord’s Building addressed at 4838 Ronson Court, Suite A, and approximately 4,293 rentable square feet of space located in Landlord’s Building addressed 4858 Ronson Court, Suite D, for a total of approximately 16,830 rentable square feet of space, as more particularly described on Exhibit A attached to the Lease (“Premises”).  Initially capitalized terms not otherwise defined in this Second Amendment shall have the same meanings as in the Lease.

B.           In accordance with the provisions of Section 9 contained within the First Amendment, Tenant has exercised the Early Termination Option with regard to that portion of the Premises identified as 4858 Ronson Court, Suite D, thereby reducing the area of Premises by 4,293 rentable square feet.

C.           The parties wish to (i) restate the rentable square footage of the Premises as approximately 12,537; and (ii) specify the new amount of monthly Base Rent to be paid by Tenant for the reduced area of Premises.

D.           The Lease expires on March 31, 2002.

NOW, THEREFORE, the parties agree that the Lease shall be amended as set forth herein.

1.           EFFECTIVE DATE.  The effective date shall be December 1, 2000 (the “Effective Date”).

2.           MONTHLY BASE RATE.  The following table sets forth the revised schedule of the monthly Base Rent payable for the Premises during the remaining Term:

Month of Term	No. of Months	Total Monthly Base Rent
December 1, 2000 – March 31, 2001	4 months	$10,620.51
April 1, 2001 – March 31, 2002	12 months	$10,992.22
April 1, 2002 – March 31, 2003 (Pursuant to Option to Extend)	12 months	$11,486.87

3.           OPERATING EXPENSES.  Operating Expenses shall continue to be treated as set forth in Section 26 of the Lease.

4.           CONDITION OF THE PREMISES.  Tenant accepts the Premises in its current “as is” condition.  Landlord shall not be required to make any additional improvements or modifications in or to the Premises.

5.           SECURITY DEPOSIT.  There shall be no change in the amount of Tenant’s Security Deposit.

6.           NO OTHER CHANGES.  Except as specifically amended herein, all other terms and conditions of the Lease shall remain in full force and effect between the parties hereto.

[SIGNATURE BLOCK ON FOLLOWING PAGE]

Landlord:
Date:	10/24/00	H.G. FENTON PROPERTY COMPANY, a California corporation
		By:	/s/ Kevin D. Hill
			Kevin D. Hill, Leasing Manager
		By:	/s/ Michael Neal
			Michael P. Neal, President
Tenant:
Date:	10/19/00	D3 TECHNOLOGIES, INC., a California corporation
		By:	/s/ William A. Huston
			William A. Huston, President
		By:	/s/ Edward Knowles
			Edward Knowles, CFO

FIRST AMENDMENT TO LEASE

This First Amendment to Lease (“First Amendment”) dated for reference purposes only April 17, 2000 is made at San Diego, California, between WESTERN SALT COMPANY, a California corporation, (“Landlord”), and D3 Technologies, Inc., a California corporation (“Tenant”) with reference to the following facts and circumstances.

RECITALS:

A.           Landlord and Tenant entered into that certain Lease dated March 24, 1997 (the “Lease”) wherein Landlord leased to Tenant, and Tenant leased from Landlord, approximately 16,480 rentable square feet of space located in Landlord’s Building addressed at 4838 Ronson Court, Suite A, and 4858 Ronson Court, Suite D, as more particularly described on Exhibit A attached to the Lease (“Premises”).  Initially capitalized terms not otherwise defined in this First Amendment shall have the same meanings as in the Lease.

B.           The Lease expires on March 31, 2000.

C.           The parties wish to (i) extend the Term of the Lease for the Premises; (ii) specify the amount of monthly Base Rent to be paid by tenant for the Premises, (iii) restate the rentable square footage of the Premises as approximately 16,830.  The parties also wish to make certain other modifications to the Lease.

NOW, THEREFORE, the parties agree that the Lease shall be amended as set forth herein.

1.           EFFECTIVE DATE.  The effective date shall be April 1, 2000 (the “Effective Date”).

2.           EXTENSION OF TERM.  The Term of the Lease shall be extended twenty four (24) full calendar months to now expire on March 31, 2002 (the “Extended Term”).

3.           MONTHLY BASE RATE.  The following table sets forth the revised schedule of the monthly Base Rent payable for the Premises during the Extended Term:

Month of Term	Total Monthly Base Rent
April 1, 2000 – March 31, 2001	$14,257.25
April 1, 2001 – March 31, 2002	$14,756.25
April 1, 2002 – March 31, 2003 (Option to Extend)	$15,420.28

4.           OPTION TO EXTEND.  At the expiration of the Extension of Term, Tenant shall have the right to extend the Term for one (1) additional period of one (1) year in accordance with the Basic Lease Provisions.  The total monthly base rent for this Option to Extend will be $15,420.28.

5.           OPERATING EXPENSES.  Operating Expenses shall continue to be treated as set forth in Section 26.

6.           CONDITION OF THE PREMISES.  Tenant accepts the Premises in its current “as is” condition.  Landlord shall not be required to make any additional improvements or modifications in or to the Premises, except as set forth below.

(a)           The completion of the Additional Improvements by Landlord shall be deemed Landlord’s Work for all purposes of the Lease.

(b)           Landlord shall use its best efforts to complete the Additional Improvements by June 15, 2000 for 4838 Ronson Court, Suite A.  The Additional Improvements for 4858 Ronson Court, Suite D will only be made after the expiration of the Early Termination Option (as such term is defined in Section 9 below) or upon written notification that the Early termination Option would not be exercised.

7.           ADDITIONAL IMPROVEMENTS TO BE COMPLETED BY LANDLORD.  Which is defined as follows:

(a) Spot painting of drywall surfaces which are marked, scuffed or damaged.  Spot painting may require painting of an entire an entire wall or office (as mutually agreed upon by Landlord and Tenant), however, for purposes of this provision, the parties acknowledge that “Cosmetic painting” does not contemplate painting of the entire Premises.  Tenant shall be responsible for moving all furniture, fixtures and equipment.  All work shall be done during normal working hours.

(b) Replacement of stained, damaged, or broken ceiling tiles in premises;

(c) Replacement of rusted or damaged HVAC registers.

8.           ALTERATIONS AND ADDITIONS.  Pursuant to the provisions of Section 8.6 of Lease, Tenant is authorized and shall be required to make improvements (as it’s sole costs and expense) to 4838 Ronson Court pursuant to the G.L. Foster Construction, Inc. proposal attached hereto as Exhibit A.  Said improvements shall be made for the purpose of restoring the Premises to its original and intended configuration.

9.           EARLY TERMINATION OPTION.  Tenant shall have a one-time right and option to terminate this Lease for the portion of the Premises identified as 4858 Ronson Court, Suite D (“Early Termination Option”), within the first six (6) months of the Extended term (the “Termination Period”), subject to the following terms and conditions:

(i) Tenant shall provide Landlord with written notice (“Termination Notice”) at least sixty (60) days prior to the date upon which Tenant desires to terminate the Lease (the “Termination Date”); and

(ii) Concurrently with delivery of the Termination Notice, Tenant shall pay Landlord a fee (“Termination Fee”), in the amount of $3,636.60; and

(iii) Tenant shall not be in default of any material provisions of this Lease, both at the time the Termination Notice is delivered and at the Termination Date.

10.           SECURITY DEPOSIT.  There shall be no increase in the amount of Tenant’s Security Deposit.

11.           NO OTHER CHANGES.  Except as specifically amended herein, all other terms and conditions of the Lease shall remain in full force and effect between the parties hereto.

Landlord:
Date:	5/8/00	WESTERN SALT COMPANY, a California corporation
		By:	/s/ Linda B. Kaufman
			Linda B. Kaufman, Leasing Manager
		By:	/s/ Michael Neal
			Michael P. Neal, Vice President
Tenant:
Date:	4/28/00	D3 TECHNOLOGIES, INC., a California corporation
		By:	/s/ W. A. Huston
			William A. Huston, President
		By:	/s/ Edward Knowles
			Edward Knowles, CFO

STANDARD INDUSTRIAL LEASE

(MODIFIED GROSS)

Sycamore Grove Business Park

WESTERN SALT COMPANY,

a California corporation

"Landlord"

And

D3 TECHNOLOGIES, INC.,

a California corporation

"Tenant"

TABLE OF CONTENTS SECTION

SECTION	PAGE
1.	BASIC LEASE PROVISIONS	1
2.	DEFINITIONS	2
3.	PREMISES	4
4.	TERM; DELIVERY OF PREMISES	5
5.	RENT	6
6.	SECURITY DEPOSIT	7
7.	USE	7
8.	MAINTENANCE, REPAIRS AND ALTERATIONS	8
9.	TAXES	9
10.	UTILITIES	9
11.	INSURANCE	10
12.	WAIVER AND INDEMNITY	11
13.	DAMAGE AND DESTRUCTION	12
14.	CONDEMNATION	13
15.	ASSIGNMENT AND SUBLETTING	13
16.	DEFAULT BY TENANT; REMEDIES	15
17.	TENANT’S INSOLVENCY	16
18.	DEFAULT BY LANDLORD	17
19.	SUBORDINATION AND ESTOPPEL	18
20.	HAZARDOUS MATERIALS	18
21.	NOTICE	19
22.	OTHER TERMS AND CONDITIONS	19
23.	GENERAL PROVISIONS	21
24.	ADDENDUM	25

EXHIBITS

A	Site Plan
B	Premises and Improvements to Premises
C	Rules and Regulations
D	Intentionally Omitted
E	Environmental Questionnaire
F	Intentionally Omitted

STANDARD INDUSTRIAL LEASE-MODIFIED GROSS

THIS STANDARD INDUSTRIAL LEASE–MODIFIED GROSS ("Lease"), dated for reference purposes only, March 24, 1997, Is made at San Diego, California, between WESTERN SALT COMPANY, a California corporation ("Landlord"), and D3 TECHNOLOGIES, INC., a California corporation ("Tenant").

1.           BASIC LEASE PROVISIONS. The words and figures set forth in this Section 1 are used as defined terms in this Lease.

1.1           Premises: The real property and improvements which are the subject of this Lease.  The Premises shall consist of 16,480 rentable square feet (rsf) comprised of the following areas:

12,187 rsf as depicted on Exhibit B, which has an address of 4838 Ronson Court

4,293 rsf as depicted on Exhibit B, which has an address of 4858 Ronson Court, Suite A (1/2 of Building).

1.2           Building: The Industrial buildings addressed at 4838 and 4858 Ronson Court, San Diego, California.

1.3           Project: Those portions of the Business Park addressed at 4828-4858 Ronson Court San Diego, California. The Project, which is depicted on Exhibit A, contains a total rentable area of approximately 49,380 square feet.

1.4            Term:	Thirty-six (36) months.
1.5            Commencement and Expiration Dates:
(a)           Commencement Date:	April 1, 1997
(b)           Expiration Date:	March 31, 2000
(c)           Delivery of the Premises:	April 1, 1997
1.6            Extension Option Period:	Two (2); each for a period of one (1) year.
1.7            Initial Monthly Base Rent:	$12,560.00
1.8            Prepaid Base Rent:	None.
1.9            Periodic Increase In Base Rent:
Lease Year: 2 3	Base Rent $13,045.40 $13,548.80
1.10           Security Deposit Amount:	3,240.00 (Already Held by Landlord)
1.11           Tenant Improvement Allowance:	None; however, subject to the provisions of Exhibit B.
1.12           Tenant’s Share of Excess Operating Expenses:
(a)           Real Property Taxes:	33.37%
(b)           Other Operating Expenses:	33.37%
1.13           Permitted Use:	General office use and storage of supplies and equipment.
1.14           Expense Stop:	Not Applicable (see Section 26 of Addendum to Lease)
1.15           Broker(s):	Not Applicable
1.16           Parking:	45 vehicles.

1.17           Landlord’s Address for Notice:	H. G. Fenton Material Company % Fenton-Western Properties 7220 Trade Street, Suite 300 (92121) Post Office Box 64 San Diego, California 92112 Tel: (619) 566-2000 Fax: (619) 549-3587 Attention: Property Manager
1.18           Tenant’s Address for Notice:	D3 Technologies 4838 Ronson Court San Diego, CA 92111 Tel: (619) 571-1685 Fax: (619) 571-8563 Attention: Manning D. Calhoun
1.19           Tenant’s Guarantor(s):	None.
1.20           Addendum:	Section 24 – 27.

2.           DEFINITIONS. The captions appearing in this Section 2 are used as defined terms in this Lease.

2.1           Additional Rent. All sums payable by Tenant hereunder other than Base Rent, including without limitation Tenant's Share of Excess Operating Expenses, late charges, interest on past due amounts, attorneys' fees, and reimbursements to Landlord of sums advanced by Landlord to cure any default or discharge any obligation of Tenant hereunder.

2.2           Base Rent. The basic monthly rent payable to Tenant for the use and occupancy of the Premises, in accordance with Section 5 of this Lease.

2.3           Intentionally Omitted

2.4           Commencement Date. The first day of the Term, as determined in accordance with Section 4.1 below.

2.5           Common Areas. All areas and facilities outside the Premises and within the Building and Project that Tenant is permitted to use, as provided and designated by the Landlord from time to time for the general non-exclusive use of Landlord, Tenant and other tenants of the Building and Project and their respective employees, suppliers, shippers, customers, invitees, licensees or other visitors, including without limitation hallways, entryways, common rest rooms on multi-tenant floors, elevators, stairways, common pipes, conduits, wires and appurtenant equipment serving the Premises, parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

2.6           Declaration. The recorded Declaration of Covenants, Conditions and Restrictions for the Business Park, as the same may be amended from time to time.

2.7           Delivery of the Premises. The date of the inspection and acceptance (or deemed acceptance) of the Premises by Tenant, following Landlord's notice that Landlord's Delivery Work has been substantially completed in accordance with Exhibit B attached hereto.

2.8           Hazardous Materials. Any and all materials or substances which have been determined to be nuisance or dangerous, toxic or hazardous or a pollutant or contaminant, including but not limited to any hydrocarbon material, flammable explosives, asbestos, urea formaldehyde, radioactive materials or waste, or other hazardous, toxic, contaminating or polluting materials, substances or wastes, including, without limitation, any `hazardous substances", "hazardous wastes", "hazardous materials" or "toxic substances" under any Hazardous Materials Laws.

2.9           Hazardous Materials Laws. All federal, state and local laws, ordinances and regulations, including, but not limited to, the Federal Water Pollution Control Act (33 U.S.C. §1251, at seq.), Resource Conservation & Recovery Act (42 U.S.C. §6901, et seq.), Safe Drinking Water Act (42 U.S.C. §3000f, et seq.), Toxic Substances Control Act (15 U.S.C. §2601, at seq.), the Clean Air Act (42 U.S.C. §7401, at seq.), Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §9601, at seq.), California HEALTH & SAFETY CODE (§25100, at seq., §39000, at seq.), California Safe Drinking Water & Toxic Enforcement Act of 1986 (California HEALTH & SAFETY CODE §25249.5, at seq.), California WATER CODE (§13000, et seq.), and other comparable federal, state or local law, regulation or interpretation thereof, whether currently in force or enacted in the future, together with any licenses, permits, plans or approvals generated pursuant to or as a result of any such law, which regulates or proscribes the use, storage, disposal, cleanup, transportation, release or threatened release into the environment or presence of Hazardous Materials.

2.10           Lease Year. A period of twelve consecutive full calendar months. The first Lease Year shall begin on the Commencement Date if the Commencement Date is the first day of a calendar month; otherwise, the first Lease Year shall begin on the first day of the first full calendar month after the month in which the Commencement Date occurs. Each succeeding Lease Year shall begin on the anniversary of the beginning of the first Lease Year. If Tenant should extend the Term pursuant to any extension option granted herein, the first day of the Extension Term shall also be deemed to be the first day of a Lease Year for all purposes of this Lease.

2.11           Tenant's Work. The Improvements and other work, if any, to be accomplished by Tenant in accordance with Exhibit B.

2.12           Landlord's Delivery Work. All items of Landlord's Work except those which Landlord reasonably cannot complete prior to the Commencement Date, e.g., Landlord's Work that cannot be performed by Landlord until Tenant (i) provides Landlord with plans and specifications therefor, or (ii) obtains a building permit, or (iii) completes those items of Tenant's Work that are necessarily completed prior to a particular item of Landlord's Work.

2.13           Landlord's Work. The improvements and other work, if any, to be accomplished by Landlord in accordance with Exhibit B.

2.14           Mortgage. Any mortgage, trust deed or other encumbrance, and all renewals, extensions or replace­ments thereof, now or hereafter imposed by Landlord upon the real property which includes the Premises.

2.15           Mortgagee. The holder of a Mortgage.

2.16           Operating Expenses. All costs incurred by Landlord, if any, for any of the following:

(a)           The operation, repair and maintenance, in neat, clean and good order and condition of (i) the Common Areas of the Project, Including without limitation all parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, and irrigation systems, common area lighting facilities, and fences and gates; (ii) fire detection in the Project, including sprinkler system maintenance and repair; and (iii) unless allocated directly to Tenant pursuant to Section 8.1(b), the Building's heating, ventilation and air conditioning ("HVAC") systems.

(b)           Trash disposal for the Project, and to the extent any such services are provided, janitorial service, security services, gardening, painting, plumbing, electrical, carpentry, window washing, signage and equipment rental expenses, and any other service to be provided by Landlord that is elsewhere in the Lease stated to be an item of Operating Expenses.

(c)           Any deductible portion of an insured loss concerning any of the items or matters described in this Section.

(d)           Premiums for any insurance policies maintained by Landlord pursuant to Section 11 below.

(e)           Real Property Taxes to be paid by Landlord.

(f)           Utilities not separately metered to Tenant or other tenants of the Project.

(g)           Independent contractors for services (excluding capital improvements), and compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with day-to-day operation, maintenance and repair of the Project, provided such compensation is commercially reasonable.

(h)           Maintenance and repair of roofs, building walls, foundations, and all sewer and water facilities.

(i)           A property management fee in the amount of fifteen percent (15%) of the preceding items of Operating Expenses.

(j)           Dues and assessments payable to the Business Park's property owners association (if any).

(k)           Intentionally Omitted.

The inclusion of the improvements, facilities and services set forth in the foregoing definition shall not be deemed Landlord's representation that such improvements or facilities exist, nor shall It impose on Landlord any obligation either to have those improvements or facilities or to provide those services, unless the improvements or facilities already exist in the Project or Landlord already provides the services as of the Commencement Date, or unless Landlord has agreed to do so elsewhere in the Lease.

2.17           Real Property Taxes. All general property and improvement taxes and all forms of assessment, special assessment or reassessment, license fee, license tax, business license tax, commercial rental tax, in lieu tax, levy, charge, penalty (to the extent not imposed as a result of Landlord's negligence) or similar imposition, Imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, or any agency or public body, as against any legal or equitable interest of Landlord in the Premises and all improvements thereon and thereto as they presently exist or as they may be expanded, developed, constructed or altered from time to time, including but not limited to: (a) any tax on Landlord's rent, right to rent or other income from the Premises or all or any portion of the Project or as against Landlord's business of leasing the Premises, but specifically excluding Landlord's federal, state or city income, franchise, corporate, personal property, stock transfer, revenues, inheritance or estate taxes; (b) any assessments, taxes, fees, levies or charges in addition to, or in substitution, partially or totally, for any assessment, tax, fee, levy or charge previously included within the definition of real property tax before adoption of Proposition 13 by the voters of the State of California in the June 1978 election, it being acknowledged by Tenant and Landlord that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road mainte­nance, refuse removal and for other governmental services that were before Proposition 13 provided without charge to property owners or occupants; and (c) any assessment, tax, fee, levy or charge upon this transaction or any document to which Tenant is a party which is imposed on the creation or transfer of an interest or an estate in the Premises. It is the intention of Tenant and Landlord that all new and increased assessments, taxes, fees, levies and charges, and all similar assessments, taxes, fees, levies and charges be included within the definition of Real Property Taxes for the purposes of this Lease. Real Property Taxes for the first year of the Term shall be calculated as if the Premises and related improvements were fully assessed. If at any time during the Term the laws concerning the methods of real property taxation prevailing at the commencement of the Lease Term are changed so that a tax or excise on rents or any other tax, however described, is levied or assessed against Landlord as a substitution in whole or in part for any real property taxes, then Real Property Taxes shall include, but not be limited to, any such assessment, tax, fee, levy or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof. With respect to any assessments that may be levied against or upon the Premises, the Building or all or any portion of the Project and that under the laws then in force may be evidenced by improvement or other bonds, or may be paid in annual installments, there shall be included within the definition of Real Property Taxes with respect to any tax fiscal year only the amount currently payable on such tax, bond or assessment, including interest, for such tax fiscal year or the current annual installment for such tax fiscal year.

3.           PREMISES.

3.1           Lease of Premises. In consideration of the rent and covenants set forth below, Landlord hereby leases the Premises to Tenant, and Tenant hires the Premises from Landlord, for the term, at the rental, and upon all of the conditions set forth herein. Except as otherwise provided herein, this Lease is subject to: (ii) all covenants, conditions, restrictions, easements, mortgages, deeds of trust, leases, ground or underlying leases, rights of way, reciprocal easement agreements to which Landlord is a party which affect the Project and all other matters now or hereafter affecting the Project or the Premises; and (ii) all zoning laws, ordinances and building codes now or hereafter affecting the Project or the Premises. In the event Landlord has a leasehold Interest in the Project or the Premises, this Lease shall terminate upon the termination of such leasehold interest whether such termination is voluntary, involuntary, or by operation of law, without liability of Landlord (unless otherwise specifically set forth herein).

3.2           Landlord's Reserved Rights. Landlord reserves to itself the absolute rights: (i) to use the roof, exterior walls and area beneath the Premises, and (ii) to install, use, maintain and replace equipment, machinery, pipes, conduits and wiring located within the Premises which serve other parts of the Project, in a manner and in locations that do not unreasonably interfere with Tenant's use of the Premises.

3.3           Condition of Premises. Tenant acknowledges that except to the extent expressly set forth in this Lease or in a written addendum or amendment hereto, neither Landlord nor its agents have made (i) any promise to alter, remodel or otherwise improve, or (ii) any representation or warranty with respect to the condition of, the Premises, the Building or any part of the Project or improvements thereon or therein. Tenant's taking possession of the Premises shall be deemed acceptance of the Premises by Tenant, and shall be deemed conclusively to establish that the Premises are in good and satisfactory condition as of the date Tenant takes possession. Subject to the completion of any Landlord's Work, Tenant accepts possession of the Premises in their current, "as is", condition, and acknowledges that it has inspected the Premises before signing this Lease and is fully aware of the condition of the Premises.

3.4           Rights in Common Areas. Landlord grants to Tenant and to Tenant's employees, invitees and licensees a non-exclusive license during the Term to use the Common Areas, subject to the terms and conditions of this Lease. Tenant acknowledges that others, including without limitation Landlord and other tenants of the Building and Project, and their respective employees, invitees and visitors, and other persons authorized by Landlord, will also be entitled to use the Common Areas. Without advance notice to Tenant and without any liability to Tenant in any respect, Landlord shall have the right to:

(a)           Establish and enforce reasonable rules and regulations concerning the maintenance, management, use and operation of the Common Areas.

(b)           Close off any of the Common Areas to whatever extent required in the opinion of Landlord and its counsel to prevent a dedication of any of the Common Areas or the accrual of any rights by any person or the public to the Common Areas, provided such closure does not deprive Tenant of the substantial benefit and enjoyment of the Premises.

(c)           Temporarily close any of the Common Areas for maintenance, alteration or improvement purposes.

(d)           Select, appoint or contract with any person for the purpose of operating and maintaining the Common Areas, subject to such terms and at such rates as Landlord deems reasonable and proper.

(e)           Change the size, use, shape or nature of any portions of the Common Areas, provided such change does not deprive Tenant of the reasonable benefit and enjoyment of the Premises. So long as Tenant is not thus deprived of the reasonable use and benefit of the Premises, Landlord will also have the right at any time to change the arrangement or location of, or both, or to regulate or eliminate the use of, any concourse, parking spaces, garage, or any elevators, stairs, toilets or other public conveniences in the Project, without incurring any liability to Tenant or entitling Tenant to any abatement of rent, and such action will not constitute an actual or constructive eviction of Tenant.

(f)           Erect one or more additional buildings on the Common Areas, expand the existing buildings or other buildings to cover a portion of the Common Areas, convert Common Areas to a portion of the Building or other buildings, or convert any portion of such other buildings to Common Areas. Upon erection of any additional buildings or change in the Common Areas, the portion of the Project upon which buildings or structures have been erected will no longer be deemed to be a part of the Common Areas. In the event of any such changes in the size or use of the Common Areas of the Project, Landlord may make an appropriate adjustment In the Building's or any other buildings' pro rata share of exterior Common Areas of the Project as appropriate, and a corresponding adjustment to Tenant's Share of Excess Operating Expenses.

4.           TERM: DELIVERY OF PREMISES.

4.1           Term. The Term shall be for the number of months set forth at Section 1.4 above, beginning on the Commencement Date and ending on the Expiration Date.

4.2           Intentionally Omitted.

4.3           Intentionally Omitted.

4.4           Memorandum of Commencement Date. Following the Delivery of the Premises, Landlord shall prepare and forward to Tenant two copies of a written Memorandum of Commencement Date, signed by Landlord, confirming the Commencement Date and the date on which the Term will expire. Within ten (10) days after receipt thereof, Tenant shall sign and return one copy of the Memorandum of Commencement Date, indicating either Tenant's agreement with the matters set forth therein or any areas of disagreement. Tenant's failure to return a copy of the Memorandum of Commencement Date within such ten-day period shall be conclusively deemed Tenant's agreement with all matters set forth therein. Any dispute or disagreement on Tenant's part as to the Commencement Date set forth in such memorandum shall, at the election of either party, be submitted to final, binding arbitration in San Diego, California under the Commercial Arbitration Rules of the American Arbitration Association.

4.5           Intentionally Omitted.

5.           RENT.

5.1           General. From and after the Commencement Date, Tenant agrees to pay Landlord, in advance, on the first day of each and every calendar month during the Term, Base Rent and Additional Rent as specified in this Section. Payment of all such rent shall be without offset or demand, shall be in lawful money of the United States of America and shall be made at the address set forth for Landlord herein or at such other place as Landlord may direct.

5.2           Base Rent. Base Rent shall initially be in the amount per month set forth in Section 1.7.

5.3           Annual Adjustment to Base Rent. Base Rent shall be increased during the Term in accordance with the schedule set forth in Section 1.9.

5.4           Excess Operating Expenses. See Section 26 of Addendum to Lease.

5.5           Late Charges. Tenant acknowledges that late payment by Tenant to Landlord of Base Rent or Additional Rent due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which is extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Landlord by the terms of any mortgage or deed of trust covering the Premises. Therefore, if any payment of Base Rent or Additional Rent is not paid within five (5) days after the date due, Tenant shall pay to Landlord ten percent (10%) of the amount due or Two Hundred Fifty Dollars ($250.00), whichever is greater. The parties agree that such late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of the late payment by Tenant. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as limiting Landlord's remedies in any manner.

6.           SECURITY DEPOSIT. Tenant has paid to Landlord, a security deposit in the amount set forth at Section 1.10 ("Security Deposit"). The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by Tenant. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any rent or any other sum in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of the Security Deposit is so used or applied, Tenant shall, upon demand therefor, deliver cash to Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest thereon. If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord's option, to the last assignee of Tenant's interests hereunder) at the expiration of the Term, provided that Landlord may retain the Security Deposit until such time as any amount due from Tenant under this Lease has been determined and paid in full.

7.           USE.

7.1           Permitted Use. The Premises shall be used and occupied only for the purposes and activities set forth in Section 1.13 above, and for no other uses or purposes whatsoever. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business or other activity carried on in the Premises, or if a failure to procure such a license or permit might or would in any way affect Landlord or the Business Park, then Tenant, at Tenant's expense, shall (i) duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord, (ii) install and pay for any improvements, changes or alterations in the Premises, required by any governmental authority, as a result of its proposed use of the Premises or its manner of operation, and (iii) at all times, comply with the requirements of each such license or permit. Tenant warrants that it has investigated whether its proposed use of the Premises and its proposed manner of operation will comply with, and Tenant assumes the risk that its proposed use of the Premises and its proposed manner of operation are and will continue to be in compliance with, all applicable land use approvals, laws and regulations, including without limitation all zoning laws regulating the use of and enjoyment of the Premises. Tenant agrees that under no circumstances shall Tenant be released in whole or in part from any of its obligations under this Lease as a result of any governmental authority's disallowing or limiting Tenant's proposed use of the Premises or its manner of operation.

7.2           Condition of Premises. Landlord warrants to Tenant, but without regard either to any Tenant's Work or to the use for which Tenant will use the Premises, that as of the date of Delivery of the Premises, the Premises do not violate the Declaration or any other covenants or restrictions of record or any applicable building code, regulation or ordinance in effect on the date of this Lease. In the event it should be determined that this warranty has been violated, then after written notice from Tenant, Landlord shall promptly, at its sole cost and expense, rectify any such violation. In the event Tenant does not give Landlord any such written notice of violation within three (3) months after the Commencement Date, the correction of such violation shall thereafter be Tenant's obligation, to be performed at Tenant's sole cost and expense. The foregoing warranty shall be of no force or effect if, prior to the date of this Lease, Tenant was the owner or occupant of the Premises, in which event Tenant shall correct any such violation, whenever determined to exist, at Tenant's sole cost and expense.

7.3           Compliance With Requirements. Subject to Section 7.2 above, Tenant shall, at Tenant's expense, promptly comply with all applicable statutes, ordinances, rules, regulations, applicable covenants and restrictions of record, and requirements of any fire insurance underwriters or rating bureaus, now in effect or which may hereafter come into effect during the Term, whether or not they reflect a change in policy from that now existing, relating in any manner to the Premises and the occupation and use by Tenant of the Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Business Park. Without limiting the generality of the foregoing, Tenant shall, at its sole cost and expense, comply promptly with all Hazardous Materials Laws and with all environmental laws and ordinances applicable to the conduct of Tenant's business, including all air quality and air pollution regulations of the regional air pollution control district. If at any time it reasonably appears to Landlord that Tenant is not fulfilling its obligations under this Section, Landlord may cause to be performed, at Tenant's sole cost, an audit or inspection of the Premises to evaluate Tenant's compliance herewith.

7.4           Compliance With Americans With Disabilities Act. Landlord shall ensure that as of the date of this lease, the design and construction of the Building, the Premises and any Common Areas are in compliance with Title III of the Americans With Disabilities Act ("ADA") and other applicable laws and regulations that relate to access by the disabled or handicapped. Tenant shall be responsible for compliance with the ADA and related statutes with respect to any alterations or improvements to the Premises and the operation of any businesses conducted from the Premises; Landlord shall have no responsibility or liability with respect thereto. In the event of any changes to the ADA or other applicable statutes, or any rules or regulations promulgated pursuant thereto, that become effective after the date of this Lease, Tenant shall be responsible, at its sole expense, for any necessary alterations or improvements to the Premises, and Landlord shall be responsible for any necessary alterations or improvements to the Building or any Common Areas; provided, however, that Landlord's costs and expenses incurred in connection with any such alterations or improvements shall be conclusively deemed to be Operating Expenses, notwithstanding the classification of such costs and expenses as capital items in accordance with generally accepted accounting practice.

7.5           Rules and Regulations. Tenant shall at all times comply with the Declaration and with the rules and regulations for the Business Park. A copy of the rules and regulations in existence on the date of this Lease is attached hereto as Exhibit C, but Landlord reserves the right to amend the rules and regulations at any time by giving notice of amendment to Tenant, if Landlord determines such amendments to be to the best interests of the Building and its tenants. Tenant shall not be bound by any such amended rules and regulations until Tenant has received a written copy thereof. Landlord agrees that the rules and regulations shall be enforced in a uniform and non-discriminatory manner; provided, however, that Landlord shall not be liable to Tenant for Landlord's failure to enforce the rules and regulations against any other tenants of the Project.

8.           MAINTENANCE. REPAIRS AND ALTERATIONS.

8.1           Tenant's Obligations.

(a)           Tenant shall keep and maintain in good, sanitary order, condition, and repair (including replacement of parts and equipment if necessary) the following areas of the Premises and every part thereof and any and all appurtenances thereto wherever located, including, without limitation, the interior surfaces of the exterior walls, the interior portion of all doors, door frames, door checks, windows (including window sashes, casements and frames), Tenant's signs, walls, floor and ceilings, and all other repairs, replacements, renewals and restorations, interior ordinary and extraordinary, foreseen and unforeseen, and all other work performed, and additions, alterations, and improvements installed by or on behalf of Tenant. Any interior glass broken shall promptly be replaced by Tenant with glass of the same quality, size and kind. If Tenant shall fail to replace same within seventy-two (72) hours after such glass is broken, Landlord shall have the right, but shall not be obligated, to replace such glass, in which event Tenant shall, promptly upon demand therefor by Landlord, reimburse Landlord for expenses incurred by Landlord in connection therewith. In addition, Tenant shall be responsible for the purchase, stocking, replacement, and installation of all interior light bulbs which serve only the Premises.  Notwithstanding the foregoing, Tenant may, at Tenant's discretion, elect to have Landlord be responsible for the maintenance, repair, and replacement of the preceding items contained in this Section 8.1(a), provided however, that Landlord shall have the right to bill Tenant Additional Rent for such maintenance, repair, and replacement, and such Additional Rent shall be payable together with Tenant’s next Base Rent installment after such work has been performed by Landlord.

(b)           Intentionally Omitted

(c)           Tenant shall, at Tenant's sole cost and expense, comply with all laws, rules, orders, ordinances, directions, regulations and legal requirements of federal, state, county or municipal governmental authorities now or hereafter affecting or applying to the Premises, including, without limitation, the Americans With Disabilities Act.

(d)           Tenant shall, at Tenant's sole cost and expense, be responsible for all services related to cleaning (janitorial and portering, if any) the interior portions of the Premises, excluding the common area restrooms.

8.2           Condition on Termination. On the last day of the Term, or on any sooner termination, Tenant shall surrender the Premises to Landlord in the same condition as received, ordinary wear and tear excepted, clean and free of debris. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices. Tenant shall reimburse Landlord for repair of any damage to the Premises occasioned by the installation or removal of Tenant's trade fixtures, alterations, furnishings and equipment, and shall leave all air lines, power panels, electrical distribution systems, lighting fixtures, HVAC systems, plumbing and fencing in good operating condition.

8.3           Landlord's Rights. If Tenant fails to perform Tenant's obligations under Section 8.1 or 8.2 or under any other provision of this Lease, Landlord may enter the Premises after three (3) days' prior written notice to Tenant (except in the case of emergency, in which case no notice shall be required) and perform such obligations on Tenant's behalf and put the Premises in good order, condition and repair, and the cost thereof together with interest thereon from the date incurred at the maximum rate then allowed by law shall be due and payable as Additional Rent to Landlord together with Tenant's next Base Rent installment.

8.4           Landlord's Obligations.

(a)           Except for Sections 13 and 14 relating to damage and condemnation, and the provisions in this Section 8.4 below which relate solely to multi-tenant buildings, the parties intend that Landlord shall have no obligation whatsoever to repair and maintain the interior, non-structural portions of Premises or the equipment therein, all of which the parties intend to be obligations of Tenant pursuant to this Section 8. Notwithstanding the foregoing, the Building is a multi-tenant facility, and Landlord shall keep in good condition and repair the foundations, exterior walls, structural condition of interior bearing walls, and roof of the Building, as well as the Common Areas, and all costs and expenses incurred by Landlord in connection therewith shall be included within Operating Expenses which included in Tenant’s payment of Base Rent. Landlord shall have no obligation to make repairs under this Section until a reasonable time after receipt of written notice from Tenant of the need for such repairs.

(b)           Landlord shall procure and maintain at Tenant's expense, which expense is included in Base Rent, an HVAC system maintenance contract on any HVAC systems which serve only the Premises, and Landlord shall be responsible for any repairs thereto throughout the Term.

(c)           Except for damage caused by any negligence or intentional act or omission of Tenant, Tenant's employees suppliers shippers, customers, or invitees (which damage Tenant shall repair at its expense), Landlord shall maintain at Tenant’s expense, which expense is included in Base Rent, all plumbing and sewage facilities within the Premises (including free flow up to the main sewer line), plumbing fixtures, and electrical systems (whether or not located in the Premises), sprinkler system and exterior plate glass.

(d)           Landlord shall, at Tenant’s expense, which expense is included in Base Rent, maintain and be responsible for all services related to cleaning (janitorial and portering, if any) the Common area restrooms and kitchen, which serve only the Premises.

8.5           Waiver. Tenant expressly waives all rights to make repairs at the expense of Landlord or deduct any amounts from rent as provided in any statute or law in effect during the Term of this Lease, including its rights under the provisions of § 1941 and § 1942 of the Civil Code of the State of California.

8.6           Alterations and Additions.

(a)           Tenant shall not, without Landlord's prior written consent which shall not be unreasonably withheld, make any alterations, improvements, additions, or Utility Installations in, to or about the Premises. Tenant shall make no change or alteration to the exterior of the Building without Landlord's prior written consent, which consent may be withheld for any reason in Landlord's sole discretion and which may at Landlord's discretion be conditioned upon Tenant's providing Landlord, at Tenant's sole cost and expense, a lien and completion bond in an amount equal to one and one-half (1 1/2) times the cost of the work. As used in this Section, the term "Utility Installations" shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning, plumbing and fencing. Landlord may require that Tenant remove at the expiration of the Term any or all alterations, improvements, additions or Utility Installations which were not part of the original Tenant Improvements, and restore the Premises and the Common Areas to their prior condition. Should Tenant make any alterations, improvements, additions or Utility Installations without the prior approval of Landlord, Landlord may, at any time during the Term of this lease, require that Tenant remove any or all of the same.

(b)           Except for improvements to be accomplished by Landlord at its expense, if any, Tenant shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant at or for use in the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Building or any interest therein. Tenant shall give Landlord not less than ten days' notice prior to the commencement of any work in the Premises, and Landlord shall have the right to post notices of non-responsibility in or on the Premises or the Building as provided by law. If Tenant shall, in good faith, contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense, defend itself and Landlord against the same and shall pay and satisfy any adverse Judgment that may be rendered thereon before the enforcement thereof against the Landlord or the Building, upon the condition that if Landlord shall require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to one and one-half (1/2) times the amount of such contested lien claim or demand, indemnifying Landlord against liability for such claim or lien and for all costs of defense thereof, of obtaining the release of any lien, and of making the Building free from the effect of such lien or claim. In addition, Landlord may require Tenant to pay Landlord's attorneys' fees and costs in participating in such action if Landlord shall decide it is in Landlord's best interest to do so. In any event, Landlord may pay the lien claim prior to the enforcement thereof, in which event Tenant shall reimburse Landlord in full, including attorneys' fees for any such expense, as Additional Rent, with the next due rents.

(c)           All alterations, Improvements, additions and Utility Installations (exclusive of all trade fixtures of Tenant) which may be made on the Premises, shall be the property of Landlord and shall remain upon and be surrendered with the Premises at the expiration of the Lease term, unless Landlord requires their removal. Notwithstanding the provisions of this Section 8.6, Tenant's machinery and equipment (other than Utility Installations), other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises or the Building, shall remain the property of Tenant and may be removed by Tenant subject to the provisions of Section 8.2.

9.           TAXES.

9.1           Real Property Taxes. Landlord shall pay all Real Property Taxes with respect to the Building and the Project, which shall be included in Operating Expenses. If the Premises are separately assessed, or included within an assessor's parcel that does not encompass the entire Project, Landlord shall adjust Tenant's Share of Excess Operating Expenses as it relates to Real Property Taxes, to reflect the proportion between the area of the Premises and the total area of the assessor's parcel encompassing the Premises.

9.2           Personal Property Taxes. Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained in the Premises or elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay to Landlord the taxes attributable to Tenant within ten days after a receipt of a written statement setting forth the taxes applicable to Tenant's property.

10.           UTILITIES. Tenant shall be solely responsible for, shall arrange for, and shall promptly pay all charges, including meter and connection fees, for gas, electricity, and any other utility used upon or furnished to the Premises. In the event any such utility is not separately metered, Tenant shall pay its share of the cost thereof, as equitably determined by Landlord, as Additional Rent, as part of Operating Expenses. In this regard, Tenant acknowledges and agrees that if Tenant's use of the Premises results In a disproportionately heavy use of water or other commonly metered utilities, then Landlord, at Landlord's discretion, and in a reasonable and equitable manner, may adjust Tenant's Share of Excess Operating Expenses to reflect such disproportionately heavy use. Landlord does not warrant that any services Landlord supplies will not be interrupted, e.g., because of accidents, repairs, alterations, improvements or any reason beyond the reasonable control of Landlord. No such interruption shall: (i) be considered an eviction or disturbance of Tenant's use and possession of the Premises; (ii) entitle Tenant to terminate this Lease; (iii) make Landlord liable to Tenant for damages; (iv) abate Base Rent, Additional Rent or any other sums due hereunder; or (v) relieve Tenant from performing its obligations hereunder.

11.           INSURANCE.

11.1           Liability Insurance–Tenant. Prior to the earlier of the Commencement Date or Tenant's occupancy of the Premises, Tenant, at its own expense, shall obtain from and shall thereafter keep in force with companies reasonably acceptable to Landlord, commercial general liability insurance applying to the use and occupancy of the Premises, or any areas adjacent thereto, and the business operated by Tenant or any other occupant on the Premises. Such insurance shall: include broad form contractual liability insurance coverage specifically insuring all of Tenant's indemnity obligations under this Lease; have a minimum combined single limit liability of at least $2,000,000; be written to apply to all bodily injury, property damage, personal injury and other covered loss, however occasioned, occurring during the policy term; contain endorsements deleting any employee exclusion on personal injury coverage; include products and completed operations coverage; provide for severability of interests or a cross-liability provision or endorsement; be endorsed to delete any liquor liability exclusion, and afford coverage for all claims based on acts, omissions, injury and damage, which claims occurred or arose (or the onset of which occurred or arose) in whole or in part during the policy period. The foregoing policy of insurance shall name Landlord and any parties designated by Landlord as additional insureds, and shall include a per-location endorsement, Form C62504 or equivalent. In addition, Tenant shall maintain non-owned automobile liability insurance. The policy limits herein specified shall be increased from time to time upon written demand from Landlord, if circumstances reasonably justify such increases. Tenant shall furnish Landlord with a certificate of such insurance within thirty days after the Commencement Date and whenever requested shall satisfy Landlord that such policy is in full force and effect. The policy shall be endorsed to provide that its coverage shall be primary and noncontributing with any insurance carried by Landlord, and shall be further endorsed to provide that it shall not be canceled or altered without thirty days' prior written notice to Landlord.

11.2           Liability Insurance–Landlord. Landlord shall obtain and keep in force during the Term commercial general liability insurance, insuring against liability for injury to or death of persons and loss of or damage to property occurring in or on the Common Areas. Landlord's liability insurance shall be in amount of not less than $2,000,000 combined single limit per occurrence for bodily and personal injury and property damage.

11.3           Property Insurance—Landlord.

(a)           Landlord shall maintain in full force and effect at all times a standard policy or policies insuring against "all risk" perils (also known as "special perils") covering the Building and other improvements owned by Landlord in the Business Park in an amount at least sufficient to avoid the effects of coinsurance provisions of the policy or policies (i.e., not less than ninety percent [90%] of the actual replacement cost of the Building and other improvements, without deduction for depreciation and excluding foundations, excavation costs and the cost of underground flues, pipes and drains, if such costs are properly excludable under coinsurance requirements). Such insurance shall include (i) a standard form of lender's loss payable endorsement, issued to the holder or holders of a mortgage or deed of trust secured in whole or in part by the Building and the other property on which the insured improvements are located; (ii) at Landlord's sole option, coverage for flood or earthquake or both; and (iii) rental income insurance equal to Base Rent and Operating Expenses for up to one year. In addition, Landlord shall obtain and keep in force during the Term such other insurance as Landlord deems advisable.

(b)           Tenant shall pay for any increase in the property insurance of the Building or such other building or buildings if the increase is caused by Tenant's acts, omissions, use or occupancy of the Premises. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this Section 11.3. If Tenant does or permits to be done anything which shall increase the cost of the insurance policies referred to in this Section 11.3, then Tenant shall within thirty (30) days after demand therefor by Landlord reimburse Landlord for any additional premiums attributable to any act or omission or operation of Tenant causing such increase in the cost of insurance. Landlord shall deliver to Tenant a written statement setting forth the amount of any such insurance cost increase and showing in reasonable detail the manner in which it has been computed.

11.4           Property Insurance–Tenant. Tenant shall pay for and shall maintain in full force and effect at all times, a standard policy insuring against "all risk" perils (also known as "special perils"), covering all exterior glass, whether plate or otherwise, and all interior glass, stock in trade, merchandise, trade fixtures, equipment and other personal property located In the Premises and used by Tenant in connection with its business. Tenant shall furnish Landlord with a duly executed certificate evidencing such coverage at the commencement of the Term and not less than thirty (30) days before the expiration of the term of such coverage.

11.5           Insurance Policies. Each policy of insurance required to be maintained by Tenant hereunder shall name Landlord, and any other parties in interest designated by Landlord, as additional insureds and shall contain a clause that the insurer will not cancel or change such insurance without first giving Landlord thirty (30) days' prior written notice. Such Insurance may be furnished by Tenant under any blanket policy carried by it or under a separate policy therefor; provided that such blanket policy shall contain an endorsement that names Landlord (and any other parties in interest designated by Landlord) as an additional insured, references the Premises and guarantees that a minimum limit equal to the insurance amounts required in this Lease will be available specifically for the Premises. All insurance shall be with a good and solvent insurance company authorized to do business in the State in which the Business Park is located, having a minimum rating of A and X in Best's Insurance Guide. A copy of the paid-up policy or other evidence reasonably satisfactory to Landlord shall be delivered to Landlord prior to the Term Commencement Date and not less than thirty (30) days prior to each renewal or extension of such policy of insurance. In the event that Tenant shall deliver a certificate of insurance in lieu of a copy of the paid-off insurance policy at any time during the Term of this Lease, a copy of such insurance policy shall be provided to Landlord as soon thereafter as practicable. No policy of insurance under this Section shall provide for a deductible in excess of Ten Thousand Dollars ($10,000), provided that Tenant shall remain obligated for the insurance deductible. All public liability, property damage or casualty policies and the coverage evidenced thereby shall be primary with respect to any policies carried by Landlord and any coverage carried by Landlord shall pay only amounts in excess of the limits in said policies of Tenant. In addition to the foregoing, in the event Tenant fails to provide or keep in force any of the insurance required pursuant to this Section 11, then Landlord, in its discretion and without waiving any of its rights under this Lease, may provide such insurance, in which event the cost thereof shall be payable by Tenant to Landlord as Additional Rent on the first day of the calendar month immediately following demand therefor from Landlord.

11.6           Waiver of Subrogation. Each party hereby waives any and all rights of recovery against the other party hereto and its officers, agents, employees, or representatives, and Tenant hereby waives any rights it may have against any trust deed holder, for the loss, damage, or injury to property arising from any event which is covered by insurance against fire, vandalism, malicious mischief, and extended coverage, and such other perils as are from time to time included in the "all risk" insurance policy(ies) carried by Landlord and Tenant pursuant to this Section 11, provided that such waiver shall apply only to the extent of any recovery by the injured party under such insurance. In the event the other party is a self-insurer (as may be permitted herein), such waiver shall be to the limit of that insurance required to be carried hereunder. Each party hereto, on behalf of its respective insurance companies hereby waives, to the extent of any recovery under any such insurance policies, any right of subrogation that one may have against the other, and Tenant, on behalf of its insurance companies, hereby waives any right of subrogation which such insurer may have against any trust deed holder. Each party hereto shall cause its respective insurance policies to contain endorsements evidencing such waivers of subrogation. The foregoing releases and waivers of subrogation shall be operative only so long as same shall neither preclude the obtaining of insurance nor diminish, reduce or impair the liability of any insurer. In the event that a waiver of subrogation cannot be obtained, the other party is relieved of the obligation to obtain a waiver of subrogation rights with respect to the particular insurance involved.

12.           WAIVER AND INDEMNITY.

12.1           Waiver and Exemption of Landlord From Liability. Tenant hereby agrees that except for damage or injury resulting from Landlord's sole active negligence or willful misconduct, Landlord shall not be liable for injury to Tenant's business or any loss of income, including damage to the goods, wares, merchandise or other property of Tenant or of Tenant's employees, invitees, customers, or any other person in or about the Premises, or the Common Areas. Landlord shall not be liable, except when the damage or injury is a result of Landlord's sole active negligence or willful misconduct, for injury to the person of Tenant, Tenant's employees, agents or contractors, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or from any other cause, whether said damage or injury results from conditions arising upon the Premises, or the Common Areas or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant. Landlord shall not be liable for any damages arising from any act or neglect of any other tenant, occupant or use of the Business Park or from the failure of Landlord to enforce the provisions of any, other lease in the Business Park. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property of Tenant or injury to persons, in, upon or about the Premises and elsewhere arising from the above or any other causes, and Tenant hereby waives all claims in respect thereof against Landlord.

12.2           Tenant's Indemnity. Tenant shall indemnify, protect, defend, and hold Landlord and Landlord's officers, directors, employees and agents (collectively, "representatives") harmless from and against any and all claims, actions, demands, proceedings, losses, damages, costs of any kind or character (including reasonable attorneys' fees and court costs), expenses, liabilities, judgments, fines, penalties, or interest (collectively, "Losses"), arising from or out of Tenant's use of the Premises, or from the conduct of Tenant's business or from any activity, work or things done, permitted or suffered by Tenant in or about the Premises or elsewhere. Tenant shall also indemnify, protect, defend, and hold Landlord and Landlord's representatives harmless from and against any and all Losses arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease, or arising from any act or omission of Tenant, or any of Tenant's agents, contractors, or employees, and from and against all costs, attorneys' fees, expenses and liabilities reasonably incurred in the defense of any such claim or any action or proceeding brought thereon; and in case any action or proceeding be brought against Landlord or any of Landlord's representatives by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant's expense by counsel reasonably satisfactory to Landlord and Landlord shall cooperate with Tenant in such defense. Neither termination of this Lease nor completion of the acts to be performed under this Lease shall release Tenant from its obligations to defend or indemnify Landlord as required hereunder so long as the event upon which any such Loss is predicated shall have occurred prior to the effective date of any such termination or completion.

12.3           Landlord's Indemnity. Landlord shall defend, indemnify and hold Tenant and Tenant's representatives harmless from and against any and all Losses arising in any way from (i) the sole active negligence or willful misconduct of Landlord; or (ii) any breach or default in the performance of any obligation on Landlord's part to be performed under this Lease. Landlord shall defend any such action or proceeding brought against Tenant or its representatives at Landlord's expense with counsel reasonably satisfactory to Tenant. Neither termination of this Lease nor completion of the acts to be performed under this Lease shall release Landlord from its obligations to defend or indemnify Tenant as required hereunder so long as the event upon which any such Loss is predicated shall have occurred prior to the effective date of any such termination or completion.

13.           DAMAGE AND DESTRUCTION.

13.1           Definitions.

(a)           "Partial Damage" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is less than fifty percent (50%) of the then replacement cost of the Premises.

(b)           "Total Destruction" shall mean if the Premises are damaged or destroyed to the extent that the cost of repair is fifty percent (50%) or more of the then replacement cost of the Premises.

(c)           "Insured Loss" shall mean damage or destruction which was covered by an event required to be covered by the insurance described in Section 11.3. The fact that an Insured Loss has a deductible amount shall not make the loss an uninsured loss.

(d)           "Replacement Cost" shall mean the amount of money necessary to be spent in order to repair or rebuild the damaged area to the condition that existed immediately prior to the damage occurring, excluding all improvements made by tenants.

13.2           Partial Damage.

(a)           Insured Loss: Subject to the provisions of Sections 13.4 and 13.5, if at any time during the Term there is damage which is an Insured Loss and which falls into the classification of Partial Damage, then Landlord shall, at Landlord's expense, repair such damage to the Premises, but not Tenant's fixtures or equipment, as soon as reasonably possible and this Lease shall continue in full force and effect. In no event, however, shall Landlord be obligated to spend for such repairs more than the amount of available insurance proceeds, plus the amount of any deductible elected by Landlord.

(b)           Uninsured Loss: Subject to the provisions of Sections 13.4 and 13.5, if at any time during the Term there is damage which is not an Insured Loss and which falls within the classification of Partial Damage, unless caused by a negligent or willful act of Tenant (in which event Tenant shall make the repairs at Tenant's expense), which damage causes substantial interference with the normal conduct of Tenant's business, Landlord may at Landlord's option either (i) repair such damage as soon as reasonably possible at Landlord's expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Tenant within thirty days after the date of the occurrence of such damage of Landlord's intention to cancel and terminate this Lease as of the date of the occurrence of such damage. In the event Landlord elects to give such notice of Landlord's intention to cancel and terminate this Lease, Tenant shall have the right within ten days after the receipt of such notice to give written notice to Landlord of Tenant's intention to repair such damage at Tenant's expense, without reimbursement from Landlord, in which event this Lease shall continue in full force and effect, and Tenant shall proceed to make such repairs as soon as reasonably possible. If Tenant does not give such notice within such ten-day period this Lease shall be canceled and terminated as of the date of the occurrence of such damage.

13.3           Total Destruction. Subject to the provisions of Sections 13.4 and 13.5, if at any time during the Term there is damage, whether or not it is an Insured Loss, which falls into the classification of Total Destruction, then Landlord may at Landlord's option either (i) repair such damage or destruction, but not Tenant's fixtures, equipment or tenant improvements (except for tenant improvements initially constructed at the commencement of the Term), as soon as reasonably possible at Landlord's expense, and this Lease shall continue in full force and effect, or (ii) give written notice to Tenant within thirty days after the date of occurrence of such damage of Landlord's intention to cancel and terminate this Lease, in which case this Lease shell be canceled and terminated as of the date of the occurrence of such damage.

13.4           Damage Near End of Term. Subject to the following sentence, if at any time during the last year of the Term of this Lease as extended from time to time there is substantial damage, whether or not an Insured Loss, which falls within the classification of Partial Damage, Landlord may at its option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Tenant, within thirty days after the date of occurrence of such damage, of Landlord's election to terminate. Notwithstanding the foregoing, in the event that Tenant has an option to extend or renew this Lease, and the time within which said option may be exercised has not yet expired, Tenant shall exercise such option, if it is to be exercised at all, no later than thirty days after the occurrence of an Insured Loss falling within the classification of Partial Damage during the last year of the Term. If Tenant duly exercises such option during the thirty day period, Landlord shall, at Landlord's expense, repair such damage, but not Tenant's fixtures, equipment or tenant improvements, as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that In no event shall Landlord be obligated to spend for such repairs more than the amount of available insurance proceeds, plus the amount of any deductible elected by Landlord. If Tenant fails to exercise such option during the thirty day period, then Landlord may at Landlord's option terminate and cancel this Lease as of the date of the occurrence of such damage.

13.5           Abatement of Rent. In the event Landlord repairs or restores the Premises pursuant to the provisions of this Section 13, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Tenant's normal and customary use of the Premises is impaired. Except for abatement of rent, if any, Tenant shall have no claim against Landlord for any damage suffered by reason of any such damage, destruction, repair or restoration.

13.6           Waiver. Landlord and Tenant waive the provisions of any statutes which relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease.

14.           CONDEMNATION.

14.1           Total Condemnation of Premises. If the whole of the Premises shall be taken by any public authority under condemnation, the power of eminent domain, or by a sale in lieu thereof under threat of condemnation (collectively "taking" or "taken" as the case may be), then the Term shall cease as of the day of possession pursuant to such taking, and the Rent shall be paid up to that day. Landlord shall refund such rent as may have been paid in advance for the period subsequent to the date of such possession.

14.2           Partial Condemnation.

(a)           If less than the whole but more than twenty percent (20%) of the Premises shall be taken, Tenant shall have the right to terminate this Lease or, subject to Landlord's right of termination as set forth in Section 14.2(b), to continue in possession of the remainder of the Premises and shall notify Landlord in writing within ten (10) days after notice of such taking of Tenant's intention. If twenty percent (20%) or less of the Premises shall be so taken, the Term shall cease with respect to the part so taken as of the day possession shall be taken, and Tenant shall pay rent up to that day for the part so taken.

(b)           If more than twenty percent (20%) of the Building or more than twenty percent (20%) of the Premises shall be taken, Landlord may, by notice to Tenant delivered on or before the date surrendering possession, terminate this Lease.

(c)           In the event this Lease is not so terminated, Tenant shall remain in the portion of the Premises not so taken, and all of the terms, provisions, covenants, conditions, and agreements contained herein shall continue in effect with respect to the portion not so taken, except that Base Rent shall be reduced in proportion to the amount of the Premises taken, and Landlord shall, to the extent of severance damages received by Landlord in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Tenant has been reimbursed therefor by the condemning authority. Tenant shall pay any amount in excess of such severance damages required to complete such repair.

14.3           Landlord's and Tenant's Damages. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Landlord, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Tenant shall be entitled to any award for loss of or damage to Tenant's trade fixtures, moving costs and removable personal property to the extent separately awarded. Tenant shall have the right to negotiate its award separately with the condemning authority; provided, however, that Tenant's right to pursue its claim shall be subordinate to the right of Landlord's first lien mortgagee to the extent required to discharge the first lien mortgage after application of Landlord's award.

14.4           Waiver. This Article 14 is in lieu of, and Tenant hereby expressly waives any rights it may have under, any statute governing the condemnation of the Premises, including § 1932 and § 1933 of the California Civil Code and § 1265.130 of the California Code of Civil Procedure.

15.           ASSIGNMENT AND SUBLETTING.

15.1           Landlord's Consent Required. Tenant shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant's interest in the Lease or in the Premises, without Landlord's prior written consent, which shall not be unreasonably withheld. Any attempted assignment, transfer, mortgage, encumbrance or sublease without such consent shall be void, and shall constitute a breach of this Lease without the need for notice to Tenant.

15.2           Procedure. In the event Tenant wishes to sublet or assign the Premises, or any portion thereof, Tenant shall submit in writing to Landlord (i) the name of the proposed sublessee or assignee, (ii) a statement describing the nature of the business to be carried on in the Premises, (iii) a copy of the proposed sublease or assignment, including all terms and conditions thereof, (iv) Landlord's lease application form, completed by the proposed assignee or sublessee, (v) financial statements for the proposed assignee or sublessee, which shall include, at a minimum, prior year and year to date (current to within six months) balance sheets, income and expense statements and sources and uses of cash statements, and (vi) such other financial information regarding such sublessee or assignee as Landlord shall reasonably request.

15.3           Provisions Applicable to Both Assignment and Subletting.

(a)           No sublessee or assignee shall further assign or sublet all or any part of the Premises without Landlord's prior written consent.

(b)           The consent by Landlord to any assignment or sublease shall not constitute a consent to any subsequent assignment or sublease by Tenant or to any assignment or sublease by the sublessee. However, Landlord may consent to subsequent subleases and assignments of the sublease or any amendments or modifications thereto, provided Landlord notifies Tenant or anyone else liable on the Lease or sublease and Landlord shall obtain their consent thereto.

(c)           If Tenant subleases the Premises or any part of it or assigns any of its rights under this Lease in and to the Premises, all rents paid by the sublessee or assignee which are in excess of the amount of Base Rent and Additional Rent then payable by Tenant under this Lease shall be the property of and shall be paid to Landlord. Any attempt on the part of Tenant to enter into a sublease or assignment which does not provide for the payment of such excess rent to Landlord shall be deemed to be a material breach of this Lease. The parties acknowledge that the provisions of this Section are a material inducement for Landlord's execution of this Lease and that Tenant has represented and warranted that its sole purpose for entering into this Lease is to obtain possession of the Premises and not to generate revenues from the leasing or subleasing of any portion of the Premises.

(d)           In the event of any default under this Lease, Landlord may proceed directly against Tenant, any guarantors or any one else responsible for the performance of this Lease, including the sublessee, without first exhausting Landlord's remedies against any other person or entity responsible therefor to Landlord, or any security held by Landlord or Tenant.

15.4           Provisions Applicable to Subletting. Regardless of Landlord's consent, the following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be included in subleases.

(a)           Tenant hereby assigns and transfers to Landlord all of Tenant's interest in all rentals and income arising from any sublease made by Tenant, and Landlord may collect such rent and income and apply the same toward Tenant's obligations under this Lease; provided, however, that until a default shall occur in the performance of Tenant's obligations under this Lease, Tenant may receive, collect and enjoy the rents accruing under such sublease. Landlord shall not, by reason of any assignment of such sublease to Landlord or by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Tenant to perform and comply with any of Tenant's obligations to such sublessee under such sublease. Tenant hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Landlord stating that a default exists in the performance of Tenant's obligations under this Lease, to pay to Landlord the rents due and to become due under the sublease. Tenant agrees that such sublessee shall have the right to rely upon any such statement and request from Landlord, and that such sublessee shall pay such rents to Landlord without any obligation or right to inquire as to whether such default exists and notwithstanding any notice from or claim from Tenant to the contrary. Tenant shall have no right or claim against such sublessee or Landlord for any such rents so paid by said sublessee to Landlord.

(b)           No sublease entered into by Tenant shall be effective unless and until it has been approved in writing by Landlord. By entering into a sublease, any sublessee shall be deemed, for the benefit of Landlord, to have assumed and agreed to comply with all of Tenant's obligation hereunder, except to the extent such obligations are contrary to or inconsistent with provisions contained in a sublease to which Landlord has expressly consented in writing.

(c)           Landlord's written consent to any sublease of the Premises by Tenant shall not constitute an acknowledgment that no default then exists under this Lease of the obligations to be performed by Tenant nor shall such consent be deemed a waiver of any then existing default, except as may be otherwise stated by Landlord at the time in writing.

(d)           With respect to any sublease to which Landlord has consented, Landlord agrees to deliver a copy of any notice of default by Tenant to the sublessee. Such sublessee shall have the right to cure a default of Tenant within ten days after service of said notice of default upon such sublessee, and the sublessee shall have a right of reimbursement and offset from and against Tenant for any such defaults cured by the sublessee.

(e)           If Tenant's obligations under this Lease have been guaranteed by third parties, then a sublease, and landlord's consent thereto, shall not be effective unless said guarantors give their written consent to such sublease and the terms thereof.

(f)           The consent by Landlord to any sublease shall not release Tenant from its obligations or alter the primary liability of Tenant to pay the rent and perform and comply with all of the obligations of Tenant to be performed under this Lease.

(g)           In the event Tenant shall default in the performance of its obligations under this Lease, Landlord, at its option and without any obligation to do so, may require any sublessee to attorn to Landlord, in which event Landlord shall undertake the obligations of Tenant under such sublease from the time of the exercise of said option to the termination of such sublease; provided, however, Landlord shall not be liable for any prepaid rents or security deposit paid by such sublessee to Tenant or for any other prior defaults of Tenant under such sublease.

(h)           Each and every consent required of Tenant under a sublease shall also require the consent of Landlord.

15.5           Attorneys' Fees. In the event Tenant shall assign or sublet the Premises or request the consent of Landlord to any assignment or sublease or if Tenant shall request the consent of Landlord for any act Tenant proposes to do, then Tenant shall pay Landlord's reasonable attorneys' fees incurred in connection therewith, such attorneys' fees not to exceed $500.00 for each such request.

15.6           Continuing Liability of Tenant. No transfer permitted by this Section shall release Tenant or change Tenant's primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Landlord's acceptance of rent from any other person is not a waiver of any provision of this Section. Consent to one transfer is not a consent to any subsequent transfer. If Tenant's transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant's transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant of its liability under this Lease.

15.7           Effect of Termination. In the event of Tenant's surrender of this Lease or the termination of this Lease in any other manner, Landlord may, at its option, either terminate any or all subtenancies or succeed to the interest of Tenant as sublessor thereunder. No merger shall result from Tenant's sublease of the Premises under this Section, Tenant's surrender of this Lease or the termination of this Lease in any other manner.

16.           DEFAULT BY TENANT: REMEDIES.

16.1           Events of Default. The occurrence of any of the following (each, a "Default") shall constitute a material breach or default by Tenant of its obligations hereunder:

(a)           Failure by Tenant to pay rent when due if the failure continues for three (3) days after notice has been given to Tenant that the rent is delinquent.

(b)           Failure by Tenant to perform any provision of this Lease required of it other than clause (a) above if the failure is not cured within ten (10) days after notice has been given to Tenant. If, however, the failure cannot reasonably be cured within the cure period, Tenant shall not be in default of this Lease if Tenant com­mences to cure the failure within the cure period and diligently and in good faith continues to cure the failure.

(c)           To the extent permitted by law, a general assignment by Tenant or any Guarantor of the Lease for the benefit of creditors, or the filing by or against Tenant or any Guarantor of any proceeding under any insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any Guarantor the same is dismissed within sixty (60) days, or the appointment of a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any Guarantor, unless possession is restored to Tenant or such Guarantor within thirty (30) days, or any execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within thirty days (each, an "Insolvency Event").

16.2           Default Notices. Notices given under this Section will specify the alleged failure or breach and the applicable Lease provisions; and shall demand that Tenant perform the provisions of this Lease or pay the rent that is delinquent, as the case may be, within the applicable period of time or quit the Premises. No such notice shall be deemed a forfeiture or a termination of this Lease unless Landlord so elects in the notice. The purpose of the notice requirements in this Section is to extend the notice requirements of the unlawful detainer statutes. Such notice shall, however, be In lieu of and not in addition to any notice required under the unlawful detainer statutes.

16.3           Landlord's Remedies. Landlord shall have the below listed remedies if Tenant commits a default. These remedies are not exclusive; they are cumulative to any remedies now or later allowed by law.

(a)           Landlord may terminate Tenant's right to possession of the Premises at any time. No act by Landlord other than giving notice of termination to Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the Premises or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease shall not constitute a termination of Tenant's right to possession. On termination, Landlord shall have the right to recover from Tenant:

(i)           The worth at the time of the award of the unpaid rent that had been earned at the time of termination of this Lease;

(ii)           The worth at the time of the award of the amount by which the unpaid rent that would have been earned after the date of termination of this Lease until the time of award exceeds the amount of the loss of rent that Tenant proves could have been reasonably avoided;

(iii)           The worth at the time of the award of the amount by which unpaid rent for the balance of the Term after the time of award exceeds the amount of the loss of rent that Tenant proves could have been reasonably avoided; and

(iv)           Any other amount, including reasonable attorneys' fees and court costs, necessary to compensate Landlord for all detriment proximately caused by Tenant's default or which in the ordinary course of things would be likely to result therefrom.

The phrase "worth at the time of the award" as used in clauses (i) and (ii) above is to be computed by allowing interest at the rate of twelve percent (12%) per annum, but not to exceed the then legal rate of interest. The same phrase as used in clause (iii) above is to be computed by discounting the amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%).

(b)           Landlord may exercise the remedy provided in California Civil Code §1951.4, that is, Landlord may continue this Lease In full force and effect, and collect Base Rent and Excess Operating Expenses as they become due, so long as Landlord does not terminate Tenant's right to possession pursuant to Section 16.3(a) above. During the period that Tenant is in default, Landlord may enter the Premises and relet them or any part of them, to third parties for Tenant's account, for a shorter or longer term than the Term of this Lease, and for such rental and on such other terms as Landlord, in its sole discretion, shall deem advisable and Tenant shall be immediately liable to Landlord for all costs which Landlord incurs in reletting the Premises, including, without limitation, broker's commissions, advertising expenses, the cost of remodeling the Premises which may be required for reletting, and all such similar costs. No act by Landlord pursuant to this Section shall terminate this Lease unless Landlord shall notify Tenant that it elects to terminate this Lease. After Tenant's default and for as long as Landlord does not terminate Tenant's right to possession of the Premises, Tenant shall have the right to assign its interest in the Lease upon the reasonable prior consent of Landlord; provided, however, that Tenant shall not be released from any liability under this Lease as a result of such assignment.

(c)           Landlord may, after expiration of any applicable cure period, unless there is an emergency (in which case Landlord need not wait), correct or remedy any failure of Tenant not timely cured. The reasonable cost paid by Landlord to correct or remedy any such default will immediately become due and payable to Landlord as additional rent.

(d)           Nothing contained in this Lease shall limit Landlord to the remedies specifically set forth in this Section 16.3. Upon Tenant's default or breach, Landlord shall be entitled to exercise any right or remedy then provided by law, including without limitation the right to obtain injunctive relief and the right to recover all damages caused by Tenant's default or breach in the performance of any of its obligations under this Lease.

16.4           Interest. Any amount owed to Landlord under the terms and provisions of this Lease which is not paid when due shall bear interest at the highest rate allowed by applicable law from the date the same becomes due and payable by the terms and provisions of this Lease until paid, unless otherwise specifically provided in this Lease.

16.5           Mitigation. Efforts by Landlord to mitigate damages caused by Tenant's breach shall not be construed as a waiver of Landlord's right to recover damages.

16.6           Right of Landlord to Re-Enter. In the event of any termination of this Lease, Landlord shall have the immediate right to enter upon and repossess the Premises, and any personal property of Tenant may be removed from the Premises and stored in any public warehouse at the risk and expense of Tenant.

16.7           Recapturable Expenses. Tenant acknowledges that Landlord has undertaken or may undertake certain expenses in connection with the Lease, including payment of some or all of the following: brokerage commissions, the costs of any Landlord's Work, moving expenses or other categories of cost or expense ("Recapturable Expenses"). Notwithstanding any provision or implication to the contrary in this Lease, in the event of premature termination of the Term of this Lease pursuant to Section 16.3(a) following Tenant's default, there shall be immediately due and payable from Tenant, as Additional Rent which has been fully earned at the time of termination, the unamortized portion of the Recapturable Expenses actually incurred by Landlord. For purposes of this Section, the unamortized portion of the Recapturable Expenses shall be determined by multiplying the total Recapturable Expenses actually incurred by Landlord by a fraction, the numerator of which is the number of months remaining in the Term following premature termination in which unabated Base Rent would have been payable to Landlord pursuant to the Lease, and the denominator of which is the total number of months in the Term, both before and after the premature termination, in which unabated Base Rent was paid or would have been payable to Landlord had the Lease not been terminated. Any Recapturable Expenses due to Landlord in accordance with this Section shall be in addition to any sums otherwise recoverable pursuant to Section 16.3(a) of this Lease.

17.           TENANT'S INSOLVENCY.

17.1           Applicability of Section. In addition to any rights or remedies of Landlord under the terms of this Lease, the following provisions shall specifically apply upon the occurrence of an Insolvency Event (as defined in Section 16.1(c) above).

17.2           Assumption Or Rejection Of Lease.

(a)           Notwithstanding anything to the contrary contained herein, Tenant as debtor in possession and any receiver or trustee in bankruptcy for Tenant (collectively, "Tenant's Trustee") shall either assume or reject this Lease within sixty (60) days following the entry of an order for relief or within such earlier time as may be provided by applicable law.

(b)           Notwithstanding anything to the contrary contained herein, in the event that this Lease is attempted to be assumed under the Bankruptcy Code by Tenant's Trustee during the existence of any Default by Tenant, no such attempted assumption shall be effective unless and until Tenant's Trustee: (i) cures, or provides adequate assurance that it will promptly cure, such Default; and (ii) compensates, or provides adequate assurance that it will promptly compensate, Landlord for any actual pecuniary loss to Landlord resulting from such Default; and (iii) provides adequate assurance of future performance of Tenant's obligations and covenants under this Lease. Landlord shall be entitled to reimbursement from the estate of Tenant for all actual costs incurred by Landlord in considering any proposed assignee of the Lease pursuant to this Section 17.

(c)           Tenant's Trustee may assign this Lease pursuant to the provisions of the Bankruptcy Code only if: (A) Tenant's Trustee assumes the Lease in accordance with the above provisions of this Section 17.2; and (B) the assignee of Tenant's Trustee assumes all of the obligations arising under this Lease and provides adequate assurance of its future performance of Tenant's obligations and covenants under this Lease (whether or not a Default has occurred under the Lease). Any such assignee shall, upon demand, execute and deliver to Landlord, an instrument confirming such assumption.

(d)           For purposes of Section 17.2(b) and (c), the term "adequate assurance of future performance" shall include, without limitation, at least the following:

(i)           Any proposed assignee must have, as demonstrated to Landlord's satisfaction, a net worth (as defined in accordance with generally accepted accounting principles consistently applied) in an amount sufficient to assure that the proposed assignee will have the resources to meet the financial responsibilities under this Lease, including the payment of all rent. The financial condition and resources of Tenant and any Guarantor(s) are material inducements to Landlord entering into this Lease.

(ii)           Any proposed assignee must have engaged in the permitted use described in Section 1.13 for at least five (5) years prior to any such proposed assignment.

(iii)           In entering into this Lease, Landlord considered extensively Tenant's permitted use and determined that such permitted business would add substantially to the tenant balance in the Business Park, and were it not for Tenant's agreement to operate only Tenant's permitted business on the Premises, Landlord would not have entered into this Lease. Landlord's anticipated benefits from the lease of the Premises will be materially impaired if a trustee in bankruptcy or any assignee of this Lease operates any business other than Tenant's permitted business.

(iv)           Any assumption of this Lease by a proposed assignee shall not adversely affect Landlord's relationship with any of the remaining tenants in the Premises, taking into consideration any and all other "use" clauses and/or "exclusivity" clauses which may then exist under their leases with Landlord.

(v)           Any proposed assignee must not be engaged in any business or activity which it will conduct on the Premises and which will subject the Premises to contamination by any Hazardous Materials.

(vi)           The percentage rent, if any, due under this Lease shall not decline substantially.

(vii)           Any assumption or assignment of this Lease shall not breach substantially any provision in any other lease, financing agreement, or master agreement relating to the Business Park;

(viii)           Any assumption or assignment of this Lease shall not alter or affect materially any other obligation or duty of Tenant nor be used to circumvent the remainder of the provisions of this Lease.

18.           DEFAULT BY LANDLORD.

18.1           Landlord's Default. Landlord shall be in default if Landlord fails to perform any provision of this Lease required of it and the failure is not cured within thirty (30) days after notice has been given to Landlord. If, however, the failure cannot reasonably be cured within the cure period, Landlord shall not be in default of this Lease if Landlord commences to cure the failure within the cure period and diligently and in good faith continues to cure the failure. Notices given under this Section shall specify the alleged breach and the applicable Lease provisions. If Landlord shall at any time default beyond the applicable notice and cure period, Tenant shall have the right to cure such default on Landlord's behalf. Any sums expended by Tenant in doing so, and all reasonably necessary incidental costs and expenses incurred in connection therewith, shall be payable by Landlord to Tenant within thirty days following demand therefor by Tenant; provided, however, that Tenant shall not be entitled to any deduction or setoff against any rent otherwise payable to Landlord under this Lease.

18.2           Notice to Mortgagee(s). Whenever Tenant serves notice on Landlord of Landlord's default, written notice shall also be served at the same time upon the Mortgagee under any first- or second-priority Mortgage; provided, however, that Tenant shall have no obligation to provide such notice unless and until Tenant has received written notice of the Mortgagee's existence and address. Such Mortgagee shall have the periods of time within which to cure Landlord's defaults as are provided in Section 18.1, which periods shall commence to run thirty (30) days after the commencement of the periods within which Landlord must cure its defaults under Section 18.1. In this connection, any representative of the Mortgagee shall have the right to enter upon the Premises for the purpose of curing Landlord's default. Such Mortgagee shall notify Landlord and Tenant of the address of such Mortgagee to which such notice shall be sent, and the agreements of Tenant under this Section are subject to prior receipt of such notice. If the nature of the default is such that the Mortgagee's possession is required to cure the default, then Tenant will not terminate the Lease so long as such Mortgagee commences proceedings to obtain possession of the Premises within the period of time afforded to the Mortgagee to cure such default, and once the Mortgagee has obtained possession, diligently proceeds to cure the default. Nothing contained in this Lease shall be construed to impose any obligation on any Mortgagee to cure any default by Landlord under the Lease.

19.           SUBORDINATION AND ESTOPPEL.

19.1           Subordination. Subject to the provisions of this Section 19, at the option and upon written declaration of Landlord, this Lease and the leasehold estate created hereby shall be subject, subordinate and inferior to the lien and charge of any Mortgage; provided, however, that this Lease shall not be subordinate to any Mortgage arising after the date of this Lease, or any renewal, extension or replacement thereof, unless and until Landlord provides Tenant with an agreement from the Mortgagee of the type normally provided by commercial lenders in southern California ("Non-Disturbance Agreement"), setting forth that so long as Tenant is not in default hereunder, Landlord's and Tenant's rights and obligations hereunder shall remain in force and Tenant's right to possession shall be upheld. Subject to the foregoing condition, (i) Landlord hereby expressly reserves the right, at its option and declaration, to place Mortgages upon and against the Premises and/or any part thereof, superior in lien and effect to this Lease and the estate created hereby, and (ii) Landlord shall be entitled to sign, acknowledge and record in the Office of the County Recorder of the County in which the Premises are situated, a declaration that this Lease and leasehold estate are subject, subordinate and Inferior to any Mortgage placed or to be placed by Landlord upon or against the Premises and/or any part thereof (in favor of any Mortgagee, trustee or title insurance company insuring the interest of any such Mortgagee), recordation of which shall, of and by itself and without further notice to or act or agreement of Tenant, make this Lease and the estate created hereby subject, subordinate and inferior thereto. Notwithstanding the foregoing, Tenant shall, promptly following a request by Landlord and after receipt of the Non-Disturbance Agreement, execute and acknowledge any subor­dination agreement or other documents required to establish of record the priority of any such Mortgage over this Lease, so long as such agreement does not otherwise increase Tenant's obligations or diminish Tenant's rights hereunder.

19.2           Attornment. In the event of foreclosure of any Mortgage, whether superior or subordinate to this Lease, then (a) this Lease shall continue in force; (b) Tenant's quiet possession shall not be disturbed if Tenant is not in default hereunder; (c) Tenant shall attorn to and recognize the Mortgagee or purchaser at foreclosure sale ("New Owner") as Tenant's landlord for the remaining term of this Lease; and (d) the New Owner shall not be bound by (i) any payment of rent for more than one month in advance, (ii) any amendment, modification or ending of this Lease without the New Owner's consent after the New Owner's name is given to Tenant, unless the amendment, modification or ending is specifically authorized by the original Lease and does not require landlord's prior agreement or consent, or (iii) any liability for any act or omission of a prior Landlord. At the request of the New Owner, Tenant shall execute a new lease for the Premises, setting forth all of the provisions of this Lease except that the term of the new lease shall be for the balance of the Term.

19.3           Estoppel Certificate. Tenant shall execute and deliver to Landlord, within ten days after receipt of Landlord's request, any estoppel certificate or other statement to be furnished to any prospective purchaser of or any lender against the Premises. Such estoppel certificate shall acknowledge and certify each of the following matters, to the extent each may be true: that the Lease is in effect and not subject to any rental offsets, claims or defenses to its enforcement; the commencement and termination dates of the Term; that Tenant is paying rent on a current basis; that any Landlord's Work required to be furnished under the Lease has been completed in all respects; that the Lease constitutes the entire agreement between Tenant and Landlord relating to the Premises; that Tenant has accepted the Premises and is in possession thereof; that the Lease has not been modified, altered or amended except in specified respects by specified instruments; and that Tenant has no notice of any prior assignment, hypothecation or pledge of rents or the Lease. Tenant shall also, upon request of Landlord, certify and agree for the benefit of any Mortgagee against the Premises or the Building that Tenant will not look to such Mortgagee: as being liable for any act or omission of Landlord; as being obligated to cure any defaults of Landlord under the Lease which occurred prior to the time Mortgagee, its successors or assigns, acquired Landlord's interest in the Premises by foreclosure or otherwise; as being bound by any payment of Base Rent or Additional Rent by Tenant to Landlord for more than one month in advance; or as being bound by Landlord to any amendment or modification of the Lease without Mortgagee's written consent.

19.4           Remedies. Failure of the Tenant to sign any statement or instrument delivered by Landlord or Mortgagee to effectuate the provisions of this Section 19 within ten (10) days after request to do so by Landlord shall constitute a material breach of this Lease, and Landlord shall have the right, by not less than ten (10) days' notice to Tenant, to declare this Lease terminated and the Term ended; in which event, this Lease shall cease and terminate on the date specified in such notice with the same force and effect as though the date set forth in such notice were the date originally set forth herein and fixed as the Expiration Date, and Tenant shall vacate and surrender the Premises but shall remain liable as hereinafter provided. The foregoing shall be in addition to, rather than in lieu of, any remedies or rights Landlord may now or hereafter have hereunder or at law or in equity.

20.           HAZARDOUS MATERIALS.

20.1           Tenant's Environmental Questionnaire. Tenant warrants and represents, and acknowledges that this Lease was entered into by Landlord in material reliance upon, the information set forth in the environmental questionnaire, in the form attached as Exhibit E, that was previously delivered by Tenant to Landlord.

20.2           Tenant's Obligations.

(a)           Tenant shall at all times and in all respects comply with all Hazardous Materials Laws, and shall, at its own expense, procure, maintain in effect and comply with all conditions of any and all permits, licenses, and other governmental and regulatory approvals required for Tenant's use of the Premises, including, without limitation, discharge of (appropriately treated) materials or wastes into or through any sanitary sewer serving the Premises. Except as discharged into the sanitary sewer in strict accordance and conformity with all applicable Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials removed from the Premises to be removed and transported solely by duly licensed haulers to duly licensed facilities for final disposal of such materials and wastes. Tenant shall in all respects handle, treat, deal with and manage any and all Hazardous Materials in, on, under or about the Premises in total conformity with all applicable Hazardous Materials Laws and prudent industry practices regarding management of such Hazardous Materials.

(b)           Upon expiration or earlier termination of the Term, Tenant shall cause all Hazardous Materials to be removed from the Premises and transported for use, storage or disposal in accordance with and compliance with all applicable Hazardous Materials Laws.

(c)           Except in the event of an emergency, Tenant shall not take any remedial action in response to the presence of any Hazardous Materials in or about the Premises, nor enter into any settlement agreement, consent decree or other compromise in respect to any claims relating to any Hazardous Materials in any way connected with the Premises, without first notifying Landlord of Tenant's intention to do so and affording Landlord ample opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto.

(d)           Tenant shall immediately notify Landlord in writing of: (i) any enforcement, cleanup, removal or other governmental or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (ii) any claim made or threatened by any person against Tenant or the Premises relating to damage, contribution, cost recovery compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in or removed from the Premises, including any complaints, notices, warnings or asserted violations in connection therewith. Tenant shall also supply to Landlord as promptly as possible, and in any event within five business days after Tenant first receives or sends the same, copies of all claims, reports, complaints, notices, warnings or asserted violations, relating in any way to the Premises or Tenant's use thereof. Tenant shall promptly deliver to Landlord copies of hazardous waste manifests reflecting the legal and proper disposal of all Hazardous Materials removed from the Premises.

20.3           Indemnity. With respect to Tenant's use and occupancy of the Premises and Common Areas, Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and hold Landlord and each of Landlord's officers, directors, shareholders, employees, agents, attorneys, successors and assigns, free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including attorneys' fees), or death of or injury to any person or damage to any property whatsoever, arising from or caused in whole or in part, directly or indirectly, by (a) the presence in, on, under or about the Premises, or discharge in or from the Premises, of any Hazardous Materials that arose or occurred during Tenant's occupancy thereof; (b) Tenant's use, analysis, storage, transportation, disposal, release, threatened release, discharge or generation of Hazardous Materials to, in, on, under, about or from the Premises; or (c) Tenant's failure to comply with any Hazardous Materials Law. Tenant's obligations hereunder shall include, without limitation, and whether foreseeable or unforeseeable, all costs of any required or necessary repair, cleanup or detoxification or decontamination of the Premises, or the preparation and implementation of any closure, remedial action or other required plans in connection therewith, and shall survive the expiration or earlier termination of the Term. For purposes of the release and indemnity provisions hereof, any acts or omissions of Tenant, or by employees, agents, assignees, subtenants, contractors or subcontractors of Tenant or others acting for or on behalf of Tenant (whether or not they are negligent, intentional, willful or unlawful) shall be strictly attributable to Tenant.

21.           NOTICE. All notices, demands or requests from one party to the other shall be in writing. Notices may be personally delivered, sent by Federal Express or other reputable express delivery service, sent by telecopier with first-class mail backup, or sent by certified mail, postage prepaid, to the addresses set forth at Section 1.17 or 1.18, as applicable. Notices shall be deemed received upon actual delivery to the addressee with respect to personal or express delivery service or telecopier, and three (3) days after deposit in the mails with respect to mailing. Each party shall have the right, from time to time, to designate a different address by notice given in conformity with this Section to the other party.

22.           OTHER TERMS AND CONDITIONS.

22.1           Signage. Tenant shall not place or permit to be placed, any sign, advertisement, notice or other similar matter on the doors, windows, exterior walls, roof or other areas of the Premises which are open to the view of persons outside the Premises, except in accordance with Landlord's signage plan which is attached as Exhibit D.

22.2           Parking. In connection with its use and occupancy of the Premises, Tenant shall have the right to park in the parking area of the Project, at no additional charge and on a non-reserved basis and on terms and conditions to be established by the Landlord from time to time during the Term, no more than the number of vehicles set forth in Section 1.16. The parking authorized by this Section shall be for personal transportation to and from the Premises, and not for long-term storage of automobiles or for short- or long-term storage of boats, trailers or recreational vehicles. Landlord reserves the right to designate certain parking areas in the Project as being for the exclusive use of other tenants of the Project.

22.3           Site Plan. The purpose of the site plan attached hereto as Exhibit A is to show the intended development of the Project, the approximate locations of building areas, traffic lanes, sidewalks, parking areas, curb cuts and abutting thoroughfares, and of the Premises, and those intended to be leased to other tenants, whether named thereon or not. All such information is subject to change at Landlord's option without notice, and no rights are granted to Tenant by the inclusion of said plot plan as a part of this Lease. No representations or warranties are made by Landlord that the Project or the Business Park will be developed as shown. The foregoing is in addition to, not in substitution of, all rights reserved to Landlord pursuant to Section 3 above.

22.4           Easements. Landlord reserves to itself the right, from time to time, to grant such easements, rights and dedications as Landlord deems necessary or desirable, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights, dedications, maps and restrictions do not unreasonably interfere with Tenant's normal conduct of its business on the Premises. Tenant shall sign any of the aforementioned documents upon request of Landlord and failure to do so shall constitute a material default of this Lease by Tenant without the need for further notice to Tenant.

22.5           No Light, Air or View Easements. No diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Building shall in any way affect this Lease or impose any liability on Landlord.

22.6           Security Measures. Tenant acknowledges that Landlord does not intend to provide guard service or other security measures for the benefit of the Premises. Tenant assumes all responsibility for the protection of Tenant, its agents, and invitees and the property of Tenant and of Tenant's agents and invitees from acts of third parties, and assumes all risk in connection with any failure to provide or lack of such security measures. Tenant hereby waives any and all claims for damages to persons or property sustained by Tenant, or by any other person or entity, arising from, out of or in connection with, or alleged to arise from, out of or in connection with, Landlord's not providing any security measure for the Premises or Project. Nothing herein contained shall prevent Landlord, at Landlord's sole option, from providing security protection for the Premises, in which event the costs thereof shall be included within Operating Expenses.

22.7           Holding Over By Tenant. Tenant agrees upon the expiration or termination of this Lease, immediately and peaceably to yield up and surrender the Premises; notice to quit or vacate is hereby expressly waived. Tenant shall be liable to Landlord for any and all damages incurred by Landlord as the result of any failure by Tenant to timely surrender possession of the Premises as required herein. If Tenant shall hold over after the expiration of this Lease for any cause, such holding over shall be deemed a tenancy at sufferance or, at the sole discretion of Landlord, a tenancy from month-to-month, in which event such month-to-month tenancy shall be upon the same terms, conditions and provisions set forth In this Lease, at one and one-half (1 1/2) times the Base Rent that was in effect immediately prior to the termination.

22.8           Landlord's Right of Entry. Landlord and Landlord's agents may enter upon the Premises at any reasonable time and upon reasonable notice (except no notice shall be required in an emergency) to make such repairs, additions or improvements as Landlord shall deem necessary; to post such notices as Landlord may deem necessary to exempt Landlord and Landlord's interest in the Building and Premises from responsibility on account of any work or repairs done by Tenant upon or in connection with the Premises; to inspect and examine the Premises and see that the covenants hereof are being kept and performed; or to exhibit the Premises to prospective tenants or purchasers.

22.9           Relocation. Tenant acknowledges that, upon not less than thirty (30) days' prior written notice from Landlord, Landlord shall have the right to relocate Tenant to another premises within the Business Park. Tenant acknowledges that such relocation right reserved to Landlord shall be exercisable in Landlord's sole discretion, for purposes of accomplishing Landlord's plan for the delicate Tenant mix and harmony within the Business Park; provided, however, that any such relocation shall be at Landlord's expense, but only to the extent necessary to insure that upon such relocation Tenant shall occupy a Premises of substantially the same square footage, utility capacity, and basic amenities as were provided to Tenant as part of the Premises leased hereunder.

22.10           Furnishing of Financial Statements. Tenant acknowledges that Landlord entered into this Lease in reliance upon receiving current and periodic financial reports documenting the progress of Tenant's business operations. Accordingly, Tenant shall deliver to Landlord, within ten (10) days after request therefor from time to time and in any event no later than June 30 of each year of the Term, financial statements reflecting Tenant's current financial condition and financial statements for each of the two (2) years prior to the then-current fiscal statement year. Such statements shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant.

22.11           Auctions. Tenant shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises, without first having obtained Landlord's prior written consent. Notwithstanding anything to the contrary in this Lease, Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.

22.12           Keys. Two (2) keys to the Premises will be furnished by Landlord. Additional keys will be furnished upon Tenant paying Landlord the cost thereof. No additional lock or locks shall be placed by Tenant on any door in the Building unless written consent of Landlord shall have been first obtained; and, should such consent be so obtained, Landlord shall be supplied with keys to each such lock and no other than the employees of Landlord or those it has authorized in writing shall work on or modify any lock which is part of the Premises. Tenant shall not cause or allow the duplication of any keys to be made, and Tenant shall not cause or allow any keys to be possessed by any person other than an authorized agent of Tenant. Tenant agrees, at the termination of the tenancy, to return all keys of all doors.

22.13           Other Tenancies. Landlord reserves the absolute right to effect such other tenancies in the Business Center as Landlord, in the exercise of its sole business judgment, shall determine to promote the best interest thereof. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenants shall, during the Term of this Lease, occupy any space in the Business Park, notwithstanding the appearance of any names of tenants on the site plan attached hereto as Exhibit A, or any replacements or substitutions thereof.

22.14           Brokers' Fees. Landlord has agreed to pay a fee for brokerage services rendered in this transaction to the broker(s) identified in Section 1.15. Such brokerage commission shall be payable in accordance with the separate written agreement between Landlord and such broker(s), which alone shall govern such brokers' entitlement to any commission. Landlord and Tenant each represent and warrant to the other that no broker, agent or finder, licensed or otherwise has been engaged by it, respectively, in connection with the transaction contemplated by this Agreement, other than the broker(s) named above. In the event of any other claim for broker's, agent's or finder's fee or commission in connection with this transaction, the party upon whose alleged statement, representation or agreement such claim or liability arises shall indemnify, save, hold harmless and defend the other party from and against such claim and liability.

23.           GENERAL PROVISIONS.

23.1           Exculpation. The obligations of Landlord under this Lease do not constitute personal obligations of Landlord or its directors, officers or shareholders, and Tenant shall look solely to the Project and to no other assets of Landlord for satisfaction of any liability with respect to this Lease, and agrees not to seek recourse against the directors, officers or shareholders of Landlord, nor against any of their personal assets, for such satisfaction.

23.2           Conveyance By Landlord. Landlord shall be free at all times, without need of consent or approval by Tenant, to assign its interest in this Lease and/or to convey fee title to the Premises. Each conveyance by Landlord of Landlord's interest in the Lease or the Premises prior to expiration or termination hereof shall be subject to this Lease and shall relieve the grantor of any further obligations or liability as Landlord, and Tenant shall look solely to Landlord's successor in interest for all future obligations of Landlord. Tenant hereby agrees to attorn to Landlord's successors in interest, whether such interest is acquired by sale, transfer, foreclosure, deed in lieu of foreclosure or otherwise. The term "Landlord` as used in this Lease, so far as covenants and obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner at the time in question of the fee title of the Premises. Without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all obligations of Landlord hereunder during its ownership of the Premises.

23.3           Quiet Enjoyment. Landlord agrees that so long as Tenant is not in default hereunder Tenant shall have the quiet enjoyment of the Premises without hindrance on the part of Landlord. Landlord further agrees that Landlord will warrant and defend Tenant in the peaceful and quiet enjoyment of the Premises against the lawful claims of all persons claiming by, through or under Landlord.

23.4           No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord shall accept such check or payment without prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this Lease provided.

23.5           Waiver. No delay or omission in the exercise of any right or remedy of Landlord for any Default by Tenant hereunder shall impair such right or remedy or be construed as a waiver thereof. One or more waivers of any covenant or condition by Landlord shall not be construed as a waiver of a subsequent breach of the same covenant or condition, and the consent or approval by Landlord to or of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary Landlord's consent or approval to or of any subsequent similar act by Tenant. No breach of a covenant or condition of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord. The acceptance of any rent or other charges hereunder shall not be deemed a waiver of any breach or Default hereunder other than the payment of the amount accepted by Landlord.

23.6           Cumulative Rights. The various rights, options, elections, powers and remedies contained in this Lease shall be construed as cumulative and no one of them shall be exclusive of any of the others, or of any other legal or equitable remedy which either party might otherwise have in the event of breach or default in the terms hereof, and the exercise of one right or remedy by such party shall not impair its right to any other right or remedy until all obligations imposed upon the other party have been fully performed.

23.7           Independent Covenants. This Lease shall be construed as though the covenants herein between Landlord and Tenant are independent and not dependent, and Tenant hereby expressly waives the benefit of any statute to the contrary and agrees that if Landlord fails to perform its obligations set forth herein, Tenant shall not be entitled to make any repairs or perform any acts hereunder at Landlord's expense or to any setoff of the rent or other amounts owing hereunder against Landlord; provided, however, the foregoing shall in no way impair the right of Tenant to commence a separate action against Landlord for any violation by Landlord of the provisions hereof so long as notice is first given to Landlord and any Mortgagee (of whose address Tenant has theretofore been notified) and an opportunity is granted to Landlord and such holder to correct such violation as provided above.

23.8           Relationship of the Parties. Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture between the parties hereto, it being understood and agreed that neither the method of computation of rent, nor any other provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant.

23.9           Force Majeure. If either party is delayed in the performance of any covenant of this Lease because of any of the following causes, then such performance shall be excused for the period of the delay and the period for such performance shall be extended for a period equivalent to the period of such delay: acts of the other party; action of the elements; war, riot or civil insurrection; building moratoria, trip generation restrictions or other similar action by the City of San Diego or other governmental agency or entity; labor disputes; inability to procure or a general shortage of labor or materials in the normal channels of trade; delay in transportation; delay in inspections; or any other cause beyond the reasonable control of the party so obligated, whether similar or dissimilar to the foregoing, financial inability excepted; provided, however, that except as specifically set forth elsewhere in this Lease, no such events shall affect Tenant's obligation to pay Base Rent, Additional Rent or any other amount payable under this Lease, nor shall such events affect the length of the Term (except to the extent expressly provided herein).

23.10           Consents. With respect to any provision of this Lease which either provides or is held to provide that Landlord shall not unreasonably withhold or unreasonably delay any consent or approval, Tenant shall not be entitled to make any claim for, and Tenant hereby expressly waives, any claim for damages, it being understood and agreed that Tenant's sole remedy therefor shall be an action for specific performance.

23.11           Counterparts. This Lease may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

23.12           Authority. Each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said entity. Upon the request of the other party, any such party shall, at the time of the execution of this Lease, deliver to the other party evidence of such authority satisfactory to the other party.

23.13           Recording. Tenant shall not record this Lease or any short form or memorandum version hereof without the prior written consent of Landlord, which may be withheld at Landlord's sole discretion.

23.14           Interpretation and Use of Pronouns. Wherever herein the singular number is used, the same shall include the plural, and the masculine gender shall include the feminine and the neuter genders. All conditions contained herein shall be deemed covenants. The words "breach" or "default" are used interchangeably herein and each shall be deemed to include the other.

23.15           Captions and Interpretations. Section titles or captions contained in this Lease are inserted as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Lease or any provision hereof. No provision in this Lease is to be interpreted for or against either party because that party or its legal representative drafted such provision.

23.16           Severability. If any term, covenant, condition or provision of this Lease is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

23.17           Applicable Law. This Lease shall be governed by, and construed in accordance with, the laws of the State of California, notwithstanding the fact that Landlord or Tenant may be located in another State or that this Lease may be executed in another State. If any provision of this Lease or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. Any action brought to enforce or nullify this Lease or the provisions hereof shall be brought in San Diego County, California, and in no other forum.

23.18           Waiver of Right of Redemption. Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem, by statute or by order or judgment of any court or by any legal process or writ, Tenant's right of occupancy of the Premises after any termination of this Lease. Tenant hereby waives its rights under California Code Of Civil Procedure §1179.

23.19           Attorneys' Fees. In case suit shall be brought for any unlawful detainer of the Premises, for the recovery of any rent due under the provisions of this Lease, or because of the breach or alleged breach of any other covenant herein contained, the prevailing party shall recover from the non-prevailing party all costs and expenses incurred therein, including reasonable attorneys' fees and expenses incurred in enforcing any judgment. If Landlord, through no fault of its own, is made a party to any litigation relating to the subject matter covered by this Lease instituted by or against Tenant, then Tenant shall defend, indemnify and hold Landlord harmless from and against all costs and expenses, including reasonable attorneys' fees, incurred by Landlord in connection therewith. In addition thereto, Tenant agrees to pay Landlord's costs, expenses and reasonable attorneys' fees with respect to: (i) each request to Landlord for permission or consent to assign or sublet the Premises, as provided in Section 15.5 above; (ii) each request made by Tenant to modify, amend or supplement this Lease; and (iii) any breach or default by Tenant which is cured prior to litigation. Landlord shall notify Tenant of the amount of such attorneys' fees, and Tenant shall pay the same (as Additional Rent) within fifteen (15) days after such notice.

23.20           Joint and Several Obligations. If there shall be more than one Tenant, they shall all be bound jointly and severally by the terms, provisions, covenants, conditions, and agreements herein. No rights, however, shall inure to the benefit of any assignee of Tenant unless the assignment to such assignee has been approved by Landlord in writing as required hereunder.

23.21           Successors and Assigns. The covenants and conditions herein contained shall, subject to the provisions as to assignments, apply to and bind the heirs, successors, executors, administrators and assigns of the respective parties hereof. If this Lease is signed by more than one person as Tenant, their obligation shall be joint and several.

23.22           Time of the Essence. Time is expressly declared to be of the essence of this Lease, and of all covenants and conditions herein contained.

23.23           No Third-Party Beneficiaries. The provisions of this Lease are solely for the benefit of the parties hereto, and no broker or other third party shall be entitled to any benefits hereof or hereunder.

23.24           Entire Agreement. This Lease and the exhibits, and the Addendum, if any, attached hereto and forming a part hereof, set forth all the terms, provisions, covenants, conditions, promises, agreements and understandings between Landlord and Tenant concerning the Premises. There are no warranties, representations, covenants, promises, agreements, conditions or understandings, either oral or written, between them other than set forth herein. No alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by each party.

23.25           No Option By Landlord. Preparation of this Lease by Landlord or Landlord's agent and submission of same to Tenant shall not be deemed an option or offer to lease the Premises on the terms and conditions contained herein or a reservation of the Premises in favor of Tenant. This Lease shall become binding upon Landlord only upon Landlord's execution and delivery of this Lease to Tenant. The receipt (which shall include the cashing, deposit or other negotiation of checks, money orders and the like) of any moneys by Landlord which are tendered by Tenant along with a Tenant-executed copy of this Lease, or at any time prior to Landlord's delivery of a fully executed copy of this Lease to Tenant, shall not constitute an acceptance of Tenant's offer to lease as contained herein. Tenant acknowledges that Landlord will not deliver a fully executed copy of this Lease until Landlord has received both any Guaranties required hereunder, and such corporate resolutions or other information as reasonably satisfies Landlord as to the incumbency and authority to sign of each individual signing this Lease or any Guaranty. Tenant also acknowledges that the fully executed Lease will not be delivered by Landlord to Tenant unless and until approved by Landlord's lender, and that in determining whether to approve, Landlord's lender will consider Tenant's lease application, credit information, biographical data on Tenant's key officers or principals, and financial statements relating to Tenant's business. Notwithstanding the foregoing, delivery of this Lease by Tenant to Landlord after signature by Tenant shall constitute an option which can be accepted by Landlord at any time until two (2) weeks after delivery of the signed Lease by Tenant.

23.26           Exhibits. All exhibits described herein, if any, are part of this Lease and by this reference are expressly incorporated herein. This Lease contains the following Exhibits:

Exhibit A                    Project Site Plan

Exhibit B                     Premises and Improvements to Premises

Exhibit C                     Rules and Regulations

Exhibit D                     Intentional Omitted

Exhibit E                      Environmental Questionnaire

Exhibit F                      Intentional Omitted

Exhibit G                      Intentional Omitted

23.27           Addendum. The attached Addendum, if any is specified in Section 1.20 above, is part of this Lease and by this reference is expressly incorporated herein.

IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date(s) set forth by their respective signatures.

Landlord:
Date:  3/25/97	WESTERN SALT COMPANY, a California corporation By     /s/ Kevin D. Hill Kevin D. Hill, Leasing Manager By   /s/ Michael P. Neal Michael P. Neal, Development Manager
Tenant:
Date:  3-21-97	D3 TECHNOLOGIES, a California corporation By __________________________________________                                                                By  /s/ W.A. Huston

EX-10.7

Exhibit 10.7

FIRST AMENDMENT TO

QUADRANT BUSINESS PARK

STANDARD FORM MULTI-TENANT LEASE

THIS FIRST AMENDMENT TO QUADRANT BUSINESS PARK STANDARD FORM MULTI-TENANT LEASE (this "Amendment") is dated for reference purposes the 27th day of June, 2006, by and between STERLING REALTY ORGANIZATION CO., a Washington corporation, successor in interest to F. H. Braillard, doing business as The Quadrant Business Park ("Landlord"), and D3 TECHNOLOGIES, INC., a California corporation ("Tenant").

RECITALS

A.           Landlord and Tenant entered into that certain Quadrant Business Park Standard Form Multi-Tenant Lease dated June 23, 2005 (the "Lease"), for the lease of certain premises consisting of approximately 9,230 square feet located at Building F, 8217 44th Avenue West, Suite D, Mukilteo, Washington 98275 (the "Initial Premises").

B.           Landlord and Tenant desire to amend the Lease on the terms and conditions set forth in this Amendment.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency cit which is hereby acknowledged, the parties agree as follows:

1.           Defined Terms. Unless otherwise defined in this Amendment, capitalized terms used herein shall have the same meaning as they are given in the Lease.

2.           Expansion of Premises. Commencing on September 1, 2006 (the "Expansion Space Commencement Date"), the Initial Premises shall be expanded by 8,824 square feet of space located in Suite A of Building F, 8217 44th Avenue West, Mukilteo, Washington 98275 (the "Expansion Space"). The floor plan showing the exact location of the Expansion Space is attached hereto as Exhibit A. All terms and conditions of the Lease, as amended by this Amendment, shall apply to Tenant's lease of the Expansion Space.

3.           Expansion Space Term. Tenant's lease of the Expansion Space shall commence on the Expansion Space Commencement Date and shall continue through December 31, 2011 (the "Expansion Space Term"). Tenant shall have the right to extend the Expansion Space Term on the same terms and conditions as those set forth in the last two sentences of Section 3 of the Lease.

4.           Expansion Space Base Rent. Monthly Base Rent for the Expansion Space for the Expansion Space Term shall be as follows:

Term:	Base Rent:	Total Per Month:
9/1/06 – 12/31/06	$5,000.00	$5,000.00 + CAM
1/1/07 – 12/31/07	$9,706.00	$9,706.00 + CAM
1/1/08 – 12/31/08	$9,998.00	$9,998.00 + CAM
1/1/09 – 12/31/09	$10,298.00	$10,298.00 + CAM
1/1/10 – 12/31/10	$10,606.00	$10,606.00 + CAM
1/11/11 – 12/31/11	$10,925.00	$10,925.00 + CAM

5.           Improvements. Landlord shall, at Landlord's expense and on a turnkey basis, complete the tenant improvements to the Premises as depicted on the Floor Plan using the same finishes that were used in the Initial Premises provided, however, Tenant shall be responsible for paying for any specific Tenant upgrades (such as, without limitation, upgrades to finishes. structure and building systems). Tenant shall reimburse Landlord for the cost of any such upgrades within ten (10) days after receipt of an invoice from Landlord for such cost. Except for the improvements to be completed by Landlord, Tenant is leasing the Expansion Space in its “as is” condition.

6.            Ratification. Except as expressly set forth in this Amendment, the terms and conditions of the Lease shall remain in full force and effect and are hereby ratified by Landlord and Tenant.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

TENANT:

D3 TECHNOLOGIES, INC.

By:___________________________

Ed Knowles, CFO

LANDLORD:

STERLING REALTY ORGANIZATION CO.

By: ___________________________

David Schooler, President

QUADRANT BUSINESS PARK

STANDARD FORM-MULTI-TENANT LEASE

1.           PARTIES  This lease is made this 23rd day of June, 2005 between F. H. Braillard, owner, d.b.a. THE QUADRANT BUSINESS PARK, “Landlord”, and D3 TECHNOLOGIES, “Tenant”

2.           PREMISES   Landlord agrees to lease to Tenant, “The Premises” described in Exhibit “A” and consisting of approximately 9,230 S. F. (exact square feet to be determined within 30 days of execution and adjustments to this lease as required), of office space.  The Premises are a part of “The Building”, which Building is located on the “Real Property” described in Exhibit “B”.

3.           TERM  The term of this lease shall be 65 months commencing on the 1st day of August, 2005, and terminating on the 31st day of December, 2010, unless sooner terminated as provided herein; or extended pursuant to Paragraph twenty-two (22) herein.  Tenant may extend this lease for four (4), one (1) one year periods, at terms to be agreed to.  Tenant must notify Landlord, in writing, on hundred and eighty (180) days prior to each Lease Extension.

4.           POSSESSION

a. If the Landlord, for any reason whatsoever, cannot deliver possession of the Premises to the Tenant on the commencement date of the term hereof, this Lease shall not be void or voidable, nor shall Landlord be liable to tenant for any loss or damage resulting therefrom, but in that event all rent shall be abated during the period between the commencement of said term and the time when the Landlord delivers possession.

b. The Landlord shall permit the Tenant to occupy the Premises on or before July 25th, 2005, such occupancy shall be subject to all the provisions of the Lease and shall not advance the termination date of this Lease.

c. If Tenant should cause any delay in Landlord’s completion of the Premises, thereby delaying tenant’s occupancy of the Premises beyond the commencement date of this Lease, then the Landlord, may at it option require the Tenant to commence payment of rent on the stated commencement date as specified herein.

5.           RENT   Without prior notice or demand, Tenant agrees to pay Landlord as monthly rent for the Premises the sum of: (SEE SCHEDULE BELOW) on or before the fifth (5th) day of the first full calendar month of the term hereof and a like sum on or before the fifth (5th) day of each and every successive calendar month thereafter during the term hereof.  Rent for any period during the term hereof which is for less than one (1) month shall be a prorated portion of the monthly installment herein, based upon a thirty (30) day month.  Rent shall be paid to Landlord at the address to which notices to Landlord are to be given without deduction or offset in lawful money of the United States of America, or to such other person or at such other place as Landlord may from time to time designate in writing.  In addition to base rent stated here, Tenant shall pay additional rent as their share of the Common Area Costs and Expenses, pursuant to Paragraph 8.

Term	Base Rent	CAM	Total Per Month
July 25-December 31, 2005	$5,000.00	$1,938.00	$6,938.00
January 1-December 31, 2006	$9,230.00	Current CAM Charges	$9,350.00 + CAM
January 1-December 31, 2007	$9,500.00	Current CAM Charges	$9,630.00 + CAM
January 1-December 31, 2008	$9,790.00	Current CAM Charges	$9,920.00 + CAM
January 1-December 31, 2009	$10,085.00	Current CAM Charges	$10,215.00 + CAM
January 1-December 31, 20010	$10,388.00	Current CAM Charges	$10,524.00 + CAM

6.           PREPAID RENT  Upon execution of this Lease, Tenant shall deposit with Landlord $6,964.00 (the “deposit”) as prepaid rent and shall be allocated as follows:

a.           Prepaid Rent

$     0       of the Deposit shall be applied to monthly rent due for the first month of the Lease term.

b.            $   6,938.00   of the Deposit shall e applied to monthly rent due for the last month of the Lease term.

7.           USE   Tenant shall use the Premises for engineering and general business offices, and other lawful purposes as may be incidental thereto and hereby agrees that it has determined to its satisfaction that the Premises can be used for those purposes.  The Premises may not be used for any other purposes without Landlord’s written consent. Outside storage, including without limitation, trucks and other vehicles, is prohibited Landlord’s written consent.  Tenant shall at his own expense and cost obtain any and all licenses and permits necessary for its use of the Premises, and shall promptly comply with all governmental orders and directives including but not limited to those regarding the correction, prevention and abatement of nuisances in or upon, or connected with, the Premises, all at Tenant’s sole expense.  Tenant shall not permit any objectionable odors smoke, dust, gas, noise or vibrations to emanate from the premises, nor take any other action which would constitute a nuisance or would disturb or endanger any other tenants of the building or buildings on the Property, or unreasonably interfere with their use of their respective Premises.  In additional to any other remedies Landlord may have for a breach by Tenant of the terms of this Section 7, Landlord shall have the right ot have Tenant evicted from the Premises.  Without Landlord’s prior written consent, Tenant shall not receive, store or otherwise handle any product, material or merchandise which is explosive or highly inflammable.

With respect to any release of toxic or hazardous substances or wastes or other condition of the Premises occurring on or after the date of the Lease and caused by or resulting from the negligent acts or omissions or willful misconduct of Tenant, its employee’s, authorized agents or contractors, and which release or other condition violates the provisions of, or necessitates any removal, treatment, or other remedial action under, any past, present, or future federal, state or local statute or ordinance or any regulation, directive, or requirement of any governmental authority with jurisdiction relating to protection of the environment, Tenant agrees to defend, indemnify, and hold harmless Landlord, its partners, employees, agents, and contractors, from and against any and all losses, claims, liabilities, damages, fines, costs, and expenses (including reasonable attorney’s fees and legal expenses) arising out of or resulting there from.  The provisions of this paragraph shall survive the termination or expiration of this Lease and the surrender of the Premises by tenant, with respect to releases, or conditions occurring prior to such termination, expiration, or surrender.  With respect to any release of toxic or hazardous substances, or wastes or other condition of the Premises occurring prior to the date of this Lease and caused by or resulting from the negligent acts or omissions or willful misconduct of Landlord, it's agents, or contractors, and which release or condition violates the provisions of, or necessitates any removal, treatment, or other remedial action under, any past, present, or future federal, state, or local statute or ordinance or any regulation requirement or directive of any governmental authority with jurisdiction relating to protection of the environment, Landlord agrees to defend, indemnify, and hold harmless Tenant from and against any and all losses, liabilities, damages, demands, fines, costs and expenses (including reasonable attorney’s fees and legal expenses) arising out of or resulting there from.

Tenant shall remove any sumps and clarifiers and any related Hazardous Materials (“Hazardous Material” shall mean any petroleum and petroleum products, asbestos, and PCB’s and any “hazardous substances”, “hazardous materials” or “hazardous substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1908, as amended, the Hazardous Materials Transportation Act, as amended, or the Resource Conservation and Recovery Act, as amended, those substances, materials and wastes which are defined as “hazardous wastes” or as “hazardous substances” in the Washington health and safety codes or labor codes, and “hazardous” or “toxic” in the regulations adopted or publication promulgated pursuant to any of said laws in or about the Premises and associated with Tenant’s use and occupancy thereof upon the expiration or earlier termination of the lease.

Notwithstanding anything to the contrary contained herein, Landlord agrees that the Tenant shall not be responsible for, and Landlord shall hold Tenant harmless against any costs of cleanup or removal arising from or associated with any hazardous material existing in, on or throughout Premises, as of the date Tenant occupies the premises pursuant to the terms of this Lease.

Tenant shall not do or permit anything to be done in or about the Premises or bring or keep anything therein which will in any way increase the existing rate or affect any fire or other insurance upon the Building of any of its contents, or cause cancellation of Insurance Policy covering the Building or any part thereof of any of its contents.

Tenant shall not do or permit anything to be done in or about the Premises to be used for any improper, immoral, unlawful, or objectionable purpose.  Tenant shall not commit or suffer to be committed any waste in or upon the Premises.  Tenant shall not place upon or install in windows or other openings or exterior sides of doors or walls of the Premises any signs, symbols, drapes or other materials without written consent of the Landlord.

Landlord gives Tenant and its employees, authorized representatives, and business invites a nonexclusive right to reasonable use and enjoyment of the Common Areas, subject to Landlord’s rights set forth herein.

8.           TENANT’S SHARE OF COMMON COSTS AND EXPENSES   Tenant shall pay as additional rent their share of the common costs and expense of the operation and maintenance of the Property.  Tenant’s Share is estimated to be equal to $0.21 for each square foot of the Premises for the first accounting period of the Lease term, which is currently $1,938.00 per month.

An accounting period is a calendar year.  The first accounting period shall commence on the date the Lease term commences, and the last accounting period shall and on the date the Lease term expires.  The first accounting period of the Lease term shall be the first full calendar year of the Lease term.  Landlord may adjust the Estimated Common Costs and Expenses at the commencement of each new accounting period throughout the Lease term, whereupon Tenant’s share shall be adjusted accordingly.  If at any time during any accounting period, Landlord determines that he actual Common Costs and Expenses for the remainder of such accounting period will vary by more than five percent (5%) from the Landlord’s original estimate, Landlord may, by written notice to Tenant, adjust the Common Cots and Expenses for the remainder of such accounting period, and, accordingly, Tenant’s Share to be paid hereunder.  If the actual Tenant’s Share of the Common Area Costs and Expenses exceeds Tenant’s payments made, Tenant shall pay to Landlord the deficiency within thirty (30) days of Tenant’s receipt of such statement of deficiency.  If Tenant’s payments made during the accounting period exceed the actual Tenant’s Share, Landlord may, at Landlord’s sole discretion, pay excess to Tenant at the time Landlord furnishes said statement to credit the excess toward Tenant’s payments of the Tenant’s share of the next succeeding accounting period.

Common Costs and Expenses shall include the “Property Taxes” and “Operating Expenses”.  Property Taxes shall include, without limitation, all real and personal taxes, charges and assessments imposed on the Premises, Building, Property or Common Areas, and any other taxes, charges or assessments assessed against the Landlord, Premises, Building, or Common Area in connection with the use or occupancy of the Premises at any time during the term of this Lease.  “Operating Expenses” shall mean the annual Operating Expenses which include, without limitation, all operating costs incurred by Landlord or on behalf of the Premises in maintaining, operating, and providing services to and for the Building, Property, and Common Areas, including, without limitations, the costs of maintenance, utilities, supplies, insurance, service contracts, advertising, independent contractors, property management, a reserve account for the replacement of capital items, compensation of all persons who perform regular and recurring duties connected with the Building, Property, and Common Areas, its equipment, utilities, sprinkler systems, and operation thereof, and an allowance to Landlord or Landlord’s agent for supervision of such maintenance, operation, services and repairs of the Building, Property, and Common Areas and any and all assessments charges to Landlord or the property, in connection with the operation, repair and maintenance of the Common Areas.

9.           REPAIR RESPONSIBILITY

a.           By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in good, sanitary order, condition, and repair.  Tenant shall supply a punch list, within five (5) days of possession that will describe any exception items for Landlord to repair at Landlord’s expenses.  Tenant shall, when and if needed, at Tenant’s sole expense, make repairs to the Premises and every part thereof including electrical, plumbing, lighting, heating, and air conditioning.  Tenant shall surrender the Premises to Landlord in good condition upon the expiration or sooner termination of this Lease; provided however, that Tenant shall not be held responsible for damage to the Premises from causes beyond the reasonable control of Tenant, to the extent covered by Landlord’s fire and extended coverage insurance policy, or for ordinary wear and tear.  Except as specifically provided in an addendum, if any, to this Lease, Landlord shall have no obligation whatsoever, to alter, remodel, improve, repair, redecorate or paint the Premises or any part thereof and the parties hereto affirm that Landlord has made no representations to Tenant respecting the condition of the Premises or the Building except as specifically herein set forth.

b.           Landlord, at its option for the benefit of the Tenant and to assure proper maintenance of the heating and air conditioning, may engage a maintenance firm to maintain the heating, ventilation and air conditioning system (if any) servicing the Premises.  Tenant shall pay to Landlord, or, at Landlord’s election, directly to the maintenance firm, Tenant’s share of the cost of such maintenance.

c.           Except as provided herein, Tenant shall, at its expense clean, maintain and keep in good repair throughout the term of this Lease the entire Premises and appurtenances, including without limitation, signs, windows, doors, skylights, and trade fixtures including the cleaning of glass and woodwork on both sides of the interior wall separating their Premises from the Interior Common area do the Building.

d.           Notwithstanding the provisions of Article 9a. above, but subject to the provisions of Paragraph 15, Landlord shall repair and maintain the structural portions of the Building, including the basic plumbing, air conditioning, heating, and electrical systems, installed or furnished by Landlord only in so for as such heating, air conditioning and electrical system provide service to the entire Building, unless such maintenance and repairs are caused in part or in whole by the act, neglect, fault or omission of any duty by the Tenant, its agents, servants, employees or invitees, in which case Tenant shall pay to Landlord the reasonable costs of such maintenance and repairs.  Landlord shall not be liable for any failure to make any such repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written of the need of such repairs or maintenance is given to Landlord by Tenant.  Except as provided in Articles 15 and 16 hereof, there shall be no abatement of rent and no liability by Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs or improvements in or to any portion of the Building or the Premises or to fixtures, appurtenances and equipment therein.  Tenant waives the right to make repairs at Landlord’s expense under any law, statute, or ordinance now or hereafter in effect.

10.           MAINTENANCE AND MANAGEMENT

a.           Landlord shall maintain the Common Areas in good condition at all times and shall have the right to:

1. Establish and enforce reasonable rules and regulations applicable to all tenants concerning the maintenance management, use and operation of the Building.

2. Make changes, to the Common Areas including, without limitation, structural and decorating changes in interior common area, the location of entrances, exits and parking areas.

b.           Common Areas, as defined in this Lease, mean all parts of the interior and exterior of the Building, and related land areas and facilities outside the individual Premises but constituting a part of the Building.  Common Areas include, without limitation:

1. The property upon which the Premises are located, pedestrian walkways, landscaped areas, sidewalks, loading areas and roads located on the Property.

2. The structural parts of the Building and other improvements in which the Premises are located, which structural parts include only the foundation, bearing and exterior walls (excluding glass and doors), subflooring, and roof (excluding skylights).

3. The unexposed electrical, plumbing, and sewage systems lying outside the Premises.

4. External window frames, gutters, and downspouts on the Building in which the Premises are located.

5. Those cretin open areas, landscaped areas, and roadways, utility systems and facilities located outside the Premises and Building but constituting a party of the Property.

c.           Landlord shall not be liable, nor shall the rent be abated because of services caused by accident, strike, necessity for repairs, or for any other reason beyond its control.

11.           UTILITIES.    Tenant shall pay, prior to delinquency, for heat, light, water and other utility services supplied to the Premises and will pay any required deposits.  Water sewer and other utility charges for which separate billings are not available shall be prorated by Landlord based on the ratio of the number of square feet in the Building, provided, however, that Landlord may increase Tenant’s prorata portion of any such charges to reflect unusual or excessive utility system demands.  Separate charges may be made to reflect unusual or excessive utility system demands where not separately metered.

12.           ALTERATIONS AND ADDITIONS BY TENANT.    Tenant may make, at its sole expense, such additional improvements or alterations to the Premises, which it may deem necessary or desirable including altering and/or adding, relocating or removing restrooms.  However, any repairs or new construction by Tenant shall be done in conformity with plans and specifications approved in writing by Landlord.  All work performed shall be done in a workmanlike manner and with materials (where not specifically described in the specifications) of the quality and appearance standard in the Building and shall become the property of the Landlord.  Landlord may require Tenant to remove any improvements or alterations at the expiration of the term, such removal to occur at Tenant’s sole cost and expense.  At the end of the lease period, all improvements made by Tenant shall become the property of the Landlord and shall remain on the Premises.

13.           LIENS.    Tenant shall keep the Premises and the property in which the Premises are situated free from all liens arising out of any work performed, materials furnished or obligations incurred by Tenant.  Landlord may require, at Landlord’s sole option, that Tenant shall provide to Landlord, at Tenant’s sole cost and expense, a lien and completion bond in an amount equal to one and on-half (1 1/2) times any and all estimated cost of any improvements, additions, or alterations to the Premises, to insure Landlord against any liability for mechanics’ and materialmen’s liens and to insure completion of the work.

14.           INSURANCE.    Landlord shall procure throughout the term of the lease fire and extended coverage insurance in the amount of the full insurable value of the Building containing the Premises.  Tenant assumes the risk of loss of its furnishings, trade fixtures, equipment and supplies which shall not be insured under the above policy.  Tenant agrees to procure and maintain throughout the term of the Lease at Tenant’s sole cost and expense, liability insurance underwritten by a form satisfactory to Landlord covering all persons and property on Premises in connection with Tenant’s business in the following amounts:

a. $1,000,000 combined Single Limit for Bodily Injury and Property Damage or

b. $500,000/$1,000,000 for Bodily Injury and $250,000 each occurrence for Property Damage.

Landlord shall be named as an additional insured and shall be furnished with a certificate of insurance.  Such coverage shall be primary and noncontributing with any insurance carried by the Landlord.  The liability insurance policy shall contain endorsements requiring 90 days notice to Landlord prior to and cancellation or any reduction in amount of the coverage.  Tenant as a material part of the consideration to be rendered to Landlord, hereby agrees to defend, indemnify and hold harmless Landlord against any and all claims, costs and liabilities, including reasonable attorney’s fees, arising from Tenant’s use of the Premises, or from the conduct of Tenant’s business, or from any activity, work or things done, permitted of suffered by Tenant’s agents, contractors or employees.

15.           DESTRUCTION.    If the Premises or the Building is destroyed or damaged by fire, earthquake or other casualty to the extent that they are untentatable in whole or in part, then at Landlord’s option, Landlord may proceed with reasonable diligence to rebuild and restore the Premises or such part thereof, provide that within thirty (30) days after such destruction or injury landlord shall notify Tenant in writing of Landlord’s intention to do so.  During the period from destruction or damage until restoration, the rent shall be abated in proportion to the share of the Premises, which Landlord determines is unfit for occupancy.  If damage is due to the fault or neglect of Tenant or its agents, employees, invitees or licensees, there shall be not abatement of rent.  If Landlord shall fail to notify Tenant, then this Lease shall, at the expiration of the time for giving of notice as herein provided, be deemed terminated and at an end.  Landlord shall not be required to repair any injury or damage by fire or other cause, or to make any repairs or replacements of any panels, decoration, office fixtures, paintings, floor covering, partitions, or any other property installed in the Premises by Tenant, Tenant’s personal property or any inconvenience or annoyance occasioned by such damage, repair, reconstruction or restoration.

16.           CONDEMNATION.     If all or part of the Premises are taken under power of eminent domain, or sold under the threat of the exercise of said power, this Lease shall terminate as to the part so taken as of the date of the condemning authority takes possession.  If more than 25% of the floor area of Premises is taken by condemnation, Tenant may by written notice within ten (10) days after notice of such taking, or absent of such notice, within ten (10) days after the condemning authority takes possession terminate this Lease as of the date the condemning authority takes possession.  If Tenant does not so terminate, this lease shall remain in effect as to the portion of the Premises remaining except that the rent shall be reduced in the proportion that the floor area taken bears to the original total floor area, provided that circumstances makes abatement based on the floor area unreasonable, the rent shall abate by a reasonable amount to be determined by Landlord.  In the event Tenant elects not to terminate the Lease with respect to any part of the Premises remaining after condemnation, Landlord shall have no responsibility to restore such part of the Premises to its condition prior to condemnation.  Any award for the taken of all or a part of the Premises under the power of eminent domain, including payment made under threat of the exercise of such power, shall be the property of the Landlord, whether made as compensation for diminution in value or the leasehold or for the taking of the fee or as severance damages, provided that Tenant shall be entitled to such compenstion as may be separately awarded or recoverable by Tenant in Tenant’s own right for the loss of or damage to Tenant’s trade fixtures and removable personal property.  Landlord shall not be liable to Tenant for the Loss of all or any part of the Premises taken by condemnation.

17.           ASSIGNMENT AND SUBLETTING.     Tenant shall not assign, let or sublet this Lease or any part thereof, either by operation of law or otherwise, or permit any other party to occupy all or any part of the Premises without first obtaining written consent of Landlord.  This Lease shall not be assignable by operation of law.  Landlord shall not unreasonably withhold approval of the proposed assignee whose credit worthiness is comparable to that of Tenant.  Landlord shall not unreasonably withhold approval of the proposed assignee whose credit worthiness is comparable to that of Tenant.  Landlord reserves the right to recapture the Premises, or applicable portion thereof, in lieu of giving its consent by notice given to Tenant within twenty (20) days after receipt of Tenant’s written request for assignment or subletting.  Such recapture shall terminate this Lease as to the applicable space effective on the prospective date of assignment or subletting, which shall be the last day of a calendar month and not earlier than sixty (60) days after receipt of the Tenant’s request. If Landlord elects not to recapture and thereafter gives its consent, Landlord and Tenant agree that Landlord may charge Tenant a reasonable sum, not to exceed $500.00, to reimburse Landlord for legal and administrative costs incurred in accommodating this Assignment and/or Subletting.  Tenant and Landlord to share equally in any rental and other proceeds paid to Tenant in excess of the rent to be paid to Landlord under the terms of this Lease.  If Tenant is a corporation, and transfer of this Lease from Tenant by merger, consolidation or liquidation or any change in the ownership, or power to vote the majority of the outstanding voting stock of Tenant, said transfer shall constitute an assignment for the purposes of this section.  If Tenant is a partnership, any other change in the individuals or entities of which the partnership is composed shall constitute an assignment for purposes of this section.  Subject to the provisions above, this Lease shall be binding upon and inure to the benefit of the parties, and successors and assigns.

18.           DEFAULT.     The occurrence of any one or more of the following events shall constitute a material default and breach of the Lease by the Tenant.

1.           Vacation or abandonment of any portion of the Premises.

2.           Failure by Tenant to make any payment required as and when due, where such failure shall continue after five (5) business days written notice form Landlord.

3.           Failure by Tenant to observe or perform any of the covenants, conditions or provisions of this Lease, other than the making of any payment, where such failure shall continue for a period of thirty (30) days after written notice form Landlord.

4.           a. (I) the making of any general assignment or general arrangement for the benefit of creditors, (II) the filing by or against Tenant of a petition in bankruptcy, including reorganization or arrangement, unless, in the case of a petition filed against Tenant, the same is dismissed within thirty (30) days; (III) the appointment of a trustee or receiver to take this Lease; (IV) the seizure by any department of any government or any officer thereof of the business or property of Tenant; (V) adjudication that Tenant is bankrupt.

b. Notice by Tenant of Default.  Tenant shall notify Landlord promptly of any default not by its nature necessarily known to Landlord.

c. Default by Landlord.  Landlord shall not be in default unless Landlord fails to perform its obligations within thirty (30) days after notice by Tenant in writing specifying wherein Landlord has failed to perform; provided that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for performance, Landlord shall not be in default if Landlord commences performance within thirty (30) days of Tenant’s notice and thereafter completes Landlord’s performance within a reasonable time.

19.           REMEDIES IN DEFAULT.     In event of any default or breach, Landlord may, at any time without waiving or limiting any other right or remedy, reenter and take possession of the premises or terminated this Lease, or pursue any remedy allowed by law or equity.  Tenant agrees to pay Landlord the cost of recovering possession of the Premises, the expenses or reletting, and any other costs or damages arising out of Tenant’s default including, without limitation, the costs of removing persons and property from the Premises, the costs of preparing or altering the Premises for reletting, broker’s commissions and legal fees not withstanding any reentry or termination, the liability of Tenant for the rent provided for therein shall not be extinguished for the balance of the term of this Lease, and Tenant covenants and agrees to make good to the Landlord any deficiency arising form reletting the Premises at a lesser rent than herein agreed to.  Tenant shall pay such deficiency each month as the amount thereof as ascertained by the Landlord.

20.           ACCESS.     Tenant shall permit Landlord to enter the premises at reasonable times for any reasonable purpose including but not limited to inspecting, altering and repairing the Premises and ascertaining compliance with provisions thereof by Tenant, but nothing herein shall be construed as imposing any obligation on Landlord to perform any such work or duties.  Landlord may also show the premises to prospective purchasers or tenants at reasonable times, provided that Landlord shall not interfere with Tenant’s business operation.

21.           WAIVER OF SUBROGATION.     Tenant and Landlord each releases and relieves the other and waives its entire right of recovery against the other for loss or damage arising out of incident ot the perils covered by fire and extended coverage, and liability insurance endorsements approved for use in Washington which occur in, or about the Premises, weather caused by the negligence of either party, their agents employees, or otherwise.

Each party shall obtain from its insurer(s) provisions permitting waiver of any claim against the other party for loss or damage within the scope of the above insurance.  The release and waiver of recovery contained herein shall be limited by, and shall be coextensive with; the waiver provisions of the Insurance policies procured by and maintained by the parties pursuant to this Lease, if either Landlord or Tenant is unable to obtain its insurer’s permission to waiver of any claim against the other party, Landlord or Tenant shall promptly notify the other party of such inability.

22.           HOLDOVER TENANCY.     If (without execution of a new Lease or written extension) Tenant shall hold over after the expiration of the term of this Lease with Landlord’s written consent, Tenant shall be deemed to be occupying the premises as a Tenant form month to month which tenancy may be terminated as provided by law.  If tenant shall hold over after expiration of the term of the Lease without Landlord’s written consent, Tenant’s rent payable hereunder shall be increased by fifty (50) percent over Tenant’s rent required in the last month of the term of this Lease.  During any such tenancy, Tenant agrees to be bound by all of the terms, covenants and conditions as specified, in so far as applicable.

23.           COMPLIANCE WITH LAW.     Tenant shall not use Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation currently in force or which may hereafter be enacted or promulgated.  Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the conditions, use or occupancy of the Premises, excluding structural changes not related to or affected by Tenant’s improvements or acts.  The Judgment of any court of competent jurisdiction of the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not that Tenant has violated any law, statute, ordinance or governmental rule, regulation or requirement, shall be conclusive of the fact as between the Landlord and Tenant.

24.           RULES AND REGULATIONS.     Tenant shall faithfully observe and comply with the rules and regulations that Landlord shall from time to time promulgate.  Landlord reserves the right from time to time to make reasonable modifications to said rules.  The additions to those rules shall be binding upon delivery of a copy of them to Tenant.  Landlord shall not be responsible to Tenant for the nonperformance of any said rules by any other Tenants or occupants.  At this date June 23, 2005, there are no written rules or regulations in effect.  The only rule in place is that no Tenant may park any vehicle in front of any roll-up door that is not part of there demised space.

25.           PARKING.     Tenants shall have the right to use, in common with other tenants and occupants of the Building, the parking facilities of Building subject to the rules and regulations and any charges of Landlord for such parking facilities which may be established or altered by Landlord at any time or from time to time during the term hereof.

26.           MORTGAGES, DEEDS OF TRUST, PURCHASERS (ESTOPPEL STATEMENT).      It is understood and agreed that Landlord may sell, mortgage or grant deeds of trust with respect to the Premises, the Building or Property.  Tenant agrees to execute, within twenty (20) days following Landlord’s request, such reasonable certificates as may required by a mortgage or trust deed beneficiary stating that the Lease is in full force and effect and the dates to which the rent and charges have been paid.  Upon a foreclosure or conveyance in lieu or foreclosure, and a demand by Landlord’s successor, Tenant shall attorn to and recognize such successor as Landlord under this Lease.

27.           SUBORDINATION.     Tenant agrees that this Lease and all renewals and modifications, supplements, consolidations and extensions therefore shall be subordinate to the Lien of any mortgages or deeds of trust now or hereafter placed against the Property or Building to which the Premises comprise a part, provided, however in the event that any mortgagee or beneficiary shall so elect, Landlord reserves the right to subordinate this Lease to said mortgage or deeds of trust upon the terms required by such mortgagee or beneficiary.  Not withstanding the above, so long as Tenant is not in default herein, this Lease shall remain in full force and effect for the full term hereof.

28.           TENANTS PROPERTY.     Furnishings, trade fixtures and equipment installed by Tenant shall be the property of the Tenant.  On termination of the Lease, Tenant shall remove any such property.  Tenant shall repair or reimburse Landlord for the cost of repairing any damage to the Premises resulting from the installment or removal of such property.

29.           REMOVAL OF PROPERTY.     All personal property of Tenant remaining in the Premises after reentry or termination of this Lease shall conclusively be deemed abandoned and may be removed by Landlord.  Landlord may store such property in any place selected by Landlord including but not limited to a public warehouse, at the expense and risk of the owner thereof, with the right to sell stored property without notice to Tenant.  The proceeds of such sale shall be applied first to the costs of such sale, second to the payment of the cost of removal and storage, if any and third to the payment of any other sums of money which may then be due from Tenant to Landlord under any of the terms hereof, and balance if any to be paid to Tenant.

30.           PERSONAL PROPERTY TAXES.     Tenant shall pay, or cause to be paid, before delinquency, any and all personal property taxes taxes levied or assessed, which become payable during the term hereof upon Tenant’s leasehold improvements, equipment, furniture, fixtures and personal property located in the Premises.  In the event any or all of the Tenaors Leasehold improvements, equipment, furniture, fixtures and personal property shall be assessed and taxed with the Building, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes.

31.           NOTICES.     All notices under this Lease shall be in writing and shall be effective when mailed or delivered to Landlord, c/o:

F. H. Braillard QUADRANT

BUSINESS PARK

P.O. Box 1000 Muldteo, WA

98276 Phone 425-366-8048

Or to Tenant at the following address, or to such other address as either party may designate to the other in writing from time to time.

D-3 Technologies

4838 Ronson Court

San Diego, CA

92111 Phone 868-

671-1686

32.           GENERAL PROVISIONS.

a.           Plats and Riders.  Clauses, plats and riders, if any signed by Landlord and Tenant and endorsed on or affixed to this lease are part Thereof.

b.           Waiver.  The waiver by either party to any term covenant or condition herein contained shall not be deemed to be a waiver of such term covenant or condition on any subsequent breach of the same or any other term covenant or condition herein contained.  The subsequent acceptance of rent hereunder by Landlord shall not be deemed to be a waiver of any breach by Tenant to any term, covenant or condition of this Lease, other than the failure of the Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of rent.  No covenant, term or condition of this Lease shall be deemed to have been waived by Landlord unless such waiver shall be in writing and signed by Landlord’s duly authorized representative.

c.           Joint Obligation.  If there be more than on Tenant the obligation hereunder imposed upon Tenants shall be Joint and several.

d.           Marginal Headings.  The marginal headings and section titles in the Sections of this Lease are not part of this Lease and shall have no effect upon the construction or interpretation of any part hereof.

e.           Time. Time is of the essence of this Lease and each and all of its provisions in which performance is a factor.

f.           Recordation.  Tenant shall not record this Lease or a short form memorandum hereof without the prior written consent of the Landlord.

g.           Late Charges.  Tenant acknowledges that late payment by Tenant to Landlord of rent or other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which would be extremely difficult and impractical to ascertain.  Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises; therefore, in the event Tenant should fail to pay any Installment of rent or any other sum due hereunder within five (5) days after such amount is due, Tenant shall pay to Landlord as additional rent a late charge equal to 5% of each installment or the sum of $50.00 per month, whichever is greater.  Tenant will pay a $25.00 charge to Landlord for each returned check.  In addition, any sums due to Landlord under terms of this Lease which is not paid when due shall bear interest at the rate of 18% from the date the same becomes due and payable until paid.

h.           Prior Agreements.  This Lease contains all the agreements of the parties hereto with respect to any matter covered or mentioned in this Lease, and no prior agreements or understandings pertaining to any matters shall be effective for any purpose.  No provision of this lease may be amended or added to except by an agreement in writing signed by the parties hereto or their respective successors in Interest.  This Lease shall not be effective or binding on any party until fully executed by both parties hereto.

i.           Inability to Perform.  This Lease and the obligations of the Tenant hereunder shall not be affected impaired because the Landlord is unable to fulfill any of its obligations hereunder, or is delayed in doing so, if such inability is caused by reason of strike, labor trouble, acts of God or any other cause beyond the reasonable control of the Landlord.

j.           Attorney’s Fees.  If either party requires the services of an attorney in connection with enforcing the terms of this Lease or in the event suit is brought for the recovery of any rent due under this Lease or for the breach of any covenant or condition of this Lease, or for the restitution of said Premises to Landlord and/or eviction of Tenant during said term or after the expiration thereof, the prevailing party will be entitled to reasonable sum for attorney’s fees, witness fees and court costs, including costs of appeal.

k.           Sale of Property.  In the event of any sale of the Building or Property, or any assignment of this Lease by Landlord, Landlord shall be and hereby entirely freed and retieved of all liability under any and aU of Its covenants and obligations contained in or derived from this Lease arising out of an act, occurrence, or omission accruing after the consummation of such sale or assignment; and the purchaser or assignee of such sale or assignment or any subsequent sale or assignment; and the purchaser or assignee of such sale or assignment or any subsequent sale or assignment of Lease, the Property or Building, shall be deemed, without any further agreement between the parties or their successors in Interest or between the parties and any such purchaser or assignee have assumed and agreed to carry out any and all of the covenants and obligations of the Landlord under this Lease.

l.           Name.  Tenant shall not use the name of the Building or of the development of which the Building is situated for any purpose other than as an address of the business to be conducted by the Tenant in the Premises.

m.           Severability.  Any provision of this Lease which shall prove invalid, void or Illegal shall in no way affect, Impair or invalidate any other provision here of and such other provisions shall remain in full force and effect.

n.           Cumulative Remedies.  No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at Jaw or en equity.

o.           Choice of Law.  The laws of the State of Washington shall govern this Lease.

p.           Light, Air and VieW.  Landlord does not guarantee the continued present status of light, air, or view over any improvements adjoining or in the vicinity of the Building.

q.           Interpretation.  This Lease has been submitted to the scrutiny of all parties hereto and their counsel, if desired, and shall be given a fair and reasonable interpretation in accordance with the words hereof, without consideration or weight being given to its having been drafted by any party hereto or its counsef.

r.           Keys.  Upon termination of this Lease, Tenant shall surrender all keys to the Premises to Landlord at the place then fixed for payment of rent.  Tenant shall inform Landlord of all combination locks, safes and vaults, if any in the Premises.

33.           SIGNS.     Signage is allowed per individual suites and must be approved in writing by Landlord prior to installation.

34.           NORMAL BUSINESS HOURS.     If use defined under section 7 is a retail activity, Tenant agrees to maintain normal business hours consisted with similar retail business in the area.  Failure to maintain normal business hours shall be deemed a default under the terms of this Lease.

35.           AUTHORITY OF PARTIES.

a.           Corporate Authority.  If Tenant is a corporation each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with a duly adopted resolution of the board of directors of said corporation or in accordance with the by-laws of said corporation, and that this Leas is binding upon said corporation and all its officers in accordance with its terms.

b.           Limited Partnerships.  If the Landlord herein is a Limited partnership, it is understood and agreed that any claims by tenant ion Landlord shall be limited to the assets of the limited partnership, and furthermore, Tenant expressly waives any and all rights to proceed against the individual partners or the officers, directors or shareholders of any corporate partner, except to the extent of their interest in said limited partnership.

36.           RELOCATION.      To accommodate the changing needs of the tenants in the park, Tenant agrees, if requested, to cooperate with Landlord in relocating to different premises within the park to help Landlord meet those changing space needs.  Any relocation will be done so as to minimize the impact on the Tenant, and the costs of said relocation would be the responsibility of the Landlord.  Tenant agrees if requested to cooperate with landlord in evaluating proposals to relocate to different premises within the park to help Landlord meet those changing space needs. Tenant agrees not to unreasonably decline any such requests to relocate.  However, Tenant reserves the right to decline any such request when the proposed relocation will, in the opinion of Tenant, have a negative impact upon the conduct of its business.

37.           COMMISSIONS.     No commissions are payable in connection with this transaction.

38.           PERSONAL GUARENTEE.     This lease is entered into by the Landlord conditioned upon an in reliance upon the personal guarantee of the terms and conditions contained herein by the persons identified as Personal grantors on the signature page attached hereto.

39.           EXHIBITS.    A-The Premises, B-Legal Description, C-Landlord Provided Tenant Improvements.

THIS LEASE IS SUBJECT TO ACCEPTANCE BY THE LANDLORD.

IN WHITNESS HEREOF, the parties hereto have executed this Lease the date and year above written.

Landlord	Tenant
F. H. Braillard	D-3 Technologies
QUADRANT BUSINESS PARK	4838 Ronson Court
PO Box 1000	San Diego, CA
Mukilteo, WA  98275	92111
Phone 425-355-9048
__________________________________	________________________________
LANDLORD	TENANT
Date: 6/24/05	Date: 27, June 2005

EX-10.8

Exhibit 10.8

EXECUTION COPY

LEASE AGREEMENT

by and between

CIT CRE LLC,

a Delaware limited liability company,

as Landlord

and

LMI FINISHING, INC.,

an Oklahoma corporation,

as Tenant

Dated as of:  February 13, 2007

TABLE OF CONTENTS

Section		Page
Parties		1
1.	CERTAIN DEFINITIONS	1
2.	DEMISE OF LEASED PREMISES	9
3.	TITLE, CONDITION AND POSSESSION	9
4.	USE OF LEASED PREMISES; QUIET ENJOYMENT	10
5.	TERM	11
6.	MINIMUM RENT; INTERIM RENT	11
7.	ADDITIONAL RENT	12
8.	NET LEASE: NON-TERMINABILITY.	13
9.	PAYMENT OF IMPOSITIONS.	14
10.	COMPLIANCE WITH LAWS AND AGREEMENTS; ENVIRONMENTAL MATTERS	14
11.	LIENS; RECORDING	18
12.	MAINTENANCE AND REPAIR	19
13.	ALTERATIONS, IMPROVEMENTS AND EXPANSIONS	20
14.	PERMITTED CONTESTS	21
15.	INDEMNIFICATION	22
16.	INSURANCE	23
17.	CASUALTY AND CONDEMNATION: CLAIMS	26
18.	CASUALTY AND CONDEMNATION: RESTORATION	28
19.	RESTORATION PROCEDURES	28
20.	ASSIGNMENT AND SUBLETTING; PROHIBITION AGAINST LEASEHOLD FINANCING	29
21.	SALES BY LANDLORD; RIGHT OF FIRST REFUSAL	30
22.	EVENTS OF DEFAULT	31
23.	REMEDIES AND DAMAGES UPON DEFAULT	33

24.	NOTICES	37
25.	ESTOPPEL CERTIFICATE	37
26.	SURRENDER	37
27.	NO MERGER OF TITLE	38
28.	BOOKS AND RECORDS	38
29.	NON-RECOURSE AS TO LANDLORD	39
30.	FINANCING	39
31.	SUBORDINATION	40
32.	TAX TREATMENT: REPORTING	40
33.	MISCELLANEOUS	40

SCHEDULES:
	Schedule 12(f) Immediate Repairs and Deferred Maintenance Expenditures
EXHIBITS:
	Exhibit A – Premises
	Exhibit B – Building Equipment
	Exhibit C – Minimum Rent Schedule
	Exhibit D – Certification Related to the USA Patriot Act
	Exhibit E – Determination of Fair Market Rental Value of the Leased Premises
	Exhibit F – Environmental Reports
	Exhibit G – Form of Certification

LEASE AGREEMENT

LEASE AGREEMENT, made as of this 13th day of February, 2007, between CIT CRE LLC, a Delaware limited liability company, or nominee, with an address c/o CIT Lending Services Corporation, 1 CIT Drive, Livingston, NJ 07039 ("Landlord"), and LMI FINISHING, INC., an Oklahoma corporation, with an address c/o LMI Aerospace, Inc., P.O. Box 900, St. Charles, Missouri 63302-0900 ("Tenant").

In consideration of the rents and provisions herein stipulated to be paid and performed, Landlord and Tenant hereby covenant and agree as follows:

1.           Certain Definitions. As used herein, the following terms shall have the following meaning:

"Additional Rent" has the meaning assigned to such term in Section 7.

"Adjustment Date" has the meaning assigned to such term in Section 6.

"Affiliate" of any Person means any Person (presently existing or hereafter created or acquired) controlling, controlled by or under common control with the specified Person, and "control" of a Person (including, with correlative meaning, the terms "controlled by" and "under common control with") means the power to direct or cause the direction of the management, policies or affairs of the controlled Person, whether through ownership of securities or partnership or other ownership interests, directly or indirectly, by contract or otherwise.

"Alterations" means all changes, additions, improvements or repairs to, all alterations, reconstructions, renewals, replacements or removals of and all substitutions or replacements for any of the Improvements or Building Equipment, both interior and exterior, structural and non-structural, and ordinary and extraordinary.

"Appurtenances" means all tenements, hereditaments, easements, rights-of-way, rights, privileges in and to the Land, including (a) easements over other lands granted by any Easement Agreement and (b) any streets, ways, alleys, vaults, gores or strips of land adjoining the Land.

"Assignment" means any assignment of rents and leases from Landlord to a Lender which (a) encumbers any of the Leased Premises and (b) secures Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified from time to time.

"Building Equipment" has the meaning assigned to such term in Section 2.

"Capital Growth Rate" means, at any given time, the yield to maturity of the "on the run" ten (10) year United States Treasury security plus four hundred (400) basis points.

"Casualty" means any injury to or death of any person or any loss of or damage to any property (including the Leased Premises) included within or related to the Leased Premises.

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

"Commencement Date" means the date hereof.

"Condemnation" means a Taking or a Requisition.

"Condemnation Notice" means notice or knowledge of the institution of or intention to institute any proceeding for Condemnation.

"Corporate Control Criteria" means, if deemed satisfied by any Transferee, that such Transferee has a Credit Rating of both "BB-" or higher from S&P and "B2" or higher from Moody's, in each case for the twenty-four (24) consecutive calendar month period prior to a Permitted Transfer and as of the date of the Permitted Transfer.

"Corporate Control Event" means any of the following: (i) a merger or consolidation of Tenant or Guarantor with or into another Person; (ii) the sale of all or substantially all of the assets of Tenant or Guarantor to any Person; (iii) the acquisition by any one Person (including Affiliates of such Person) of fifty percent (50%) or more of the common stock, voting securities or economic benefits and burdens (including distributions) of Tenant or Guarantor within any twelve (12) month period; or (iv) a change in 50% or more of the Board of Directors of Tenant or Guarantor in any twelve (12) month period.

"Costs" of a Person or associated with a specified transaction means all costs and expenses incurred by such Person or associated with such transaction, including reasonable attorneys' fees and expenses, expert fees and expenses, court costs, brokerage fees, escrow fees, title insurance premiums, mortgage commitment fees, mortgage points and recording fees and transfer taxes, as the circumstances require. For all purposes of this Lease, "attorneys' fees and expenses" and similar statements include those incurred out of court, at trial, on appeal or in any bankruptcy proceeding.

"Default Rate" has the meaning assigned to such term in Section 7(a)(iii).

"Easement Agreement" or "Easement Agreements" means any conditions, covenants, restrictions, easements, declarations, licenses and other agreements listed as Permitted Encumbrances or as may hereafter affect or benefit the Leased Premises.

"Environmental Law" or "Environmental Laws" means (i) whenever enacted or promulgated, any applicable federal, state, foreign or local law, statute, ordinance, rule, regulation, license, permit, authorization, approval, consent, court order, judgment, decree, injunction, code, requirement or agreement with any ' governmental entity, (x) relating to pollution (or the cleanup thereof), or the protection of any Environmental Media, air, water vapor, surface water, groundwater, drinking water supply, land (including land surface or subsurface), plant, aquatic and animal life from injury caused by a Hazardous Substance or (y) concerning exposure to, or the use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, handling, labeling, production, disposal or remediation of Hazardous Substances, Hazardous Conditions, Hazardous Activities or Environmental Violations, in each case as amended and as now or hereafter in effect, and (ii) any common law or equitable doctrine (including injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations or injuries or damages due to or threatened as a result of the presence of, exposure to, or ingestion of, any Hazardous Substance. The term Environmental Law includes the federal Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act, the federal Water Pollution Control Act, the federal Clean Air Act, the federal Clean Water Act, the federal Resources Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments to RCRA), the federal Solid Waste Disposal Act, the federal Toxic Substance Control Act, the federal Insecticide, Fungicide and Rodenticide Act, the federal Occupational Safety and Health Act of 1970, the federal National Environmental Policy Act and the federal Hazardous Materials Transportation Act, each as amended and as now or hereafter in effect and any similar state or local Law.

"Environmental Media" means soil, fill material, or other geologic materials at all depths, groundwater at all depths, surface water including storm water and sewerage, indoor and outdoor air, and all living organisms, including all animals and plants, whether located on or off the Leased Premises.

"Environmental Violation" means any one or more of the following, whether occurring prior to, on or after the date hereof: (a) any direct or indirect discharge, disposal, spillage, emission, escape, pumping, pouring, injection, leaching, Release, seepage, filtration or transporting of any Hazardous Substance at, upon, under, onto or within the Leased Premises or any Environmental Media, or from the Leased Premises to any Environmental Media, in violation of any Environmental Law or in excess of any reportable quantity established under any Environmental Law or which could result in any liability to Landlord, Tenant or Lender, any Federal, state or local government or any other Person for the costs of any removal or Remedial Actions or natural resources damage or for bodily injury or property damage, (b) any deposit, storage, dumping, placement or use of any Hazardous Substance at, upon, under or within the Leased Premises in violation of any Environmental Law or in excess of any reportable quantity established under any Environmental Law or which could result in any liability to any Federal, state or local government or to any other Person for the costs of any removal or Remedial Actions or natural resources damage or for bodily injury or property damage, (c) the abandonment or discarding at the Leased Premises of any barrels, containers or other receptacles containing any Hazardous Substances in violation of any Environmental Laws, (d) any activity, occurrence or condition in connection with the Leased Premises which could result in any liability, cost or expense to Landlord or Lender or any other owner or occupier of the Leased Premises, or which could result in a creation of a lien on the Leased Premises under any Environmental Law, or (e) any violation of or noncompliance with any Environmental Law in connection with the Leased Premises.

"Event of Default" has the meaning assigned to such term in Section 22.

"Existing Environmental Condition" has the meaning assigned to such term in Section 10(g).

"Expansion" has the meaning assigned to such term in Section 13.

"Expiration Date" means the Initial Expiration Date or, if this Lease has been extended for a Renewal Term in accordance with Section 5, the last day of such Renewal Term.

"Fair Market Rental Value of the Leased Premises" means the rent that would be paid by a willing tenant and accepted by a willing landlord in an arm length's lease of the Leased Premises in which neither party is under any compulsion to lease, but without consideration of any concessions, allowances or other inducements then normally being offered to prospective tenants. Fair Market Rental Value of the Leased Premises shall be determined by the appraisal process set forth in Exhibit E.

"Full Rent Commencement Date" means the first day of the month following the month in which the Commencement Date occurs.

"GAAP" means generally accepted accounting principles.

"Government Lists" has the meaning assigned to such term in Exhibit D.

"Guarantor" means LMI Aerospace, Inc., a Missouri corporation.

"Hazardous Activity" means any activity, process, procedure or undertaking which directly or indirectly (i) procures, generates or creates any Hazardous Substance; (ii) causes or results in (or threatens to cause or result in) the release, seepage, spill, leak, flow, discharge or emission of any Hazardous Substance into the environment (including the air, ground water, watercourses or water systems), (iii) involves the containment or storage of any Hazardous Substance; or (iv) would cause the Leased Premises or any portion thereof to become a hazardous waste treatment, recycling, reclamation, processing, storage or disposal facility within the meaning of any Environmental Law.

"Hazardous Condition" means any condition resulting from an act or omission occurring after the date hereof which would support any claim or liability under any Environmental Law.

"Hazardous Substance" or "Hazardous Substances" means (i) any substance, material, product, petroleum, petroleum product, derivative, compound or mixture, mineral (including asbestos), chemical, gas, medical waste, or other pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous or acutely hazardous to the environment or public health or safety, (ii) those materials included within the definitions of "hazardous substances," "extremely hazardous substances," "toxic "hazardous materials," "toxic substances" "toxic pollutants," "hazardous air pollutants" "toxic air contaminants," "solid waste," "hazardous waste," "pollutants," contaminants" or similar categories under any Environmental Laws, or (iii) any substance supporting a claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. Hazardous Substances include any toxic or hazardous waste, pollutant, contaminant, industrial waste, petroleum or petroleum-derived substances or waste, radon, radioactive materials, asbestos, asbestos containing materials, urea formaldehyde foam insulation, lead and polychlorinated biphenyls.

"Impositions" has the meaning assigned to such term in Section 9.

"Improvements" has the meaning assigned to such term in Section 2.

"Indemnitee" has the meaning assigned to such term in Section 15.

"Initial Appraiser" has the meaning assigned to such term in Exhibit E.

"Initial Expiration Date" has the meaning assigned to such term in Section 5.

"Initial Valuation" has the meaning assigned to such term in Exhibit E.

"Insurance Requirements" means the requirements of all insurance policies required to be maintained in accordance with this Lease.

"Interim Rent" has the meaning assigned to such term in Section 6.

"Land" has the meaning assigned to such term in Section 2.

"Law" means any constitution, statute, rule of law, code, ordinance, order, judgment, decree, injunction, rule, regulation, policy, requirement or administrative or judicial determination, even if unforeseen or extraordinary, of every duly constituted governmental authority, court or agency, now or hereafter enacted or in effect.

"Lease" means this Lease Agreement.

"Lease Guaranty" has the meaning the Guaranty and Suretyship Agreement dated December 28, 2006 made by Guarantor to Landlord.

"Lease Year" means (a) the period commencing on the Full Rent Commencement Date and ending at midnight on the last day of the twelfth (12th) consecutive calendar month thereafter, and (b) each succeeding twelve (12) month period occurring during the Term.

"Leased Premises" has the meaning assigned to such term in Section 2.

"Legal Requirements" means the requirements of all present and future Laws (including Environmental Laws and Laws relating to accessibility to, usability by, and discrimination against, disabled individuals) and all covenants, restrictions and conditions now or hereafter of record which may be applicable to Tenant or to any of the Leased Premises, or to the use, manner of use, occupancy, possession, operation, maintenance, alteration, repair or restoration of any of the Leased Premises, even if compliance therewith necessitates structural changes or improvements or results in interference with the use or enjoyment of any of the Leased Premises.

"Lender" means any person or entity (and their respective successors and assigns) which may, after or contemporaneously with the date hereof, make a Loan to Landlord or is the holder of any Note.

"Loan" means any loan made by one or more Lenders to Landlord, which loan is secured by a Mortgage and an Assignment and is evidenced by a Note.

"Minimum Rent" has the meaning assigned to such term in Section 6.

"Minimum Rent Payment Date" has the meaning assigned to such term in Section 6.

"Monetary Obligations" means Rent and all other sums payable by Tenant under this Lease to Landlord, to any third party on behalf of Landlord or to any Indemnitee.

"Mortgage" means any mortgage or deed of trust from Landlord to a Lender which (a) encumbers any of the Leased Premises and (b) secures Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified.

"Net Award" means (a) the entire award payable to Landlord or Lender by reason of a Condemnation whether pursuant to a judgment or by agreement or otherwise, or (b) the entire proceeds of any insurance required under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv), (v) or (vi) of Section 16(a), as the case may be, less any expenses incurred by Landlord and Lender in collecting such award or proceeds.

"Note" means any promissory note evidencing Landlord's obligation to repay a Loan, as the same may be amended, supplemented or modified.

"Owner" has the meaning assigned to such term in Exhibit D.

"Permitted Encumbrances" means those covenants, restrictions, reservations, liens, conditions and easements and other encumbrances of record as of the date hereof, other than any Mortgage or Assignment, and liens for unpaid real estate taxes and assessment not yet due and payable.

"Permitted Transfer" has the meaning assigned to such term in Section 22.

"Permitted Violations" has the meaning assigned to such term in Section 14.

"Person" means an individual, partnership, association, corporation, trust or other legal entity.

"Present Value" of any amount means such amount discounted by a rate per annum which is the lower of (a) the Prime Rate at the time such present value is determined or (b) eight percent (8%) per annum.

"Primary Term" has the meaning assigned to such term in Section 5.

"Prime Rate" means the annual interest rate as published, from time to time, in the Wall Street Journal as the "Prime Rate" in its column entitled "Money Rate". The Prime Rate may not be the lowest rate of interest charged by any "large U.S. money center commercial banks" and Landlord makes no representations or warranties to that effect. In the event the Wall Street Journal ceases publication or ceases to publish the "Prime Rate" as described above, the Prime Rate shall be the average per annum discount rate (the "Discount Rate") on ninety-one (91) day bills issued from time to time by the United States Treasury ("Treasury Bills") at its most recent auction, plus three hundred (300) basis points. If no such 91-day Treasury Bills are then being issued, the Discount Rate shall be the discount rate on Treasury Bills then being issued for the period of time closest to ninety-one (91) days.

"Purchase Agreement" means the Purchase Agreement dated as of December 28, 2006 between Tenant, as seller, and Landlord, as purchaser, relating to the Leased Premises.

"Release" means any active or passive spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of any Hazardous Substance into any Environmental Media. For the purposes of this Lease, "Release" also includes any threatened Release.

"Remedial Actions" means any investigation, work plan preparation removal, repair, cleanup, abatement, remediation, monitored natural attenuation, natural resource damage assessment and restoration, closure, post-closure, detoxification or remedial activity of any kind whatsoever necessary to address any Release, any Environmental Violation and/or any Hazardous Condition.

"Remediation Plan" has the meaning assigned to such term in Section 10.

"Renewal Date" has the meaning assigned to such term in Section 5.

"Renewal Term" has the meaning assigned to such term in Section 5.

"Rent" means, collectively, Interim Rent, Minimum Rent and Additional Rent.

"Requesting Party" has the meaning assigned to such term in Section 25.

"Requisition" means any temporary requisition or confiscation of the use or occupancy of any of the Leased Premises by any governmental authority, civil or military, whether pursuant to an agreement with such governmental authority in settlement of or under threat of any such requisition or confiscation, or otherwise.

"Responding Party" has the meaning assigned to such term in Section 25.

"Restoration Fund" has the meaning assigned to such term in Section 19.

"Set-Off" has the meaning assigned to such term in Section 8.

"Site Reviewers" has the meaning assigned to such term in Section 10(c).

"Site Assessment" has the meaning assigned to such term in Section 10.

"SNDA Provisions" has the meaning assigned to such term in Section 31.

"State" means, with respect to any parcel of Land comprising the Leased Premises, the jurisdiction in which such parcel is located.

"Subleases" has the meaning assigned to such term in Section 20.

"Surviving Obligations" means any obligations of Tenant under this Lease, actual or contingent, which arise on or prior to the expiration or prior termination of this Lease or rejection in bankruptcy, which survive such expiration, termination or rejection by their own terms.

"Taking" means (a) any taking of, or damage to, all or a portion of any of the Leased Premises (i) in or by condemnation or other eminent domain proceedings pursuant to any Law, general or special, or (ii) by reason of any agreement with any condemnor in settlement of or under threat of any such condemnation or other eminent domain proceeding, or (iii) by any other means, or (b) any de facto condemnation. The Taking shall be considered to have taken place as of the later of the date actual physical possession is taken by the condemnor, or the date on which the right to compensation and damages accrues under the law applicable to the Leased Premises.

"Term" means the Primary Term or any Renewal Term, whichever is then in effect.

"Third Appraiser" has the meaning assigned to such term in Exhibit E.

"Third Party Offer" has the meaning assigned to such term in Section 21.

"Third Party Purchaser" has the meaning assigned to such term in Section 21.

"Third Valuation" has the meaning assigned to such term in Exhibit E.

"Trade Fixtures" means all machinery; apparatus, furniture, fixtures and equipment now or hereafter installed by Tenant and used in connection with the conduct of Tenant's business on the Leased Property, other than fixtures and items of personal property that are integral to the ownership, maintenance and operation of the Improvements and which cannot be removed from the Leased Property without adversely affecting the value, or the general utility or use of such Leased Property.

"Transferee" has the meaning assigned to such term in Section 22.

"Use" has the meaning assigned to such term in Section 10.

"Valuation Notice" has the meaning assigned to such term in Exhibit E.

"Valuation Period" has the meaning assigned to such term in Exhibit E.

"Work" has the meaning assigned to such term in Section 13.

2.           Demise of Premises. Landlord hereby demises and lets to Tenant, and Tenant hereby takes and leases from Landlord, for the Term and upon the provisions hereinafter specified, the following described property (collectively, the "Leased Premises"):

(a)           the premises described in Exhibit A hereto, together with the Appurtenances (collectively, the "Land");

(b)           all buildings, structures and other improvements now or hereafter constructed on the Land (collectively, the "Improvements"); and

(c)           the fixtures, machinery, equipment and other property described in Exhibit B hereto (collectively, the "Building Equipment").

3.           Title, Condition and Possession.

(a)           The Leased Premises are demised and let subject to (i) the rights of any Persons in possession of the Leased Premises, (ii) the existing state of title of any of the Leased Premises, including any Permitted Encumbrances, (iii) any state of facts which an accurate survey or physical inspection of the Leased Premises might show, (iv) all Legal Requirements, including any existing violation of any thereof, and (v) the condition of the Leased Premises as of the Commencement Date, without representation or warranty by Landlord.

(b)           LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) AND THE INDEMNITEES HAVE NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD OR ANY OF THE INDEMNITEES BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY, (xv) OPERATION, INCOME, EXPENSES, ENTITLEMENTS OR ZONING, (xv) THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, ENVIRONMENTAL VIOLATION, RELEASE, HAZARDOUS CONDITION OR HAZARDOUS ACTIVITY OR (xvi) COMPLIANCE OF THE LEASED PREMISES WITH ANY LAW OR LEGAL REQUIREMENT; AND ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND HAVE BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR PATENT, NEITHER LANDLORD NOR ANY INDEMNITEES SHALL HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS SECTION 3(b) HAVE BEEN NEGOTIATED, AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD OR ANY INDEMNITEE, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.

(c)           Tenant represents to Landlord that Tenant has examined the title to the Leased Premises prior to the execution and delivery of this Lease and has found the same to be satisfactory for the purposes contemplated hereby. Tenant acknowledges that fee simple title (both legal and equitable) is in Landlord and that Tenant has only the leasehold right of possession and use of the Leased Premises as provided herein.

4.           Use of Leased Premises; Quiet Enjoyment.

(a)           Tenant may occupy and use the Leased Premises for the operation of any lawful business purpose related to the conduct of Tenant's business. Tenant shall not use or occupy or permit any of the Leased Premises to be used or occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner which would or might (i) violate any Law, Legal Requirement or Easement Agreement, (ii) make void or voidable or cause any insurer to cancel any insurance required by this Lease, or make it difficult or impossible to obtain any such insurance at commercially reasonable rates, (iii) cause structural injury to any of the Improvements, (iv) constitute a public or private nuisance or waste, or (v) violate or not be permitted pursuant to, a Permitted Encumbrance.

(b)           Subject to the provisions hereof, so long as no Event of Default has occurred and is continuing, Tenant shall quietly hold, occupy and enjoy the Leased Premises throughout the Term, without any hindrance, ejection or molestation by Landlord with respect to matters that arise after the date hereof; provided that Landlord or its agents may enter upon and examine any of the Leased Premises at such reasonable times as Landlord may select and upon two (2) business days' prior notice to Tenant (except in the case of an emergency, in which no notice shall be required) for the purpose of inspecting the Leased Premises, verifying compliance or non-compliance by Tenant with its obligations hereunder and the existence or non-existence of an Event of Default or event which with the passage of time and/or giving of notice would constitute an Event of Default, showing the Leased Premises to prospective Lenders and purchasers and taking such other action with respect to the Leased Premises as is permitted by any provision hereof.

(c)           Tenant shall not abandon or vacate the Leased Premises and Tenant shall operate its business at the Leased Premises pursuant to the terms and provisions of this Lease. If Tenant ceases to do business at all or a material portion of the Leased Premises for a period longer than six (6) months, then Landlord may request that the Tenant use commercially reasonable efforts to attempt to sublet the Leased Premises.

5.           Term.

(a)           Subject to the provisions hereof, Tenant shall have and hold the Leased Premises for an initial term (such term, as the same may be extended in the manner set forth hereinafter, being referred to herein as the “Primary Term”) commencing on the Commencement Date and ending on February 28, 2025 (the "Initial Expiration Date"). If, on or prior to the Initial Expiration Date or the expiration of any Renewal Term this Lease shall not have been sooner terminated, then on the Initial Expiration Date and on the fifth, tenth, and fifteenth anniversaries of the Initial Expiration Date (the Initial Expiration Date and each such anniversary being referred to herein as a "Renewal Date"), Tenant shall have the right to extend the Term for an additional period of five years (each such extension period, a "Renewal Term"). In order to extend the then Term for a Renewal Term, Tenant shall notify Landlord at least twelve (12) months prior to, but no earlier than fifteen (15) months prior to, each Renewal Date that Tenant desires to extend the then Term for a Renewal Term. It is a condition to the extension of the Term of the Lease at each Renewal Date that (a) no Event of Default shall have occurred or be continuing as of the date Tenant gives notice to Landlord of Tenant's intention to so extend the Term for an additional five-year period, and (b) no Event of Default shall have occurred and be continuing as of such Renewal Date. Any such extension of the Term shall be subject to all of the provisions of this Lease, as the same may be amended, supplemented or modified (except that Tenant shall have no right to any additional renewal terms).

(b)           The Primary Term and/or any Renewal Term may also be extended upon the occurrence of certain events as set forth in Section 13(a).

(c)           During the last year of the Term (as the same may be renewed pursuant to Section 5(a)), Landlord shall have the right to advertise the availability of the Leased Premises for sale or reletting, to erect signs upon the Leased Premises indicating such availability and to show the Leased Premises to prospective tenants at such reasonable times as Landlord may select. Landlord shall also have the right at any time to show the Leased Premises to prospective purchasers or Lenders at such reasonable times as Landlord may select.

6.           Minimum Rent; Interim Rent. Commencing on the Full Rent Commencement Date and continuing throughout the Primary Term, Tenant shall pay to Landlord, as annual minimum rent for the Leased Premises during the first Lease Year, the amount of One Hundred Fifty-Two Thousand, Seven Hundred Forty and no/100 Dollars ($152,740.00). The annual minimum rent for the second Lease Year and every Lease Year thereafter, beginning with the first day of the second Lease Year and continuing on the first day of third Lease Year and every Lease Year thereafter throughout the Primary Term (the first day of each such Lease Year being referred to herein as an "Adjustment Date"), shall be increased by an amount equal to two and three-tenths percent (2.3%) of the Minimum Rent payable immediately prior to the Adjustment Date. During any Renewal Term, such annual minimum rent shall be equal to ninety five percent (95%) of the Fair Market Rental Value of the Leased Premises. Such annual minimum rent, as so adjusted for any Lease Year during the Primary Term or any Renewal Term, is referred to herein as the "Minimum Rent". The Minimum Rent is set forth in the schedule attached hereto as Exhibit C, and shall be subject to 'increases pursuant to Section 13(a). Minimum Rent shall be paid monthly in advance on the first day of each month during the Primary Term or any Renewal Term (each such day being a "Minimum Rent Payment Date") in the amount of the annual Minimum Rent then in effect divided by twelve (12). Monthly Minimum Rent for the first Lease Year shall be Twelve Thousand, Seven Hundred Twenty-Eight and 33/100 Dollars ($12,728.33) per month. Each such rental payment shall be made, at Landlord's sole discretion, to Landlord at its address set forth above or to such one or more other Persons, at such addresses and in such proportions as Landlord may direct by ten (10) days' prior written notice to Tenant (in which event Tenant shall give Landlord notice of each such payment concurrent with the making thereof). Pro rata minimum rent for the Leased Premises (based on the annual Minimum Rent for the first Lease Year as set forth in Exhibit C) for the period commencing on the Commencement Date and ending on the day preceding the Full Rent Commencement Date (the "Interim Rent") shall be payable, in advance, on the Commencement Date.

If required by Landlord, Tenant shall pay the Interim Rent and Minimum Rent to Landlord (or to a Lender designated by Landlord) monthly by ACH and in immediately available funds.

7.           Additional Rent.

(a)           Tenant shall pay and discharge, as additional rent (collectively, “Additional Rent") the following amounts:

(i)             except as otherwise specifically provided herein, all Costs of Tenant, Landlord, Lender and any other Persons specifically referenced herein which are incurred in connection or associated with (A) the use, non-use, occupancy, possession, operation, condition, design, construction, maintenance, alteration, repair or restoration of any of the Leased Premises, (B) the performance of any of Tenant's obligations under this Lease, (C) any Condemnation proceedings, (D) the adjustment, settlement or compromise of any insurance claims involving or arising from any of the Leased Premises, (E) the prosecution, defense or settlement of any litigation involving or arising from any of the Leased Premises or this Lease, (F) the exercise or enforcement by Landlord, its successors and assigns, of any of its rights or remedies under this Lease, (G) any amendment to or modification or termination of this Lease made at the request of Tenant, and/or (H) any act undertaken by Landlord (or its counsel) at the request of Tenant, or incurred in connection with any act of Landlord performed on behalf of Tenant;

(ii)             after the date which is five (5) business days after the date on which all or any portion of any installment of Interim Rent or Minimum Rent is due and not paid, an amount equal to five percent (5%) of the amount of such unpaid installment or portion thereof. The foregoing late fees are not a penalty, and Tenant's obligation to pay Landlord late fees as set forth above shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner;

(iii)             interest at the rate (the "Default Rate") of three percent (3%) per annum in excess of the Prime Rate on the following sums until paid in full: (A) all overdue installments of Interim Rent or Minimum Rent from the respective due dates thereof, (B) all overdue amounts of Additional Rent relating to obligations which Landlord shall have paid on behalf of Tenant, from the date of Landlord's notice of the payment made by Landlord, and (C) all other overdue amounts of Additional Rent, from the date when any such amount becomes overdue;

(iv)             concurrently with each payment of Interim Rent or Minimum Rent, any rent tax, sales tax, excise tax, privilege tax or other tax then payable with respect to real property rents, and any penalties in connection therewith; and

(v)             any other items specifically required to be paid by Tenant under this Lease, including items in Section 12 that reference this Section 7.

(b)           Tenant shall pay and discharge (i) any Additional Rent referred to in Section 7(a)(i) when the same shall become due, provided that amounts which are billed to Landlord or any third party, but not to Tenant, shall be paid within five (5) days after Landlord's demand for payment thereof, and (ii) any other Additional Rent, within five (5) days after Landlord's demand for payment thereof.

(c)           In no event shall amounts payable under Section 7(a)(ii), (iii) and (iv) exceed the maximum amount permitted by applicable Law.

8.           Net Lease; Non-Terminability.

(a)           This is a net lease and all Monetary Obligations shall be paid by Tenant without notice or demand and without set-off, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense (collectively, a "Set-Off').

(b)           Except as otherwise expressly provided herein, this Lease and the rights of Landlord and the obligations of Tenant hereunder shall not be affected by any event or for any reason, including the following: (i) any damage to or theft, loss or destruction of any of the Leased Premises, (ii) any Casualty or Condemnation, (iii) Tenant's acquisition of ownership of any of the Leased Premises other than pursuant to an express provision of this Lease, (iv) any default on the part of Landlord hereunder or under any Note, Mortgage, Assignment or any other agreement, (v) any latent or other defect in any of the Leased Premises, (vi) the breach of any warranty of any seller or manufacturer of any of the Building Equipment, (vii) any violation of any provision of this Lease by Landlord, (viii) the bankruptcy, insolvency, reorganization, composition, readjustment, liquidation, dissolution or winding-up of, or other proceeding affecting Landlord, (ix) the exercise of any remedy, including foreclosure, under any Mortgage or Assignment, (x) any action with respect to this Lease (including the disaffirmance hereof) which may be taken by Landlord, any trustee, receiver or liquidator of Landlord or any court under the Federal Bankruptcy Code or otherwise, (xi) any interference with Tenant's use of the Leased Premises by parties other than Landlord, (xii) market or economic changes, or (xiii) any other cause, whether similar or dissimilar to the foregoing, any present or future Law to the contrary notwithstanding.

(c)           The obligations of Tenant hereunder shall be separate and independent covenants and agreements, all Monetary Obligations shall continue to be payable in all events (or, in lieu thereof, Tenant shall pay amounts equal thereto), and the obligations of Tenant hereunder shall continue unaffected unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. All Rent payable by Tenant hereunder shall constitute "rent" for all purposes (including Section 502(b)(6) of the Bankruptcy Code).

(d)  Except as otherwise expressly provided herein, Tenant shall have no right and hereby waives all rights which it may have under any Law (i) to quit, terminate or surrender this Lease or any of the Leased Premises, or (ii) to any Set-Off of any Monetary Obligations.

9.           Payment of Impositions. Tenant shall, before interest or penalties are due thereon, pay and discharge all taxes (including real and personal property, franchise, sales and rent taxes, and any penalties in connection therewith), all charges for any easement or agreement maintained for the benefit of any of the Leased Premises (including any Easement Agreement), all assessments and levies, all permit, inspection and license fees, all rents and charges for water, sewer, utility and communication services relating to the any of Leased Premises, all ground rents and all other public charges whether of a like or different nature, even if unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii) Tenant's leasehold interest in the Leased Premises, (iii) any of the Leased Premises, (iv) Landlord as a result of or arising in respect of the acquisition, ownership, occupancy, leasing; use, possession or sale of any of the Leased Premises, any activity conducted on any of the Leased Premises, or the Rent, in each case whether accruing before or after the Commencement Date (collectively, the "Impositions"); provided, however, that nothing herein shall obligate Tenant to pay (A) income, excess profits or other taxes of Landlord which are determined on the basis of Landlord's net income or net worth (unless such taxes are in lieu of or a substitute for any other tax, assessment or other charge upon or with respect to the Leased Premises which, if it were in effect, would be payable by Tenant under the provisions hereof or by the terms of such tax, assessment or other charge), (B) any estate, inheritance, succession, gift or similar tax imposed on Landlord, or (C) any capital gains tax imposed on Landlord in connection with the sale of the Leased Premises to any Person. If any Imposition may be paid in installments without interest or penalty, Tenant shall have the option to pay such Imposition in installments so long as each installment is timely paid and Landlord receives evidence of each such payment. Tenant shall prepare and file all tax reports required by governmental authorities which relate to the Impositions. Tenant shall deliver to Landlord (1) copies of all settlements and notices pertaining to the Impositions which may be issued by any governmental authority within ten (10), days after Tenant's receipt thereof, (2) receipts for payment of all taxes required to be paid by Tenant hereunder within ten (10) days after the due date thereof, and (3) receipts for payment of all other Impositions within ten (10) days after Landlord's request therefor.

10.           Compliance with Laws and Agreements; Environmental Matters.

(a)           Tenant shall, at its expense, comply with and conform to, and cause the Leased Premises and any other Person occupying any part of the Leased Premises to comply with and conform to, all Insurance Requirements and Legal Requirements (including all applicable Environmental Laws). Tenant shall not at any time (i) cause, permit or suffer to occur any Environmental Violation or (ii) permit any sublessee, assignee or other Person occupying the Leased Premises under or through Tenant to cause, permit or suffer to occur any Environmental Violation. Without limiting the foregoing, Tenant shall not use, store, transport, dispense, sell, Release or discharge any Hazardous Substances, except in strict compliance with all Environmental Laws.

(b)           Tenant, at its sole cost and expense, will at all times promptly and faithfully abide by, discharge and perform all of the covenants, conditions and agreements contained in any Easement Agreement or in any other contract or agreement relating to the Leased Premises on the part of Landlord or the occupier to be kept and performed thereunder. Tenant will not alter, modify, amend or terminate any Easement Agreement, give any consent, approval or waiver thereunder, or enter into any new Easement Agreement without, in each case, the prior written consent of Landlord.

(c)           Upon at least two (2) business days' prior written notice from Landlord, Tenant shall (after the Commencement Date) permit such persons as Landlord may designate ("Site Reviewers") to visit the Leased Premises and perform environmental site investigations and assessments ("Site Assessments") on the Leased Premises for the purpose of determining whether there exists on the Leased Premises any Environmental Violation or any condition which could result in any Environmental Violation. Such Site Assessments may include both above and below the ground testing for Environmental Violations and such other tests as may be necessary, in the opinion of the Site Reviewers, to conduct the Site Assessments. If Site Reviewers determine that the testing of soil and/or groundwater at the Leased Premises is necessary, Site Reviewers shall provide Tenant with a detailed written explanation setting forth a reasonable basis for the performance of such testing at the Leased Premises. Tenant shall supply to the Site Reviewers such historical and operational information regarding the Leased Premises as may be reasonably requested by the Site Reviewers to facilitate the Site Assessments, and shall make available for meetings with the Site Reviewers appropriate personnel having knowledge of such matters. So long as (i) Tenant is not in default hereunder and (ii) Landlord does not have reasonable cause to suspect that an Environmental Violation has occurred on the Leased Premises (in either situation Tenant shall be responsible for the cost of the site assessment), Landlord shall pay for the cost of such site assessment conducted by Landlord no more frequently than once every other Lease Year; provided, however, that if the results of such assessment indicate that a Hazardous Condition or an Environmental Violation exists, then Tenant shall pay for the cost of such site assessment. If such Environmental Violation is determined to be related to Existing Environmental Conditions at the Leased Premises, then Tenant shall have all rights and obligations with regard to the Existing Environmental Conditions as are set forth in Section 10(e) and 10(g) of this Lease.

(d)           If an Environmental Violation, Hazardous Condition, or Existing Environmental Condition is found to exist and, in Tenant's reasonable judgment, the cost of remediation of the same is likely to exceed $25,000, Tenant shall provide Landlord with written notice within ten (10) days of such discovery. If in Landlord's reasonable judgment, the cost of such remediation is likely to exceed $100,000, then, within ten (10) days after Landlord's request therefor, Tenant shall provide Landlord with adequate financial assurances that Tenant will take Remedial Actions to effect such remediation in accordance with applicable Environmental Laws. Such financial assurances shall be a bond or letter of credit reasonably satisfactory to Landlord in form and substance and in an amount equal to or greater than Landlord's reasonable estimate, based upon a Site Assessment performed pursuant to Section 10(c), of the anticipated cost of such Remedial Actions.

(e)           If any Environmental Violation, Hazardous Condition, or Existing Environmental Condition occurs or is found to exist (for example, but without limitation, a detection of a leak in an underground tank or a petroleum spillage by a tanker), Tenant, at its sole expense, shall take any and all Remedial Actions and other actions as necessary to cure such Environmental Violation, Hazardous Condition, or Existing Environmental Condition in strict compliance with Environmental Laws and take any other action with regard to the Existing Environmental Conditions specifically set forth in Exhibit F. Tenant shall be responsible for all reporting, investigation and/or remediation requirements under any Environmental Law with respect to any Environmental Violation, Hazardous Condition, or Existing Environmental Condition, all at Tenant's sole cost and expense. If Tenant fails to correct any Environmental Violation, Hazardous Condition, or Existing Environmental Condition which occurs or is found to exist or fails to take such steps as may be required by the applicable governmental authorities in accordance with applicable Environmental Laws, Landlord shall have the right (but no obligation) to take any and all actions as Landlord shall deem necessary or advisable in order to cure such Environmental Violation, Hazardous Condition or Existing Environmental Condition, all at Tenant's sole cost and expense, and as Additional Rent.

(f)           From and after the Commencement Date, the Use of any Hazardous Substances at the Leased Premises shall not be permitted, unless such Use is in full compliance with all Environmental Laws and any other applicable local, state and federal statutes, orders, ordinances, rules and regulations. As used in this Lease, the "Use" of Hazardous Substances means the receipt, handling, generation, storage, use, dispensing, treatment, recycling, sale, transfer, transportation, introduction, or incorporation of Hazardous Substances into, on, about, under or from the Leased Premises, whether by Tenant or by any contractor, subcontractor, subtenant, licensee, concessionaire, or invitee of Tenant.

(g)           Tenant shall notify Landlord immediately after (1) becoming aware of any actual, alleged or threatened Environmental Violation or Hazardous Condition; (2) any and all enforcement actions, initiation of Remedial Actions or other governmental or regulatory actions (excluding routine actions such as permit renewals) instituted, completed or threatened pursuant to any Environmental Laws affecting the Leased Premises; (3) all claims made or threatened by any third person against Tenant or the Leased Premises relating in any way whatsoever to Hazardous Substances, Environmental Violations or Hazardous Conditions; (4) Tenant's knowledge of any Release of Hazardous Substances at, on, in, under or from the Leased Premises or on, in or under any adjoining property; or (5) Tenant's noncompliance with any of the covenants contained in this Section 10, and Tenant shall forward to Landlord immediately upon receipt thereof copies of all orders, reports, notices, permits, applications or other communications relating to any such violation or noncompliance. Tenant shall provide Landlord with information reasonably requested by Landlord concerning Hazardous Substances in connection with the Leased Premises, regardless of whether there is an Environmental Violation. Landlord and Tenant acknowledge that each has received notice of the Environmental Violations, if any, or Hazardous Conditions, if any, identified in the environmental reports and/or any separate Environmental Violations or Hazardous Conditions listed on Exhibit F (collectively, the "Existing Environmental Conditions"). So long as Tenant is not in default under its obligations hereunder, Landlord consents to any corrective action and remediation performed by Tenant pursuant to a remediation plan submitted by Tenant to, and approved by, the applicable governmental authorities (the "Remediation Plan") in compliance with Environmental Laws with regard to any such Existing Environmental Conditions [to the extent additional remedial measures are not specifically set forth in Exhibit F with regard to Existing Environmental Conditions]. So long as (i) Tenant is not in default hereunder, and (ii) Landlord has approved such Remediation Plan, such approval not to be unreasonably withheld, Tenant shall have the exclusive right to take any action deemed necessary to implement such Remediation Plan, including (1) communications with regulatory authorities, third parties and environmental contractors, (2) preparation of corrective action plans, (3) performance of environmental testing of soil and/or groundwater, and (4) performance of corrective action, including installation of temporary and permanent monitoring wells, removal or impacted soil and groundwater, and preparation of any reports relating to such corrective action. Landlord shall cooperate with Tenant with regard to any action that is necessary in order for Tenant to satisfy Tenant's obligations relating to Existing Environmental Conditions.

(h)           All future leases, subleases or concession agreements relating to the Leased Premises entered into by Tenant shall contain covenants of the other party to not at any time (i) cause any Environmental Violation to occur or (ii) permit any Person occupying the Leased Premises through said subtenant or concessionaire to cause any Environmental Violation to occur.

(i)           Tenant shall indemnify, defend (with counsel acceptable to Landlord), release and hold Landlord and all Indemnitees (as set forth in Section 15) harmless from any and all claims, demands, judgments, damages, penalties, fines, Costs, liabilities or losses (including claims for diminution in value of the Leased Premises, stigma related damages, damages for the loss of or restriction on use of rentable or usable space or of any amenity of the Leased Premises, damages arising from any adverse impact on marketing the Leased Premises, and all sums paid in settlement of claims, and all reasonable attorneys' fees and Costs, reasonable consultant fees and costs and reasonable expert fees and costs) whether direct or indirect, known or unknown, foreseen or unforeseen, that may arise on account of or in any way be connected with any alleged, threatened or actual (1) the presence of, Tenant's Use of, or any Release of, Hazardous Substance in, on, under, about or from any part of the Leased Premises, whether or not such Hazardous Substances existed on the Leased Premises prior to the Commencement Date or migrated to the Leased Premises from other properties in the vicinity of the Leased Premises; (2) violation of any Environmental Law applicable to the Leased Premises; (3) Environmental Violation or Hazardous Condition with respect to the Leased Premises; including, but not limited to, (a) damages from injury to or destruction or loss of natural resources, including the reasonable costs of assessing such injury, destruction or loss, incurred pursuant to Section 107 of CERCLA, or any successor section or act or provision of any similar state or local Law, or (b) liability for costs and expenses of abatement, correction or clean-up, fines, damages, response costs or penalties which arise from the provisions of any other Environmental Laws; (4) breach or default by Tenant of any of Tenant's covenants set forth in this Section 10; (5) the costs associated with response costs and for costs of removal and Remedial Actions, including all necessary plans and reports, incurred by the U.S. Environmental Protection Agency, or any other federal, state or local governmental agency or entity or by any other Person, incurred pursuant to the CERCLA, RCRA, or any other applicable Environmental Laws; (6) oversight charges, fines, damages or penalties arising from the presence or Release of Hazardous Substances, and any related Remedial Actions, incurred pursuant to the provisions of CERCLA, RCRA, or any other applicable Environmental Laws; (7) liability to third Parties arising out of the presence or Release of Hazardous Substances for personal injury, bodily injury, or property damage arising under any statutory or common law theory, including damages assessed for the maintenance of a public or private nuisance or any trespass, the costs of Remedial Actions, or for the carrying on of an abnormally dangerous activity; (8) direct or indirect compensatory, consequential, or punitive damages arising out of any claim based on the presence or Release of Hazardous Substances or damage or threatened damage to Environmental Conditions; (9) Costs, fees and expenses of attorneys, consultants and experts incurred or sustained in making any investigation on account of any claim, in prosecuting or defending any action brought in connection therewith, in obtaining or seeking to obtain a release therefrom, or in enforcing any of the agreements herein contained; and (10) Rent during any period in which Remedial Actions are being taken. The foregoing indemnity, defense, release and hold harmless obligations of Tenant shall apply to Tenant's Use of Hazardous Substances irrespective of whether any activities related to such Use were or will be undertaken in accordance with Environmental Laws or other applicable laws, regulations, codes and ordinances. Tenant specifically agrees that it shall not sue or seek contribution from any Indemnitee or any successors or assigns thereof in any matter relating Environmental Violation and/or Hazardous Substance liability. All reasonable Costs and expenses related to this Section incurred by Landlord shall be repaid by Tenant to Landlord as Additional Rent. This Section 10(i) shall survive the expiration, termination or rejection in bankruptcy of the Lease.

(j)           Tenant shall, within five (5) days after request by Landlord at any time during the Term, execute the Certification Related to the USA Patriot Act in the form attached hereto as Exhibit D.

11.           Liens: Recording.

(a)           Tenant shall not, directly or indirectly, create or permit to be created or to remain and shall promptly discharge or remove any lien, levy or encumbrance on any of the Leased Premises or on any Rent or any other sums payable by Tenant under this Lease, other than any Mortgage or Assignment, the Permitted Encumbrances and any mortgage, lien, encumbrance or other charge created by or resulting solely from any act or omission of Landlord. NOTICE IS HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING OR OCCUPYING ANY OF THE LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES. LANDLORD MAY AT ANY TIME, AND AT LANDLORD'S REQUEST TENANT SHALL PROMPTLY, POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF LANDLORD.

(b)           Tenant shall (subject to Landlord's prior review and execution) execute, deliver and record, file or register all such instruments as may be required or permitted by any present or future Law in order to evidence the respective interests of Landlord and Tenant in the Leased Premises, and shall cause a memorandum of this Lease (or, if such a memorandum cannot be recorded, filed or registered, this Lease), and any supplement hereto or thereto, to be recorded, filed or registered in such manner and in such places as may be required or permitted by any present or future Law in order to protect the validity and priority of this Lease.

12.           Maintenance and Repair.

(a)           Tenant shall, at its own cost and expense, keep the Leased Premises, including all portions thereof, in good order and condition at all times on and after the Commencement Date to and including the date of the termination of the Term, by lapse of time or otherwise. Tenant shall timely and properly maintain, repair and replace all of the Leased Premises and all of its component parts, including parking lot surfaces and stripes, all landscaping, mechanical systems, electrical and lighting systems, plumbing and sewage systems, fixtures and appurtenances, interior walls, columns and floors, and ceilings, so as to preserve and protect the useful life, utility and value of such components, and in all events so as to preserve the effectiveness of any warranty relating thereto, such repairs and replacements to be at least in quality and class to the original work. If any segment of the Leased Premises shall become obsolete, non-functional, or uneconomic to repair, Tenant shall remove such item from the Leased Premises and promptly replace it with an item of comparable initial value and function. Promptly upon installation of any equipment, other than any Trade Fixtures, Tenant shall deliver to Landlord the original warranty (which shall specify Landlord as the owner of the equipment and Tenant's having a non-exclusive license and authority of Landlord solely to enforce such warranty during the Term of the Lease) relating to such equipment. Within thirty (30) days following Landlord's written request therefor, Tenant shall deliver to Landlord a written statement showing all removals and replacements of such systems or components since the last such report, including manufacturers, model numbers, and serial numbers. Landlord may, upon two (2) business days' prior notice (except that no notice shall be required if an Event of Default exists), cause independent private inspectors to make inspections of the Leased Premises or any segments thereof to determine Tenant's compliance under this Section 12. If such inspection by Landlord reveals that the Leased Premises, or any portion thereof, including any equipment thereon, is not in the condition required by this Lease in any material respect, then Tenant shall pay for such additional inspections performed by Landlord through the inspection approving the condition of such Leased Premises as being in conformity with the Lease. In addition, Tenant shall pay the cost of any such inspection at the Leased Premises by or on behalf of Landlord while an Event of Default exists.

(b)           If any Improvement, now or hereafter constructed, shall (i) encroach upon any setback or any property, street or right-of-way adjoining the Leased Premises, (ii) violate the provisions of any restrictive covenant affecting the Leased Premises, (iii) hinder or obstruct any easement or right-of-way to which any of the Leased Premises is subject or (iv) impair the rights of others in, to or under any of the foregoing, Tenant shall, promptly after receiving notice or otherwise acquiring knowledge thereof, either (A) obtain from all necessary parties waivers or settlements of all claims, liabilities and damages resulting from each such encroachment, violation, hindrance, obstruction or impairment, whether the same shall affect Landlord, Tenant or both, or (B) take such action as shall be necessary to remove all such encroachments, hindrances or obstructions and to end all such violations or impairments, including, if necessary, making Alterations.

(c)           Landlord may, but is not required to, after three (3) business days' notice to Tenant (except in the case of an emergency, in which case no notice to Tenant shall be necessary), enter the Leased Premises and make such repairs, alterations, improvements, additions, replacements or maintenance as Landlord deems necessary to cure any default of Tenant hereunder, and Tenant shall pay Landlord as Additional Rent forthwith (and in any event within thirty (30) days) after being billed for same by Landlord the cost thereof plus an administrative fee of three percent (3%) of such cost, which bill shall be accompanied by reasonably supporting documentation. Such amounts shall bear interest at the Default Rate from the date of expenditure by Landlord to the date of repayment by Tenant.

(d)           Except as expressly provided elsewhere in this Lease, it is intended by Tenant and Landlord that Landlord shall have no obligation, in any manner whatsoever, to build any improvements on the Leased Premises, to maintain or make any repairs, replacements, alterations or renewals of any nature or description to the Leased Premises (or any equipment therein), whether structural or nonstructural, all of which obligations are intended, as between Landlord and Tenant, to be those of Tenant. Tenant expressly waives the benefit of any statute now or in the future in effect which would otherwise afford Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Leased Premises in good order, condition and repair.

(e)           Tenant shall maintain at the Leased Premises, and turn over to Landlord upon expiration or termination of this Lease, then current operating manuals and original warranties (to the extent applicable) for the equipment then located on the Leased Premises.

(f)           Without limiting the generality of this Section 12, Tenant shall complete each of the items identified in Table 1 of Schedule 12(f) on or before the first anniversary of the Full Rent Commencement Date.

13.           Alterations. Improvements and Expansions.

(a)           Tenant shall have the right, without having obtained the prior written consent of Landlord, to make (i) Alterations or a series of related Alterations that, as to any such Alterations or series of related Alterations, do not cost in excess of $100,000, (ii) to make Improvements or a series of related Improvements that, as to any such Improvements or series of related Improvements, do not cost in excess of $100,000, and (iii) to install equipment in the Improvements or accessions to the Building Equipment that, as to such accessions, do not cost in excess of $100,000, so long as at the time of construction or installation of any such Alterations, Improvements or installation of such accessions no Event of Default exists and the value and utility of the Leased Premises is not diminished thereby. If the cost of any Alterations, series of related Alterations, Improvements, series of related Improvements, equipment or accessions thereto is in excess of $100,000 (each, an "Expansion") the prior written approval of Landlord shall be required. In the event that Landlord grants such prior written approval to Tenant for the undertaking of an Expansion, Landlord will pay for the approved costs of such Expansion and the Minimum Rent shall be increased over the remaining Term so as to allow Landlord to recover the cost of such Expansion plus a return on capital equal to the prevailing Capital Growth Rate. Also, if such approval is granted and such Expansion is undertaken within the last five (5) years of any Term, then the current Term shall be increased by five (5) years from the date of the conclusion of such Expansion and the Minimum Rent (as set forth in Exhibit C before giving effect to such Expansion) shall be adjusted to a blended rate based on the (1) the current Minimum Rent in effect at such time, including annual escalations thereof, and (2) the lease rate on the Expansion as agreed upon by Landlord and Tenant.

(b)           If Tenant makes any Alterations pursuant to this Section 13 or as required by Section 12 or 17 (such Alterations and actions being hereinafter collectively referred to as "Work"), whether or not Landlord's consent is required, then (i) the market value of the Leased Premises shall not be lessened by any such Work or its usefulness impaired, (ii) all such Work shall be performed by Tenant in a good and workmanlike manner, using only licensed contractors and new materials, (iii) all such Work shall be expeditiously completed in compliance with all Legal Requirements, (iv) all such Work shall comply with the Insurance Requirements, (v) if any such Work involves the replacement of Building Equipment or parts thereof, all replacement Building Equipment or parts shall have a value and useful life equal to the greater of (A) the value and useful life on the date hereof of the Building Equipment being replaced or (B) the value and useful life of the Building Equipment being replaced immediately prior to the occurrence of the event which required its replacement, (vi) Tenant shall promptly discharge or remove all liens filed against any of the Leased Premises arising out of such Work, (vii) Tenant shall procure and pay for all permits and licenses required in connection with any such Work, (viii) all such Work, shall be the property of Landlord and shall be subject to this Lease, and Tenant shall execute and deliver to Landlord any document requested by Landlord evidencing the assignment to Landlord of all estate, right, title and interest (other than the leasehold estate created hereby) of Tenant or any other Person thereto or therein, and (ix) Tenant shall comply, to the extent requested by Landlord or required by this Lease, with the provisions of Section 19(a), whether or not such Work involves restoration of the Leased Premises.

14.           Permitted Contests. Notwithstanding any other provision of this Lease, Tenant shall not be required to (a) pay any Imposition, (b) discharge or remove any lien referred to in Section 11 or 13 or (c) take any action with respect to any encroachment, violation, hindrance, obstruction or impairment referred to in Section 12(b) (such non-compliance with the terms hereof being hereinafter referred to collectively as "Permitted Violations"), so long as at the time of such contest no Event of Default exists and so long as Tenant shall contest, in good faith, the existence, amount or validity thereof, the amount of the damages caused thereby, or the extent of its or Landlord's liability therefor by appropriate proceedings which shall operate during the pendency thereof to prevent or stay (i) the collection of, or other realization upon, the Permitted Violation so contested, (ii) the sale, forfeiture or loss of any of the Leased Premises or any Rent to satisfy or to pay any damages caused by any Permitted Violation, (iii) any interference with the use or occupancy of any of the Leased Premises, (iv) any interference with the payment of any Rent, or (v) the cancellation or increase in the rate of any insurance policy or a statement by the carrier that coverage will be denied. Tenant shall provide Landlord security which is satisfactory, in Landlord's reasonable judgment, to assure that such Permitted Violation is corrected, including all Costs, interest and penalties that may be incurred or become due in connection therewith. While any proceedings which comply with the requirements of this Section 14 are pending and the required security is held by Landlord, Landlord shall not have the right to correct any Permitted Violation thereby being contested unless Landlord is required by law to correct such Permitted Violation and Tenant's contest does not prevent or stay such requirement as to Landlord. Each such contest shall be promptly and diligently prosecuted by Tenant to a final conclusion, except that Tenant, so long as the conditions of this Section 14 are at all times complied with, has the right to attempt to settle or compromise such contest through negotiations. Tenant shall pay any and all losses, judgments, decrees and Costs in connection with any such contest and shall, promptly after the final determination of such contest, filly pay and discharge the amounts which shall be levied, assessed, charged or imposed or be determined to be payable therein or in connection therewith, together with all penalties, fines, interest and Costs thereof or in connection therewith, and perform all acts the performance of which shall be ordered or decreed as a result thereof. No such contest shall subject Landlord to the risk of any civil or criminal liability.

15.           Indemnification.

(a)           In addition to the indemnification obligations set forth in Section 10, commencing as of the Commencement Date, Tenant shall pay, protect, indemnify, defend, save and hold harmless Landlord, Lender and all other Persons described in Section 29 (each an "Indemnitee") from and against any and all liabilities, losses, damages (including punitive damages), penalties, Costs (including attorneys' fees and costs), causes of action, suits, claims, demands or judgments of any nature whatsoever, howsoever caused, without regard to the form of action and whether based on strict liability, negligence or any other theory of recovery at law or in equity, arising from (i) any matter pertaining to the acquisition (or the negotiations leading thereto), ownership, use, non-use, occupancy, operation, condition, design, construction, maintenance, repair or restoration of the Leased Premises, (ii) any casualty in any manner arising from the Leased Premises, whether or not Indemnitee has or should have knowledge or notice of any defect or condition causing or contributing to said casualty, or (iii) any violation by Tenant of any provision of this Lease, any contract or agreement to which Tenant is a party, any Legal Requirement or any Permitted Encumbrance or any encumbrance Tenant consented to or any Mortgage or Assignment.

(b)           In case any action or proceeding is brought against any Indemnitee by reason of any such claim, (i) Tenant may, except in the event of a conflict of interest or a dispute between Tenant and any such Indemnitee or during the continuance of an Event of Default, retain its own counsel and defend such action (it being understood that Landlord may employ counsel of its choice to monitor the defense of any such action, all at Tenant's cost and expense), and (ii) such Indemnitee shall notify Tenant to resist or defend such action or proceeding by retaining counsel reasonably satisfactory to such Indemnitee, and such Indemnitee will cooperate and assist in the defense of such action or proceeding if reasonably requested so to do by Tenant. In the event of a conflict of interest or dispute or during the continuance of an Event of Default, Landlord shall have the right to select counsel, and the cost of such counsel shall be paid by Tenant.

(c)           Tenant acknowledges and agrees that Landlord (except in the event of, and then only to the extent directly attributable to, Landlord's gross negligence or willful misconduct), any Lender and all Indemnitees shall not be liable, under any circumstances, for any loss, injury, death or damage to person or property (including the business or any loss of income or profit therefrom) of Tenant, Tenant's members, officers, directors, shareholders, agents, employees, contractors, customers, invitees or any other person in or about the Leased Premises, whether the same are caused by (1) fire, explosion, falling plaster, steam, dampness, mold, electricity, gas, water, rain or other act of God, (2) breakage, leakage or other defects of sprinklers, wires, appliances, plumbing fixtures, water or gas pipes, roof, air conditioning, lighting fixtures, street improvements, or subsurface improvements, (3) theft, acts of God, acts of the public enemy, riot, strike, insurrection, war, terrorism, power failures, blackouts, energy or power shortages, court order, requisition or order of governmental body or authority, (4) any act or omission of any other occupant of the Leased Premises or any other party, (5) operations in construction of any private, public or quasi-public work, or (6) any other cause, including damage or injury which arises from the condition of the Leased Premises, from occupants of adjacent property, from the public, or from any other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same are inaccessible to Tenant, or which may arise through repair, alteration or maintenance of any part of the Leased Premises or failure to make any such repair, from any condition or defect in, on or about the Leased Premises including any Environmental Violation, Hazardous Condition and/or Hazardous Activity, or the presence of any mold or any Hazardous Substance, or from any other condition or cause whatsoever.

(d)           All obligations of Tenant under this Section 15 shall survive any termination, expiration or rejection in bankruptcy of this Lease.

16.           Insurance.

(a)           Commencing as of the Commencement Date and continuing thereafter throughout the Term, Tenant shall maintain the following insurance on or in connection with the Leased Premises:

(i)            "All-risk" real and personal property insurance against physical loss or damage to the Improvements and Building Equipment as provided under a "special form" property insurance policy including flood (if the Leased Premises is in a flood zone), windstorm and earthquake coverage in amounts not less than the full replacement cost of the Improvements and Building Equipment. Such policies shall contain a replacement cost endorsement, an agreed amount endorsement (deleting any co-insurance provisions), a law and ordinance endorsement, and shall contain deductibles not more than $25,000 per occurrence;

(ii)            Commercial general liability insurance including products liability and business automobile liability insurance (including owned, non-owned and hired automobile liability) and excess liability or umbrella coverage against claims for personal and bodily injury, death or property damage occurring on, in or as a result of the use of the Leased Premises, in an amount not less than $5,000,000 per occurrence/annual aggregate, but not less than $10,000,000 for aviation products liability or such higher amount as may be maintained from time to time, and all other coverage extensions that are usual and customary for properties of this size and type; there shall be severability of interest as though separate policies were issued to each additional insured except with respect to limits of liability;

(iii)            Worker's compensation insurance to the extent required by law covering all persons employed by Tenant in connection with any work done on or about any of the Leased Premises for which claims for death, disease or bodily injury may be asserted against Landlord, Tenant or any of the Leased Premises;

(iv)            Comprehensive boiler, machinery and equipment breakdown insurance on any of the Building Equipment or any other machinery or equipment on or in the Leased Premises for full replacement cost;

(v)            Business income/interruption insurance to include loss of rents at limits sufficient to cover one hundred percent (100%) of the annual Rent payable to Landlord with a period of indemnity not less than one (1) year from time of loss. Such insurance shall name Landlord as loss payee with respect to Rent payable to or for the benefit of Landlord under this Lease;

(vi)            During any period in which substantial Alterations or Improvements at the Leased Premises are being undertaken, builder's risk insurance covering the total completed value including any "soft costs" with respect to the Improvements being altered or repaired (on a completed value, non-reporting basis), replacement cost of work performed and equipment, supplies and materials furnished in connection with such construction or repair of Improvements or Building Equipment, together with such "soft cost" endorsements and such other endorsements as Landlord may reasonably require and general liability, worker's compensation and automobile liability insurance with respect to the Improvements being constructed, altered or repaired;

(vii)            Breach of warranty coverage as found in a lender's loss payable endorsement and/or mortgagee's clause to apply to Landlord so that any violations of the terms, conditions or warranties of any insurance policy by the named insured or others will not invalidate the coverage insofar as the interests of Landlord are concerned; and

(viii)            Such other insurance (or other terms with respect to any insurance required pursuant to this Section 16, including amounts of coverage, deductibles, and form of mortgagee clause) as Landlord or Lender may reasonably require, which at the time is usual and commonly obtained in connection with properties similar in type of building size, use and location to the Leased Premises, including, if deemed appropriate by Landlord, terrorism insurance.

(b)           The insurance required by Section 16(a) shall be written by companies which have a rating by A. M. Best Company of not less than A-/VII or otherwise reasonably acceptable to Landlord, and are approved to write insurance policies by the State Insurance Department for the State. The insurance policies (i) shall be for such terms and deductibles as Landlord may reasonably approve and (ii) shall be in amounts sufficient at all times to satisfy any coinsurance requirements thereof. The insurance referred to in Sections 16(a)(i), 16(a)(iv), 16(a)(v), 16(a)(vi), 16(a)(vii), 16(a)(viii), 16(a)(ix), and 16(a)(x) shall name Landlord as owner (and as an additional insured/landlord) and as sole loss payee as its interest may appear (at Landlord's request, Lender will be named as loss payee and as a mortgagee insured pursuant to a standard non-contributory mortgagee endorsement in favor of, and acceptable to, Landlord and Lender). The insurance referred to in Section 16(a)(ii), 16(a)(vii), 16(a)(viii), 16(a)(ix), and 16(a)(x) shall name Landlord and Lender as additional insureds, If said insurance or any part thereof shall expire, be withdrawn, become void, voidable, unreliable or unsafe for any reason, including a breach of any condition thereof by Tenant or the failure or impairment of the capital of any insurer, or if for any other reason whatsoever said insurance shall become reasonably unsatisfactory to Landlord, Tenant shall immediately obtain new or additional insurance reasonably satisfactory to Landlord. All insurance required to be maintained by Tenant under Section 16(a) shall be primary to, and non-contributing with, any insurance maintained by Landlord.

(c)           Each policy required by any provision of Section 16(a), except clause (iii) thereof, shall provide that it may not be cancelled or modified except after thirty (30) days' prior notice to Landlord and Lender. Each such policy shall also provide that any loss otherwise payable thereunder shall be payable notwithstanding (i) any act or omission of Landlord or Tenant which might, absent such provision, result in a forfeiture of all or a part of such insurance payment, (ii) the occupation or use of any of the Leased Premises for purposes more hazardous than those permitted by the provisions of such policy, (iii) any foreclosure or other action or proceeding taken by Lender pursuant to any provision of the Mortgage, Note, Assignment or other document evidencing or securing the Loan upon the happening of an event of default therein or (iv) any change in title to or ownership of any of the Leased Premises.

(d)           Tenant shall pay as they become due all premiums (and deductibles) for the insurance required by Section 16(a), shall renew or replace each policy and deliver to Landlord evidence of the payment of the full premium therefor or installments due prior to the due dates thereof, and in no event later than ten (10) days prior to the expiration date or cancellation (for nonpayment) of such policy. Landlord shall have the option, but never the responsibility, to make premium payments. Landlord shall not be responsible for warranties or representations to underwriters. Prior to the Commencement Date, Tenant shall deliver to Landlord a certificate of insurance evidencing all insurance coverages required to be maintained by Tenant hereunder, together with an endorsement(s) adding Landlord and Lender as additional insureds thereunder. Tenant shall promptly forward to Landlord copies of all original policies and endorsements upon Tenant's receipt thereof.

(e)           Any insurance which Tenant is required to obtain pursuant to Section 16(a) may be carried under a "blanket" or umbrella policy or policies covering other properties or liabilities of Tenant, provided that such "blanket" or umbrella policy or policies otherwise comply with the provisions of this Section 16 and provided, further, that Tenant shall provide to Landlord a statement of values which shall be reviewed annually and amended as necessary based on replacement cost valuations. The original or a certified copy of each such "blanket" or umbrella policy shall promptly be delivered to Landlord upon request.

(f)           Tenant shall promptly comply with and conform to (i) all provisions of each insurance policy required by this Section 16 and (ii) all requirements of the insurers thereunder applicable to Landlord, Tenant or any of the Leased Premises or to the use, manner of use, occupancy, possession, operation, maintenance, alteration or repair of any of the Leased Premises, even if such compliance necessitates Alterations or results in interference with the use or enjoyment of any of the Leased Premises.

(g)           Tenant shall not carry separate insurance concurrent in form or contributing in the event of a Casualty with that required in this Section 16 unless (i) Landlord and Lender are included therein as additional insureds, with loss payable as provided herein, and (ii) such separate insurance complies with the other provisions of this Section 16. Tenant shall immediately notify Landlord of such separate insurance and shall deliver to Landlord certificates of such insurance and, if requested, the original policies thereof;

(h)           All policies shall contain full waivers of subrogation against Landlord. Additionally, the policy limits for all policies required to be maintained by Tenant hereunder shall not in any way affect or limit Tenant's indemnification, defense, release and hold harmless obligations set forth in this Lease.

(i)           The per occurrence and annual aggregate limits for all insurance required to be maintained by Tenant hereunder may be increased by Landlord from time to time to reflect current market conditions (not more frequently than once every five years) or to meet Lender requirements.

(j)           Tenant shall provide Landlord with acceptable forms of evidence of the insurance required by Section 16(a) containing the original signature of the insurance underwriter or a duly authorized agent or broker prior to the closing/funding and prior to the termination, cessation or replacement of coverage thereafter throughout the term of the agreement.

(k)           Tenant agrees that the insurance maintained by Tenant does not release Tenant from liability as contained within the terms of this Lease, and that Landlord is under no obligation or duty to ascertain the existence or adequacy of insurance. Tenant shall do nothing to interrupt or disallow any insurance required under the terms of this Lease. All insurance maintained by Tenant shall be underwritten with insurers or reinsurers, if applicable, acceptable to Landlord.

17.           Casualty and Condemnation: Claims.

(a)           If any Casualty to the Leased Premises occurs, Tenant shall give Landlord and Lender immediate notice thereof. So long as no Event of Default exists Tenant is hereby authorized to negotiate all claims under any of the insurance policies required by Section 16(a) (except public liability insurance claims payable to a Person other than Tenant, Landlord or Lender) and to execute and deliver all necessary proofs of loss, receipts, vouchers and releases required by the insurers, and Landlord shall have the right to join with Tenant therein, so long as Tenant provides Landlord with copies of all correspondence to and from the insurance carrier or its representative. Any final adjustment, settlement or compromise of any such claim shall, however, be subject to the prior written approval of Landlord, which shall not be unreasonably withheld or delayed, and Landlord shall have the right to prosecute or contest, or to require Tenant to prosecute or contest, any such claim, adjustment, settlement or compromise. If an Event of Default exists, Tenant shall not be entitled to adjust, collect or compromise any such claim or to participate with Landlord in any adjustment, collection and compromise of the Net Award payable in connection with a Casualty. Tenant agrees to sign, upon the request of Landlord, all such proofs of loss, receipts, vouchers and releases. Each insurer is hereby authorized and directed to make payment under said policies directly to Landlord or, if required by the Mortgage, to Lender instead of to Landlord and Tenant jointly, and Tenant hereby appoints each of Landlord and Lender as Tenant's attorneys-in-fact to endorse any draft therefor.  The rights of Landlord under this Section 17(a) shall be extended to Lender if and to the extent that any Mortgage so provides.

(b)           Tenant, immediately upon receiving a Condemnation Notice, shall notify Landlord and Lender thereof.  So long as no Event of Default exists, Tenant is authorized to negotiate the amount of any Net Award and Landlord shall have the right to join with Tenant herein (so long as Tenant provides Landlord with copies of all correspondence to and from the condemning authority or its representative). Any final adjustment, settlement or compromise of any such Net Award shall, however, be subject to the prior written approval of Landlord, which shall not be unreasonably withheld or delayed, and Landlord shall have the right to prosecute or contest, or to require Tenant to prosecute or contest, any such claim, adjustment, settlement or compromise relating to a Net Award. If an Event of Default exists, Landlord shall be authorized to collect, settle and compromise the amount of any Net Award and Tenant shall not be entitled to participate with Landlord in any Condemnation proceeding or negotiations under threat thereof or to contest the Condemnation or the amount of the Net Award therefor. No agreement with any condemnor in settlement or under threat of any Condemnation shall be made by Tenant without the written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed. Subject to the provisions of this Section 17(b), Tenant hereby irrevocably assigns to Landlord any award or payment to which Tenant is or may be entitled by reason of any Condemnation, whether the same shall be paid or payable for Tenant's leasehold interest hereunder (including bonus value) or otherwise; but nothing in this Lease shall impair Tenant's right to any award or payment on account of Tenant's Trade Fixtures, equipment or other tangible property which is not part of the Building Equipment, moving expenses or loss of business, if available, to the extent that and so long as (i) Tenant shall have the right to make, and does make, a separate claim therefor against the condemnor and (ii) such claim does not in any way reduce either the amount of the award otherwise payable to Landlord for the Condemnation of Landlord's fee interest in the Leased Premises or the amount of the award (if any) otherwise payable for the Condemnation of Tenant's leasehold interest hereunder. The rights of Landlord under this Section 17(b) shall also be extended to Lender if and to the extent that any Mortgage so provides.

18.            Casualty and Condemnation: Restoration. If any Casualty (whether or not insured against) or Condemnation shall occur, this Lease shall continue, notwithstanding such event, and there shall be no abatement or reduction of any Monetary Obligations. Promptly after such Casualty or Condemnation, Tenant, as required in Sections 12(a) and 13(b), shall commence and diligently continue to restore the Leased Premises as nearly as possible to their value, condition and character immediately prior to such event (assuming the Leased Premises to have been in the condition required by this Lease). So long as no Event of Default exists, any Net Award up to and including $50,000 shall be paid by Landlord to Tenant and Tenant shall restore the Leased Premises in accordance with the requirements of Sections 12(a) and 13(b) of this Lease. Any Net Award in excess of $50,000 shall be made available by Landlord (or Lender, if required by the terms of any Mortgage) to Tenant for the restoration of any of the Leased Premises pursuant to and in accordance with the provisions of Section 19 hereof.

19.            Restoration Procedures.

(a)           Landlord (or Lender if required by any Mortgage) shall hold Net Award in excess of $50,000 in a fund (the "Restoration Fund") and disburse amounts from the Restoration Fund only in accordance with the following conditions:

(i)             prior to commencement of restoration, (A) the architects, contracts, contractors, plans and specifications for the restoration shall have been approved by Landlord, (B) Landlord and Lender shall be provided with mechanics' lien insurance (if available) and acceptable performance and payment bonds which insure satisfactory completion of and payment for the restoration, are in an amount and form and have a surety acceptable to Landlord, and name Landlord and Lender as additional dual obligees, and (C) appropriate waivers of mechanics' and materialmen's liens shall have been filed;

(ii)             at the time of any disbursement, no Event of Default shall exist and no mechanics' or materialmen's liens shall have been filed against any of the Leased Premises and remain undischarged;

(iii)             disbursements shall be made from time to time in an amount not exceeding the cost of the work completed since the last disbursement, upon receipt of (A) satisfactory evidence, including architects' certificates, of the stage of completion, the estimated total cost of completion and performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (B) waivers of liens, (C) contractors' and subcontractors' sworn statements as to completed work and the cost thereof for which payment is requested, (D) a satisfactory bringdown of title insurance and (E) other evidence of cost and payment so that Landlord can verify that the amounts disbursed from time to time are represented by work that is completed, in place and free and clear of mechanics' and materialmen's lien claims;

(iv)             each request for disbursement shall be accompanied by a certificate of Tenant, signed by the president or a vice president of Tenant, describing the work for which payment is requested, stating the cost incurred in connection therewith, stating that Tenant has not previously received payment for such work and, upon completion of the work, also stating that the work has been fully completed and complies with the applicable requirements of this Lease;

(v)            Landlord may retain ten percent (10%) of the restoration fund until the restoration is fully completed, including all "punch list" items;

(vi)            if the Restoration Fund is held by Landlord, the Restoration Fund shall not be commingled with Landlord's other funds and shall bear interest at a rate agreed to by Landlord and Tenant; and

(vii)            such other reasonable conditions as Landlord or Lender may impose.

(b)           Prior to commencement of restoration and at any time during restoration, if the estimated cost of completing the restoration work free and clear of all liens, as determined by Landlord, exceeds the amount of the Net Award available for such restoration, the amount of such excess shall, upon demand by Landlord, be paid by Tenant to Landlord to be added to the Restoration Fund. Any sum so added by Tenant which remains in the Restoration Fund upon completion of restoration shall be refunded to Tenant. For purposes of determining the source of funds with respect to the disposition of funds remaining after the completion of restoration, the Net Award shall be deemed to be disbursed prior to any amount added by Tenant.

(c)           If any sum remains in the Restoration Fund after completion of the restoration and any refund to Tenant pursuant to Section 19(b), such sum shall be retained by Landlord.

20.           Assignment and Subletting; Prohibition against Leasehold Financing.

(a)           Without the prior written consent of Landlord, unless guaranteed in writing by Tenant by a written instrument in form and substance satisfactory to Landlord, Tenant may not:

(i)            assign, mortgage or pledge this Lease, voluntarily or involuntarily, whether by operation of law or otherwise, except to Tenant's Affiliates; or

(ii)            sublet any of the Leased Premises at any time to any other Person.

Any such purported assignment or sublease in violation of this Section 20(a) shall be null and void. Whether or not Landlord consents to any proposed assignment, mortgage, sublease or other transfer, Tenant shall, within ten (10) days after request in writing by Landlord, reimburse Landlord for all Costs and expenses incurred by Landlord in connection with its review thereof.

(b)           If Tenant assigns all its rights and interest under this Lease with Landlord's consent, the assignee under such assignment shall expressly assume all the obligations of Tenant hereunder, actual or contingent, including obligations of Tenant which may have arisen on or prior to the date of such assignment, by a written instrument delivered to Landlord at the time of such assignment. Each sublease of any of the Leased Premises shall be subject and subordinate to the provisions of this Lease. No assignment or sublease shall affect or reduce any of the obligations of Tenant hereunder, and all such obligations shall continue in full force and effect as obligations of a principal and not as obligations of a guarantor, as if no assignment or sublease had been made. No assignment or sublease shall impose any additional obligations on Landlord under this Lease.

(c)           Tenant shall, within ten (10) days after the execution and delivery of any assignment or sublease consented to by Landlord, deliver a duplicate original copy thereof to Landlord which, in the event of an assignment, shall be in recordable form.

(d)           As security for performance of its obligations under this Lease, Tenant hereby grants, conveys and assigns to Landlord all right, title and interest of Tenant in and to all subleases (the "Subleases") now in existence or hereinafter entered into for any or all of the Leased Premises, any and all extensions, modifications and renewals thereof and all rents, issues and profits therefrom. Landlord hereby grants to Tenant a license to collect and enjoy all rents and other sums of money payable under any Sublease of any of the Leased Premises, provided, however, that Landlord shall have the absolute right at any time during the continuance of an Event of Default upon notice to Tenant and any subtenants to revoke said license and to collect such rents and sums of money and to apply the same to installments of Interim Rent or Minimum Rent next due and owing. Tenant shall not accept any rents under any Sublease more than thirty (30) days in advance of the accrual thereof nor do nor permit anything to be done, the doing of which, nor omit or refrain from doing anything, the omission of which, will or could be a breach of or default in the terms of any of the Subleases.

21.           Sales by Landlord; Right of First Refusal.

(a)           Landlord may sell or transfer the property comprising the Leased Premises at any time to any third party (each, a "Third Party Purchaser"); provided, however, that prior to any such sale or transfer, Landlord shall give notice to Tenant of the terms offered by the Third Party Purchaser (the "Third Party Offer") and offer to sell or transfer such property to Tenant on the same terms and conditions as are set forth in the Third Party Offer. Tenant shall then have ten (10) days after receipt of Landlord's offer to either accept or reject such offer in writing. If Tenant does not accept or reject such offer within such period of ten (10) days, then Tenant will be deemed to have rejected Landlord's offer, and Landlord shall be free to sell such property to such Third Party Purchaser or to any other Person on terms no less favorable to Landlord than those set forth in the Third Party Offer at any time within one hundred eighty (180) days after Tenant's rejection of Landlord's offer. It is a condition to Tenant's right of first refusal that (a) no Event of Default shall have occurred or be continuing as of the date on which Landlord receives the Third Party Offer which shall trigger such right of first refusal, and (b) no Event of Default shall have occurred or be continuing as of the date on which Tenant seeks to exercise a right of first refusal by accepting Landlord's offer to sell or transfer such property to Tenant.

(b)           In the event of any such transfer to a Third Party Purchaser, Tenant shall attorn to such Third Party Purchaser as Landlord, provided such Third Party Purchaser or Landlord has notified Tenant in writing of such transfer. At the request of Landlord, Tenant will execute such documents confirming the agreement referred to above and such other agreements as Landlord or the Third Party Purchaser may reasonably request, provided that such agreements do not increase the liabilities and obligations of Tenant hereunder. Whenever Landlord transfers its interest in the Leased Premises (whether to a Third Party Purchaser or an Affiliate or subsidiary of Landlord), Landlord shall be automatically released from further performance under this Lease and from all further liabilities and expenses hereunder, provided the transferee of Landlord's interest assumes all liabilities and obligations of Landlord hereunder from the date of such transfer.

22.            Events of Default. The occurrence of any one or more of the following (after expiration of any applicable cure period as provided in Section 22) shall, at the sole option of Landlord, constitute an "Event of Default" under this Lease:

(a)           Tenant shall fail to pay any Interim Rent or Minimum Rent as and when the same becomes due, and such failure continues for five (5) days after Landlord gives written notice thereof to Tenant, provided that if Tenant is more than five (5) days late in the payment of Interim Rent or Minimum Rent in any twelve (12) consecutive months period, only one notice need be given by Landlord during such twelve (12) consecutive months and any subsequent failure to pay Interim Rent or Minimum Rent on or before its due date within such twelve (12) consecutive months shall constitute an Even of Default after five (5) days without notice;

(b)           Tenant shall fail to pay any Additional Rent or any other Monetary Obligation as and when the same becomes due and payable and such failure continues for more than five (5) days after Landlord gives written notice thereof to Tenant;

(c)           a default occurs under Section 20;

(d)           Tenant shall fail to perform and observe, or there shall occur a violation or breach of, any other provision hereof, not otherwise specifically mentioned in this Section 22 as and when such performance or observance is due and such failure, violation, or breach continues for more than thirty (30) days after Landlord gives written notice thereof to Tenant; provided, however, that if such failure, violation or breach is not reasonably susceptible to cure within such period of thirty (30) days, an Event of Default shall not exist as long as Tenant commences with due diligence and dispatch the curing of such failure, violation or breach within such period of thirty (30 days and thereafter prosecutes with diligence and dispatch and completes the curing of such failure, violation or breach within a reasonable time not to exceed one hundred eighty (180) days;

(e)           any representation or warranty made by Tenant herein or in any certificate, demand or request made pursuant hereto proves to be incorrect, now or hereafter, in any material respect;

(f)           a default beyond any applicable cure period or at maturity by Tenant in any payment of principal or interest on any obligations for borrowed money having an original principal balance of $10,000,000 or more in the aggregate, or in the performance of any other provision contained in any instrument under which any such obligation is created or secured (including the breach of any covenant thereunder), (x) if such payment is a payment at maturity or a final payment, or (y) if an effect of such default is to cause, or permit any Person to cause, such obligation to become due prior to its stated maturity;

(g)           a default by Tenant beyond any applicable cure period in the payment of rent under, or in the performance of any other material provision of, any other lease or leases that have, in the aggregate, rental obligations over the terms thereof of $500,000 or more if the landlord under any such lease or leases commences to exercise its remedies thereunder;

(h)           a final, non-appealable judgment or judgments for the payment of money in excess of $10,000,000 in the aggregate shall be rendered against Tenant and the same shall remain undischarged for a period of sixty (60) consecutive days;

(i)           Tenant shall (A) file, or consent by answer or otherwise to the filing against Tenant of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy, insolvency or other debtors' relief law of any jurisdiction, (B) make a general assignment for the benefit of creditors, (C) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for itself or for any substantial part of the Leased Premises, (D) be unable to pay its debts as they mature or shall admit in writing its inability to pay its debts when due, or (E) take action for the purpose of any of the foregoing;

(j)           a court or governmental authority shall enter an order, judgment or decree (A) appointing, without the consent of Tenant, a custodian, receiver, trustee or other officer with similar powers with respect to Tenant or any substantial part of the Leased Premises, (B) constituting an order for relief or approving a petition for relief or reorganization or arrangement or any other petition in bankruptcy, insolvency or other debtors' relief law of any jurisdiction, or (C) ordering the dissolution, winding-up or liquidation of Tenant; and such order, judgment or decree shall remain undischarged or unstayed sixty (60) days after it is entered;

(k)           Tenant shall be liquidated or dissolved or shall begin proceedings towards its liquidation or dissolution;

(1) the estate or interest of Tenant in any of the Leased Premises shall be levied upon or attached in any proceeding and such estate or interest is about to be sold or transferred or such process shall not be vacated or discharged within sixty (60) days after it is made;

(m)           Tenant shall fail to convey the Additional Properties to Landlord on or before February 28, 2007 in accordance with the terms of the Purchase Agreement;

(n)           Tenant shall fail to perform or observe, or there shall occur a violation or breach of, or a misrepresentation by Tenant under, any provision of any agreement or any other document between Tenant and Lender, if such failure, violation, breach or misrepresentation gives rise to a default beyond any applicable cure period with respect to any Loan;

(o)           Guarantor shall engage, enter into, or publicly announce a Corporate Control Event, unless each of the following conditions precedent is satisfied (a "Permitted Transfer"):

(i)            the successor to or transferee of Tenant of Guarantor (the "Transferee") has a tangible net worth computed in accordance with GAAP consistently applied at least equal to the tangible net worth of Guarantor immediately prior to such Corporate Control Event, and satisfies the Corporate Control Criteria;

(ii)            proof reasonably satisfactory to Landlord of such required net worth and satisfaction of the Corporate Control Criteria shall have been delivered to Landlord at least twenty (20) days prior to the effective date of any such Corporate Control Event;

(iii)            the Transferee agrees directly with Landlord, by written instrument in form and substance reasonably satisfactory to Landlord, to be bound by all of the obligations and liabilities of Tenant under this lease or Guarantor under the Lease Guaranty, as the case may be;

(iv)            in no event shall the originally named Tenant or Guarantor (or the entity into which Tenant or Guarantor is merged or consolidated) be released from its obligations under the Lease or the Lease Guaranty, as the case may be;

(v)            any such transfer or transaction is for a legitimate, regular business purpose of Tenant or Guarantor and the Transferee, other than the direct or indirect transfer of Tenant's interest in this Lease;

(vi)            no Event of Default then exists or will exist immediately after giving effect to such Corporate Control Event; or

(p)           a default, event of default or breach of any term or provision by Tenant (or an Affiliate of Tenant) under any agreement or document between Tenant (or an Affiliate of Tenant) and Landlord (or an Affiliate of Landlord); and

(q)           an "Event of Default" as such term is defined in the Lease Guaranty.

23.           Remedies and Damages Upon Default

(a)           If an Event of Default shall have occurred and is continuing, Landlord shall have the right, at its sole option, then or at any time thereafter, to exercise its remedies and to collect damages from Tenant in accordance with this Section 23, subject in all events to applicable Law, without demand upon or notice to Tenant except as otherwise provided in Section 22 and this Section 23.

(i)            Landlord may give Tenant notice of Landlord's intention to terminate this Lease on a date specified in such notice and upon such date, this Lease, the estate hereby granted and all rights of Tenant hereunder shall expire and terminate. Upon such termination, Tenant shall immediately surrender and deliver possession of the Leased Premises to Landlord in accordance with Section 26. If Tenant does not so surrender and deliver possession of all of the Leased Premises, Landlord may re-enter and repossess any of the Leased Premises not surrendered, with legal process, by summary proceedings, ejectment or any other lawful means or procedure. Upon or at any time after taking possession of any of the Leased Premises, Landlord may, by peaceable means or legal process, remove any Persons or property therefrom. Landlord shall be under no liability for or by reason of any such entry, repossession or removal. Notwithstanding such entry or repossession, Landlord may collect the damages set forth in Section 23(b).

(ii)            After repossession of any of the Leased Premises, Landlord shall have the right to relet any of the Leased Premises to such tenant or tenants, for such term or terms, for such rent, on such conditions and for such uses as Landlord in its sole discretion may determine, and collect and receive any rents payable by reason of such reletting. Landlord may make such Alterations in connection with such reletting as it may deem advisable in its sole discretion. Notwithstanding any such reletting, Landlord may collect the damages set forth in Section 23(b).

(iii)            Landlord may declare by notice to Tenant the entire Interim Rent or Minimum Rent (in the amount of Interim Rent or Minimum Rent then in effect) for the remainder of the then current Term to be immediately due and payable. Tenant shall immediately pay to Landlord all such Interim Rent or Minimum Rent discounted to its Present Value, all accrued Rent then due and unpaid, all other Monetary Obligations which are then due and unpaid and all Monetary Obligations which arise or become due by reason of such Event of Default (including any Costs of Landlord). Upon receipt by Landlord of all such accelerated Interim Rent or Minimum Rent and Monetary Obligations, this Lease shall remain in full force and effect and Tenant shall have the right to possession of the Leased Premises from the date of such receipt by Landlord to the end of the Term, and subject to all the provisions of this Lease, including the obligation to pay all increases in Interim Refit or Minimum Rent and all Monetary Obligations that subsequently become due, except that (A) no Interim Rent or Minimum Rent which has been prepaid hereunder shall be due thereafter during the said Term, (B) Tenant shall have no option to extend or renew the Term.

(b)           The following constitute damages to which Landlord shall be entitled if Landlord exercises its remedies under Section 23(a)(i) or 23(a)(ii):

(i)            If Landlord exercises its remedy under Section 23(a)(i) but not its remedy under Section 23(a)(ii) (or attempts to exercise such remedy under Section 23(a)(ii) and is unsuccessful in reletting the Leased Premises) then, upon written demand from Landlord, Tenant shall pay to Landlord, as liquidated and agreed final damages for Tenant's default and in lieu of all current damages beyond the date of such demand (it being agreed that it would be impracticable or extremely difficult to fix the actual damages), and not as a penalty, an amount equal to the Present Value of all Interim Rent or Minimum Rent from the date of such demand to the date on which the Term is scheduled to expire hereunder in the absence of any earlier termination, re-entry or repossession. Tenant shall also pay to Landlord all of Landlord's Costs in connection with the repossession of the Leased Premises and any attempted reletting thereof, including all brokerage commissions, legal expenses, reasonable attorneys' fees, employees' expenses, costs of Alterations and expenses and preparation for reletting.

(ii)            If Landlord exercises its remedy under Section 23(a)(ii), then Tenant shall, until the end of what would have been the Term in the absence of the termination of the Lease, and whether or not any of the Leased Premises shall have been relet, be liable to Landlord for, and shall pay to Landlord, on the date on which the same are due and payable under the terms of this Lease all Monetary Obligations which would be payable under this Lease by Tenant in the absence of such termination less the net proceeds, if any, of any reletting pursuant to Section 23(a)(ii), after deducting from such proceeds all of Landlord's Costs (including the items listed in the last sentence of Section 23(b)(i) hereof) incurred in connection with such repossessing and reletting; provided that if Landlord has not relet the Leased Premises, such Costs of Landlord shall be considered to be Monetary Obligations payable by Tenant. Landlord shall also be entitled to recover from Tenant as damages for loss of the bargain, and not as a penalty, an amount equal to the sum of (1) the Present Value of the excess, if any, of (a) all Interim Rent and Minimum Rent payable under this Lease from the date of termination, reentry or repossession, as the case may be, over (b) the greater of (x) amount of the base rent obtained by Landlord after reletting the Leased Premises, or (y) the Fair Rental Value of the Leased Premises, plus (2) all of Landlord's Costs (including the items listed in the last sentence of Section 23(b)(i) hereof). As used herein the "Fair Rental Value" of the Leased Premises means an amount equal to the fair market rental value of the Leased Premises considered as unencumbered by this Lease and available for the highest and best use that may be made thereof. Tenant shall be and remain liable for all sums aforesaid, and Landlord may recover such damages from Tenant and institute and maintain successive actions or legal proceedings against Tenant for the recovery of such damages. Nothing herein contained shall be deemed to require Landlord to wait to begin such action or other legal proceedings until the date when the Term would have expired by its own terms had there been no such Event of Default.

(c)           Notwithstanding anything to the contrary herein contained, in lieu of or in addition to any of the foregoing remedies and damages, Landlord may exercise any remedies and collect any damages available to it at law or in equity. If Landlord is unable to obtain full satisfaction pursuant to the exercise of any remedy, it may pursue any other remedy which it has hereunder or at law or in equity, it being understood that the remedies set forth herein are not exclusive and are cumulative in addition to any remedies allowed now or after the date hereof by applicable law.

(d)           Landlord shall not be required to mitigate any of its damages hereunder. If any Law shall validly limit the amount of any damages provided for herein to an amount which is less than the amount agreed to herein, Landlord shall be entitled to the maximum amount available under such Law.

(e)           No termination of this Lease, repossession or reletting of the Leased Premises, exercise of any remedy or collection of any damages pursuant to this Section 23 shall relieve Tenant of any Surviving Obligations.

(f)           THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LEASE, AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR THE COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY (INCLUDING ANY ACTION TO RESCIND OR CANCEL THIS LEASE AND ANY CLAIMS OR DEFENSES ASSERTING THAT THIS LEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).  THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE UNDERSIGNED TO EXECUTE THIS LEASE.

(g)           Upon the occurrence of any Event of Default, Landlord shall have the right (but no obligation) to perform any act required of Tenant hereunder and, if performance of such act requires that Landlord enter the Leased Premises, Landlord may enter the Leased Premises for such purpose. Any such payment or performance by Landlord of Tenant's obligations under this Lease shall be on Tenant's account and at Tenant's sole cost and expense, and as Additional Rent hereunder.

(h)           No failure of Landlord (i) to insist at any time upon the strict performance of any provision of this Lease or (ii) to exercise any option, right, power or remedy contained in this Lease shall be construed as a waiver, modification or relinquishment thereof. A receipt by Landlord of any sum in satisfaction of any Monetary Obligation with knowledge of the breach of any provision hereof shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision hereof shall be deemed to have been made unless expressed in a writing signed by Landlord.

(i)           Tenant hereby waives and surrenders, for itself and all those claiming under it, including creditors of all kinds, (i) any right and privilege which it or any of them may have under any present or future Law to redeem any of the Leased Premises or to have a continuance of this Lease after termination of this Lease or of Tenant's right of occupancy or possession pursuant to any court order or any provision hereof, and (ii) the benefits of any present or future Law which exempts property from liability for debt or for distress for rent. Tenant hereby expressly waives the service of notice of intention to re-enter provided for in any statute now or hereafter in force, or to institute legal proceedings to that end, and also waives any and all right of redemption provided for in any statute now or hereafter in force in case Tenant shall be dispossessed by a judgment or by warrant of any court or judge. The terms "enter", "re-enter", "entry" or "re-entry", as used in this Lease, are not restricted to their technical legal meanings.

(j)           Except as otherwise provided herein, all remedies are cumulative and concurrent and no remedy is exclusive of any other remedy. Each remedy may be exercised at any time an Event of Default has occurred and is continuing and may be exercised from time to time. No remedy shall be exhausted by any exercise thereof.

(k)           Tenant shall pay all of Landlord's legal costs, expenses and reasonable attorneys' fees, expert fees and consultant fees in exercising any of Landlord's rights and remedies against Tenant, whether set forth herein or at law or equity.

(l)           If Landlord elects to terminate this Lease on account of any Event of Default on the part of Tenant, then Landlord may: (i) terminate any sublease, license, concession, or other consensual arrangement for possession entered into by Tenant and affecting any of the Leased Premises; or (ii) choose to succeed to Tenant's interest in such arrangement. No payment by a subtenant with respect to a sublease shall entitle such subtenant to possession of the Leased Premises after termination of this Lease and Landlord's election to terminate the sublease by the subtenant. If Landlord elects to succeed to Tenant's interest in such arrangement, then Tenant shall, as of the date of notice given by Landlord to Tenant of such election, have no further right to, or interest in, any rent or other consideration receivable under that arrangement.

24.           Notices.  All notices, demands, requests, consents, approvals, offers, statements and other instruments or communications required or permitted to be given pursuant to the provisions of this Lease shall be in writing and shall be deemed to have been given and received for all purposes when delivered in person or by Federal Express or other reliable 24-hour delivery service or five (5) business days after being deposited in the United States mail, by registered or certified mail, return receipt requested, postage prepaid, addressed to the other party at its address stated above or when delivery is refused. A copy of any notice given by Tenant to the originally named Landlord shall simultaneously be given by Tenant to Reed Smith LLP, 435 Sixth Avenue, Pittsburgh, Pennsylvania 15219, Attn: Chairman Real Estate Department, and to CIT Capital USA Inc., 505 Fifth Avenue, New York, New York 10017, Attn: General Counsel. For the purposes of this Section, any party may substitute another address stated above (or substituted by a previous notice) for its address by giving fifteen (15) days' notice of the new address to the other party, in the manner provided above.

25.           Estoppel Certificate. At any time upon not less than ten (10) days' prior written request by either Landlord or Tenant (the "Requesting Party") to the other party (the "Responding Party"), the Responding Party shall deliver to the Requesting Party a statement in writing, executed by an authorized officer of the Responding Party, certifying (a) that, except as otherwise specified, this Lease is unmodified and in full force and effect, (b) the dates to which Interim Rent, Minimum Rent, Additional Rent and all other Monetary Obligations have been paid, (c) that, to the knowledge of the signer of such certificate and except as otherwise specified, no default by either Landlord or Tenant exists hereunder, (d) such other matters as the Requesting Party may reasonably request, and (e) if Tenant is the Responding Party that, except as otherwise specified, there are no proceedings pending or, to the knowledge of the signer, threatened, against Tenant before or by any court or administrative agency which, if adversely decided, would materially and adversely affect the financial condition and operations of Tenant. Any such statements by the Responding Party may be relied upon by the Requesting Party, any Person whom the Requesting Party notifies the Responding Party in its request for the Certificate is an intended recipient or beneficiary of the Certificate, any Lender or their assignees and by any prospective purchase or mortgagee of any of the Leased Premises. Any certificate required under this Section 25 and delivered by Tenant shall state that, in the opinion of each person signing the same, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to the subject matter of such certificate, and shall briefly state the nature of such examination or investigation. In addition to the rights of Landlord and Tenant to obtain estoppel certificates, Tenant shall, upon Lender's request at any time, and from time to time during the existence of the Loan, and upon any foreclosure of the Loan or transfer in lieu thereof, deliver to Lender an estoppel certificate executed by Tenant, which Tenant shall provide in the same manner and with the same content and effect as estoppel certificates to be delivered by Tenant to Landlord, except that the estoppel certificate to Lender shall include such additional information as Lender may reasonably request.

26.           Surrender. Upon the expiration or earlier termination of this Lease, Tenant shall peaceably leave and surrender the Leased Premises to Landlord in the same condition in which the Leased Premises was at the commencement of this Lease, except as repaired, rebuilt, restored, altered, replaced or added to as permitted or required by any provision of this Lease, and except for ordinary wear and tear. Upon such surrender, Tenant shall (a) remove from the Leased Premises all personal property, Trade Fixtures and equipment (other than the Building Equipment) which is owned by Tenant or third parties other than Landlord and (b) repair any damage caused by such removal. The personal property, Trade Fixtures and equipment not so removed shall become the property of Landlord. Landlord may thereafter cause such property to be removed from the Leased Premises. The cost of removing and disposing of such property and repairing any damage to any of the Leased Premises caused by such removal shall be paid by Tenant to Landlord upon demand. Landlord shall not in any manner or to any extent be obligated to reimburse Tenant for any such property which becomes the property of Landlord pursuant to this Section 26. If Tenant holds over in possession after the expiration of the Term, then such holding over shall not be deemed to extend the Term or renew this Lease, but rather the tenancy thereafter shall continue as a tenancy at sufferance pursuant to the terms and conditions herein contained, at one hundred fifty percent (150%) of the Interim Rent or Minimum Rent in effect on the date of such expiration (plus the requirement that Tenant pay to Landlord all Additional Rent); and Tenant shall indemnify, defend, protect (with counsel selected by Landlord) and hold Landlord and all Indemnitees wholly free and harmless of, from and against any and all damages, losses, costs, expenses and claims arising therefrom, including reasonable attorneys' fees and costs. This Section 26 shall survive expiration, termination or rejection in bankruptcy of the Lease.

27.           No Merger of Title. There shall be no merger of the leasehold estate created by this Lease with the fee estate in any of the Leased Premises by reason of the fact that the same Person may acquire or hold or own, directly or indirectly, (a) the leasehold estate created hereby or any part thereof or interest therein and (b) the fee estate in any of the Leased Premises or any part thereof or interest therein, unless and until all Persons having any interest in the interests described in (a) and (b) above which are sought to be merged shall join in a written instrument effecting such merger and shall duly record the same.

28.           Books and Records.

(a)           Tenant shall keep adequate records and books of account with respect to the finances and business of Tenant generally and with respect to the Leased Premises, in accordance with GAAP consistently applied, and shall permit Landlord and Lender by their respective agents, accountants and attorneys, upon three (3) business days' prior written notice to Tenant, to visit and inspect the Leased Premises and examine (and make copies of) the records and books of account and to discuss the finances and business with the officers of Tenant, at such reasonable times as may be requested by Landlord; provided, however, that Landlord shall not make such request more than once during any consecutive twelve-month period. Upon the request of Lender or Landlord (either telephonically or in writing), Tenant shall provide the requesting party with copies of any information to which such party would be entitled in the course of a personal visit.

(b)           Tenant shall deliver to Landlord and to Lender within ninety (90) days of the close of each fiscal year, annual audited financial statements of Tenant prepared by a nationally recognized firm of independent certified public accountants. Tenant shall also furnish to Landlord within forty-five (45) days after the end of each of the three first calendar quarters in each calendar year unaudited financial statements and all other quarterly reports of Tenant, certified by, respectively, Tenant's chief financial officer. All financial statements of Tenant shall be prepared in accordance with GAAP consistently applied. All annual financial statements shall be accompanied by an opinion of said accountants stating that (A) there are no qualifications as to the scope of the audit and (B) the audit was performed in accordance with GAAP.

(c) All financial statements required under this Section 28 shall be accompanied by the certification of the president or a vice president of Tenant in the form attached hereto as Exhibit G, dated within five (5) days of the delivery of such statement, stating that (A) the affiant knows of no Event of Default, or event which, upon notice or the passage of time or both, would become an Event of Default which has occurred and is continuing hereunder or, if any such event has occurred and is continuing, specifying the nature and period of existence thereof and what action Tenant has taken or proposes to take with respect thereto and (B) except as otherwise specified in such affidavit, that Tenant has fulfilled all of its obligations under this Lease which are required to be fulfilled on or prior to the date of such affidavit.

29.           Non-Recourse as to Landlord. Anything contained herein to the contrary notwithstanding, any claim based on or in respect of any liability of Landlord under this Lease shall be enforced only against the Leased Premises and not against any other assets, properties or funds of (i) Landlord, (ii) Landlord's members, and any entity controlling, controlled by, or in common control of Landlord or Landlord's members, any director, officer, general partner, shareholder, limited partner, beneficiary, employee, consultant, contractor or agent of Landlord or any general partner of Landlord or any of its general partners (or any legal representative, heir, estate, successor or assign of any thereof), (iii) any predecessor or successor limited liability company, partnership or corporation (or other entity) of Landlord or any of its members, managers, general partners, shareholders, officers, directors, employees or agents, either directly or through Landlord or its general partners, shareholders, officers, directors, employees or agents or any predecessor or successor partnership or corporation (or other entity), (iv) any Lender, and any lender to a Person holding an interest in Landlord, (v) any Person affiliated with any of the foregoing, or any director, officer, employee or agent of any thereof; or (vi) the heirs, successors, personal representatives and assigns of any of the foregoing.

30.           Financing. If Landlord desires to obtain a Loan, Tenant shall, upon request of Landlord, supply any such Lender with such notices and information as Tenant is required to give to Landlord hereunder and to extend the rights of Landlord hereunder to any such Lender and to consent to such financing if such consent is requested by such Lender. Tenant shall execute a non-disturbance and attornment agreement, which may require Tenant to confirm that (a) Lender and its assigns will not be liable for any misrepresentation, act or omission of Landlord, (b) Lender and its assigns will not be subject to any counterclaim, demand or offset which Tenant may have against Landlord, (c) Lender and its assigns will not be bound by any amendment to this Lease not consented to in writing by Landlord, and (d) Landlord has assigned its interest in the Lease to Lender and no consent or approval of Landlord pursuant to this Lease shall be effective without Lender's consent.

31.           Subordination. This Lease, any memorandum of this Lease and Tenant's interest hereunder shall be subordinate to any Mortgage or other security instrument presently recorded or hereafter placed upon the Leased Premises by Landlord, and to any and all advances made or to be made thereunder, to the interest thereon, and all renewals, replacements and extensions thereof; provided, however, that such Mortgage or other security instrument (or a separate contemporaneous or subsequent instrument in recordable form duly executed by Lender and delivered to Tenant) shall include commercially reasonable subordination, non-disturbance and attornment provisions ("SNDA Provisions"), which Tenant will execute and deliver, without cost to Landlord or Lender. Such SNDA Provisions may provide, among other matters, that if any foreclosure proceedings are initiated by Lender or a deed in lieu is granted (or if any ground lease is terminated), Tenant agrees, upon written request of any such holder or any purchaser at foreclosure sale, to attorn and pay Rent to such party and to execute and deliver any instruments necessary or appropriate to evidence or effectuate such attornment, provided such Lender or purchaser at a foreclosure sale shall agree to accept this Lease and not disturb Tenant's occupancy, so long as Tenant does not default and fail to cure within the time permitted hereunder. The SNDA Provisions shall also include such other provisions as may be commercially reasonably requested by Lender. However, in the event of attornment, Lender shall not be: (i) liable for any act or omission of Landlord, or subject to any offsets or defenses which Tenant might have against Landlord (prior to such Lender becoming Landlord under such attornment), or(ii) liable for any security deposit or bound by any prepaid Rent not actually received by Lender. The SNDA provisions may also include provisions set forth in the last sentence of Section 30 of this Lease.

32.           Tax Treatment, Reporting. Landlord and Tenant each acknowledge that each shall treat this transaction as a true lease for state law purposes and shall report this transaction as a Lease for Federal income tax purposes. For Federal income tax purposes each shall report this Lease as a true lease with Landlord as the owner of the Leased Premises and Building Equipment and Tenant as the lessee of such Leased Premises and Building Equipment including: (1) treating Landlord as the owner of the property eligible to claim depreciation deductions under Section 167 or 168 of the Code with respect to the Leased Premises and Building Equipment, (2) Tenant reporting its Rent payments as rent expense under Section 162 of the Code, and (3) Landlord reporting the Rent payments as rental income.

33.           Miscellaneous.

(a)           The Section headings in this Lease are used only for convenience in finding the subject matters and are not part of this Lease or to be used in determining the intent of the parties or otherwise interpreting this Lease.

(b)           As used in this Lease, the singular shall include the plural and any gender shall include all genders as the context requires and the following words and phrases shall have the following meanings: (i) "including" shall mean "including without limitation"; (ii) "provisions" shall mean "provisions, terms, agreements, covenants and/or conditions"; (iii) "lien" shall mean "lien, charge, encumbrance, title retention agreement, pledge, security interest, mortgage and/or deed of trust"; (iv) "obligation" shall mean "obligation, duty, agreement, liability, covenant and/or condition"; (v) "any of the Leased Premises" shall mean "the Leased Premises or any part thereof or interest therein"; (vi) "any of the Land" shall mean "the Land or any part thereof or interest therein"; (vii) "any of the Improvements" shall mean "the Improvements or any part thereof or interest therein"; and (viii) "any of the Building Equipment" shall mean "the Building Equipment or any part thereof or interest therein".

(c)           Any act which Landlord is permitted to perform under this Lease may be performed at any time and from time to time by Landlord or any person or entity designated by Landlord, Each appointment of Landlord as attorney-in-fact for Tenant hereunder is irrevocable and coupled with an interest. Except as otherwise specifically provided herein, Landlord shall not unreasonably withhold or delay its consent whenever such consent is required under this Lease, except that with respect to any assignment of this Lease or subletting of the Leased Premises not expressly permitted by the terms of this Lease. Time is of the essence with respect to the performance by Tenant of all of its obligations under this Lease.

(d)           Landlord shall in no event be construed for any purpose to be a partner, joint venturer or associate of Tenant or of any subtenant, operator, concessionaire or licensee of Tenant with respect to any of the Leased Premises or otherwise in the conduct of their respective businesses.

(e)           This Lease and any documents which may be executed by Tenant on or about the effective date hereof at Landlord's request constitute the entire agreement between the parties and supersede all prior understandings and agreements, whether written or oral, between the parties hereto relating to the Leased Premises and the transactions provided for herein. Landlord and Tenant are business entities having substantial experience with the subject matter of this Lease and have each fully participated in the negotiation and drafting of this Lease. Accordingly, this Lease shall be construed without regard to the rule that ambiguities in a document are to be construed against the drafter.

(f)           This Lease may be modified, amended, discharged or waived only by an agreement in writing signed by the party against whom enforcement of any such modification, amendment, discharge or waiver is sought.

(g)           Subject to the terms and provisions of Section 20 hereof, the covenants of this Lease shall run with the land and bind Tenant, its successors and assigns and all present and subsequent encumbrancers and subtenants of any of the Leased Premises, and shall inure to the benefit of Landlord, its successors and assigns. If there is more than one Tenant, the obligations of each shall be joint and several.

(h)           If any one or more of the provisions contained in this Lease shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Lease, but this Lease shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

(i)           This Lease shall be governed by and construed and enforced in accordance with the Laws of the State.

(j)           Except as otherwise expressly stated in this Lease, any consent or approval required to be obtained from Landlord may be granted by Landlord in its sole discretion. In any instance in which Landlord agrees not to act unreasonably, Tenant hereby waives any claim for damages against or liability of Landlord which is based upon a claim that Landlord has unreasonably withheld or unreasonably delayed any consent or approval requested by Tenant, and Tenant agrees that its sole remedy shall be an action for declaratory judgment. If with respect to any required consent or approval Landlord is required by the express provisions of this Lease not to unreasonably withhold or delay its consent or approval, and if it is determined in any such proceeding referred to in the preceding sentence that Landlord acted unreasonably, the requested consent or approval shall be deemed to have been granted; however, Landlord shall have no liability whatsoever to Tenant for its refusal or failure to give such consent or approval. Tenant's sole remedy for Landlord's unreasonably withholding or delaying, consent or approval shall be as provided in this Section.

(k) Landlord and Tenant each represents to the other that no broker has been involved in this Lease. Landlord and Tenant agree that if any claim for brokerage commissions are ever made against Landlord or Tenant in connection with this Lease, all claims shall be handled and paid by the party whose actions or alleged commitments form the basis of such claim.

(l) This Lease may be executed in one or more counterparts, each of which shall constitute an original, and all of which together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, this Lease Agreement is executed as of the day and year first above written.

LANDLORD:

CIT CRE LLC, a Delaware limited liability company

By:  /s/ Roy Rosenbaum                     

        Roy Rosenbaum

        Vice President

TENANT:

LMI FINISHING, INC., an Oklahoma corporation

By: /s/ Lawrence E. Dickinson            

Title:   Vice President

EXHIBIT A

LEASED PREMISES

Address	City	State
2104 North 170th East Avenue	Tulsa	Oklahoma

[attach legal description]

EX-10.9

Exhibit 10.9

MASTER AGREEMENT

between

APB WINGLETS COMPANY, LLC.,

D.B.A. AVIATION PARTNERS BOEING

and

LMI AEROSPACE, INC.

APB-LMI-001

TABLE OF CONTENTS

TITLE PAGE

TABLE OF CONTENTS

AMENDMENT PAGE

RECITAL PAGE

1.0	DEFINITIONS			1
2.0	TERM OF AGREEMENT, ORDERS			3
	2.1	Term of Agreement		3
	2.2	Follow-on Models		3
	2.3	Order Quantity		3
	2.4	Issuance of Orders		4
	2.5	Orders Containing Additional Terms		4
	2.6	Written Authorization to Proceed		4
	2.7	Rejection of Purchase Order		5
3.0	TITLE AND RISK OF LOSS			5
4.0	DELIVERY PROCESS/INVOICE EVENT			5
	4.1	Delivery Requirements		5
	4.2	Delivery Process		5
	4.3	Shipment Notification		5
	4.4	Non-Excusable Delay		6
		4.4.1.	Delivery Performance	6
		4.4.2.	Notification	6
		4.4.3.	Mitigation	6
		4.4.4.	APB’s Rights	6
	4.5	Notice of Labor Disputes		7
5.0	ON-SITE REVIEW AND RESIDENT REPRESENTATIVES			7
	5.1	Review		7
	5.2	Resident Representatives		7
6.0	PAYMENT/PRICING			8
	6.1	Product Pricing		8
	6.2	Payment		8
	6.3	Amortization of Nonrecurring Price		8
7.0	PACKING AND SHIPPING			8
	7.1	Packaging		8
	7.2	General		9
	7.3	Requirements for each Shipment		9
	7.4	Tariff Declaration		9
	7.5	Unit Container Markings		9
	7.6	Shipping Container Markings		9
8.0	QUALITY ASSURANCE, INSPECTION, REJECTION, & ACCEPTANCE			10
	8.1	QA/Inspection/PMA		10
	8.2	Quality Management System		10
		8.2.1.	Supplier Quality Plan	10
		8.2.2.	Inspection	10

i

Master Agreement No. APB-LMI-001 

	8.3	Federal Aviation Administration or Equivalent Government Agency Inspection			11
	8.4	APB’s Inspection, Acceptance and Rejection			11
	8.5	Certificate of Conformity (C of C)			12
	8.6	Airworthiness Tag Requirement			12
	8.7	Retention of Records; Compliance with Standards			12
	8.8	Digital Data Control System			12
	8.9	First Article Inspection			13
	8.10	Tool Control System			13
	8.11	Direct Sales/Regulatory Approvals			13
9.0	PRODUCTION RATE				13
10.0	CHANGES				13
	10.1	Change Orders			13
	10.2	Examination of Records for Changes			14
	10.3	Computation of Equitable Adjustment			14
	10.4	Obsolescence			14
	10.5	Configuration			14
		10.5.1	Configuration Changes		15
	10.6	Planning Schedule			15
11.0	ACCELERATION/DECELERATION AT NO COST				15
12.0	PRODUCT SUPPORT AND ASSURANCE				15
	12.1	Warranty			15
	12.2	Insurance			16
		12.2.1	Products and Completed Operations Liability		16
		12.2.2	Property Insurance		17
			12.2.2.1	Certificate of Insurance	17
			12.2.2.2	Notice of Damage or Loss	17
	12.3	Manufacturing/Design Indemnities			17
	12.4	Notice of Claim			18
13.0	TERMINATION FOR CONVENIENCE				18
	13.1	Basis for Termination; Notice			18
	13.2	Termination Instructions			18
	13.3	LMI’s Claim			19
	13.4	Failure to Submit a Claim			19
	13.5	Partial Termination			19
	13.6	Exclusions or Deductions			19
	13.7	Partial/Payment			20
	13.8	LMI’s Accounting Practices			20
	13.9	Records			20
14.0	EVENTS OF DEFAULT AND REMEDIES				20
	14.1	Events of Default			20
	14.2	Remedies			21

ii

Master Agreement No. APB-LMI-001 

15.0	EXCUSABLE DELAY		22
16.0	SUSPENSION OF WORK		23
17.0	TERMINATION OR CANCELLATION AND INDEMNITY AGAINST
	SUBCONTRACTOR CLAIMS		23
18.0	ASSURANCE OF PERFORMANCE		23
	18.1	LMI to Provide Assurance	23
	18.2	Meetings and Information	24
19.0	LEAD TIMES		24
20.0	PERFORMANCE VISIBILITY		24
21.0	RESPONSIBILITY FOR APB PROPERTY		24
22.0	LIMITATION OF LMI’S RIGHT TO ENCUMBER ASSETS		24
23.0	PROPRIETARY INFORMATION AND MATERIALS		25
	23.1	License of LMI’s Background Proprietary Information and Inventions	27
24.0	COMPLIANCE WITH LAWS		28
	24.1	LMI’s Obligation	28
	24.2	Export Controls	28
25.0	INTEGRITY IN PROCUREMENT		28
26.0	INFRINGEMENT		28
27.0	NOTICES		29
	27.1	Addresses	29
	27.2	Effective Date	29
	27.3	Approval or Consent	29
28.0	PUBLICITY		29
29.0	RESPONSIBILITY FOR PERFORMANCE		29
	29.1	Flowdown of Requirements	29
	29.2	Performance during Disputes	30
	29.3	Disputes	30
	29.4	Subcontracting	30
	29.5	Reliance	31
	29.6	Assignment	31
30.0	PRODUCT SUPPORT		31
	30.1	Policy	31
	30.2	Scope	31
	30.3	AOG Response	32
	30.4	Routine/ Class II Response	32
	30.5	Designation by APB	32
	30.6	Reclassifications or Re-exercises	32
	30.7	Spare Parts Pricing	32
	30.8	Packaging of Spare Parts	32
	30.9	Special Handling	33
	30.10	LMI’s Spares Point of Contact	33
	30.11	Communication Response Times	33
	30.12	General Product Support Requirements	33

iii

Master Agreement No. APB-LMI-001 

		30.12.1	Resolution of Product Warranty Claims	33
		30.12.2	Technical Assistance Requests-Product Manufacture	34
		30.12.3	Agreement to Manufacture and Sell	34
31.0	TOOLING			34
32.0	APB-OWNED TOOLING			34
33.0	STATUS REPORTS/REVIEWS			35
34.0	APB-FURNISHED MATERIAL AND DATA			35
35.0	INVENTORY AT CONTRACT COMPLETION			35
36.0	CONFIGURATION CONTROL OF PRODUCTS			35
37.0	NON-WAIVER			36
38.0	HEADINGS			36
39.0	PARTIAL INVALIDITY			36
40.0	APPLICABLE LAW; JURISDICTION			36
41.0	AMENDMENT			36
42.0	LIMITATION			36
43.0	LITIGATION			37
	43.1	Rebates		37
44.0	ENTIRE AGREEMENT/ORDER OF PRECEDENCE/SURVIVAL			37
	44.1	Entire Agreement		37
	44.2	Incorporated by Reference		37
	45.3	Order of Precedence		37
45.0	SURVIVAL			38

iv

Master Agreement No. APB-LMI-001 

AMENDMENTS/ADDENDUMS

Amend Number Description Date Approval

v

Master Agreement No. APB-LMI-001 

MASTER AGREEMENT

THIS MASTER AGREEMENT is entered into as of ___________, by and between LMI AEROSPACE, INC., ("LMI') with Corporate Headquarters in St. Charles, Missouri, doing business in Savannah, Georgia, and APB Winglets Company, LLC. ("APB"), D.B.A. Aviation Partners Boeing, a Limited Liability Company (LLC) with its principal office in Seattle, Washington.

PREAMBLE

A. APB designs, purchases, tests, certifies, installs, sells, and supports Blended Winglet Systems. A Blended Winglet system is a curved wingtip device and all associated hardware installed on Boeing commercial aircraft.

B. LMI desires to provide procurement, manufacturing, and kitting of wing modification parts and assemblies for the 767-300ER/F aircraft in accordance with the terms of this Agreement.

Now therefore, in consideration of the mutual covenants set forth herein, the parties agree as follows:

1.0                      DEFINITIONS

The definitions set forth below shall apply to this Agreement and any Order. Words importing the singular number shall also include the plural number and vice versa and reference to "including" shall mean "including but not limited to."

A.	"Agreement" means this Master Agreement as amended from time to time by addendum or otherwise.
B.	“Aircraft" means airplanes modified by APB containing Product(s) supplied by LMI to APB under this Agreement.
C.	"Airplane-On-Ground" or "AOG" means the highest Spare Part priority.
D.	"APB" means APB Winglets Company, LLC.
E.	"APB Proprietary Spare" means any Spare Part which is manufactured (i) by APB, or (ii) to APB's detailed designs with APB's authorization or (iii) in whole or in part using APB's proprietary materials.
F.	"Assembly" means one or more machined or formed parts that are mechanically assembled.
G.	“Correction" means Repair, correction or provision of a defective Product to bring it into compliance with all requirements of an applicable warranty, or at LMI's option, replacement of such Product with a new Product that meets all requirements of the warranty.

1

Master Agreement No. APB-LMI-001

H.	"Customer" means any owner, lessee, operator or user or designee of such owner, lessee or operator of an aircraft or any Product and any other individual, partnership, corporation or entity which has or acquires any interest in any Product from, through or under APB.
I.	"Detail Part" means a subcomponent of an Assembly or Kit.
J.	"Drawing" means an electronic or manual depiction of graphics or technical information representing a Product or any part thereof and which includes the parts list and specifications relating thereto.
K.	"First Article" ("FA") means the first Shipset of Products to be shipped in place to APB.
L.	"First Part Qualification" means the first representative parts or kits manufactured utilizing production processes to verify that the production processes are capable of yielding parts in compliance with the respective Engineering drawing and specifications.
M.	"FAA" means the United States Federal Aviation Administration or any successor agency thereto.
N.	"FAR" means the Federal Aviation Regulations in effect on the date of this Agreement.
O.	"In-Production Requirement" means any Spare Part which is in the current engineering configuration for the Product and is used on an aircraft model currently being modified.
P.	"Kit" means a collection of machined or formed parts manufactured according to a specific Bill of Material and usually supplied as one part, or kit, number, including both right hand and left hand components.
Q.	"LMI" has the meaning given in the Preamble.
R.	"Material Representative" means the individual designated from time to time by APB as being primarily responsible for interacting with LMI regarding this Agreement and any Order.
S.	"Non-Production Requirement" means any Spare Part which is no longer being manufactured in production or is in a non-current engineering configuration for the Product.
T.	"Order" means each purchase order issued by APB and accepted by LMI under the terms of this Agreement.
U.	"Product" means goods, including components and parts thereof, services, documents, data, software, software documentation and other information or items furnished or which may be furnished to APB under any Order, including Tooling, with respect to wing modification parts or kits, for the 767-300-ER/F wing modification program.

2

Master Agreement No. APB-LMI-001

V.	"Production Phase" means the period after which APB has obtained an STC for the 767-300ERF winglet system.
W.	"Repair" means to make a Product serviceable by replacing or processing failed or damaged parts.
X.	"Repairable Product" means a Spare Parts classification assigned by APB. Indicates that a failed or damaged Product can be restored to a serviceable condition.
Y.	"Routine" means a Spare Part required in LMI's normal lead-time.
Z.	"Shipset" means the total quantity of Product necessary for one (1) airplane. Left hand wing modification parts and right hand wing modification parts are necessary for one (1) airplane.
AA.	"Spare Part" ("Spares") means any Product, regardless of whether the Product is a wing modification Kit or Detail Part, which is intended for use or sale as a spare part.
BB.	"Supplemental Type Certificate" or "STC" means a certification vehicle obtained from the FAA used by third parties to supplement the OEM Type Certificate for an airplane model.

2.0                      TERM OF AGREEMENT, ORDERS

2.1                      Term of Agreement

This Agreement is in effect for five years, commencing as of the date referenced above. It can be extended by mutual agreement at any time, but not later than 180 days prior to its expiration. Either party may initiate the extension discussion through notifying the other party of its desire to extend the Agreement.

2.2                      Follow-on Models

This Agreement is not intended to extend to any follow-on models to the 767 family, should APB elect to undertake the development of those models. APB presently anticipates that follow on model work packages will be subject to a separate RFQ process. Assuming satisfactory performance by LMI under the Agreement, LMI will have the right to participate in any such RFQ.

2.3                      Order Quantity

Subject to Section 6.1 regarding final determination of prices, APB agrees to purchase from LMI 100 Shipsets of wing modification machined parts for the 767-300ER and 767-300F program. APB has the option to order 200 additional Shipsets upon the terms and condition set forth in this Agreement, at the Base Price finally determined according to Section 6.1. LMI will be prepared to make initial deliveries on or about February 1, 2008.

3

Master Agreement No. APB-LMI-001

2.4                      Issuance of Orders

APB expects to issue Orders to LMI annually for Products. For the first year only there will be at least two orders, one initial Order for two Shipsets to support flight testing, and one Order after testing and certification is completed for the balance of the first year's production articles. Thereafter, Orders will generally be issued one per calendar year, generally six months before the beginning of the calendar year. Each Order shall contain a description of the Products ordered, a reference to the applicable specifications and Drawings, the quantities and prices, the delivery schedule, the terms and place of delivery, and any special conditions.

Each Order shall be governed by and be deemed to include the provisions of this Agreement. The following note will be contained in any Order to which this Agreement is applicable:

"Order is subject to Master Agreement between APB and LMI dated [] as amended from time to time."

Any terms and conditions on the face of the Order which conflict with or are additional requirements to this Agreement will take precedence over this Agreement.

2.5                      Orders Containing Additional Terms

To the extent any Order includes special conditions, special delivery terms or any other terms or conditions that are additional to or different from those set forth in this Agreement, such Order is APB's offer to LMI in respect of such additional terms. Acceptance by LMI is strictly limited to the additional terms in the Order. APB will not be bound by any term or condition that is different from or in addition to the provisions of the Order, whether or not such term or condition will materially alter the Order. LMI's commencement of performance or acceptance of the Order in any manner shall conclusively evidence LMI's acceptance of the Order as written. APB may revoke any Order prior to APB's receipt of LMI's written acceptance or LMI's commencement of performance.

2.6                      Written Authorization to Proceed

The Material Representative may give written authorization on behalf of APB to LMI to commence performance before APB issues an Order. If such written authority to proceed or "ATP" specifies that an Order will be issued, APB and LMI shall proceed as if an Order had been issued. The parties shall promptly consult and use commercially reasonable efforts to agree on any open terms that would otherwise be required in an Order. If APB does not specify in its ATP that an Order shall be issued, APB's obligation is strictly limited to the terms of the ATP.

LMI may not proceed with any work under this Agreement without an explicit written ATP or written Order from APB. LMI may elect to proceed at risk prior to receipt of any such ATP or Order. In such case APB accepts no liability whatsoever for costs or other obligations incurred should an ATP or Order not be issued for any reason.

4

Master Agreement No. APB-LMI-001

2.7                      Rejection of Purchase Order

Any rejection by LMI of an Order shall be in writing and specify the reasons for rejection and any changes or additions that would make the Order acceptable to LMI. LMI may not reject (and accordingly shall accept) any Order that complies with the provisions of this Agreement and does not include additional terms or conditions.

3.0                      TITLE AND RISK OF LOSS

Title to and risk of any loss of or damage to the Products shall pass in accordance with Ex Works (INCOTERMS 2000). Accordingly, title and risk of loss shall pass to APB when the Products have been completed, passed inspection by LMI's final inspectors in accordance with Article 8.0, invoiced to APB, made available for shipment, and placed in storage at its facilities in Savannah, Georgia in accordance with Article 4.0. LMI will be liable to APB for any damage to the Products prior to pick up by the carrier that is caused by LMI's fault or negligence.

4.0                      DELIVERY PROCESS/INVOICE EVENT

4.1                      Delivery Requirements

LMI shall make all deliveries to or at the direction of APB strictly in accordance with the quantities, delivery schedule, and other requirements specified in the applicable Order. LMI may not make early deliveries or partial deliveries without APB's prior written authorization. Deliveries inconsistent with the terms of an Order may be returned to LMI at LMI's sole expense.

4.2                      Delivery Process

APB will request LMI to "Ship-in-Place" Products according to the delivery schedule set fort in the applicable Purchase Order. Ship-in-Place means that LMI has completed and invoiced APB for the Products in accordance with the Order schedule, and risk and title has passed to APB, however, the physical location of the Products is at LMI's facilities in Savannah, Georgia. For Ship-in-Place, LMI shall package the completed Products and store in an LMI-controlled secure inventory warehouse.

4.3                      Shipment Notification

APB will notify LMI when APB-owned inventory is required to be shipped to APB Customers. A shipment notification form and instructions will be provided to LMI at least four days prior to the scheduled ship date. LMI will confirm receipt of the shipment notification. A customs invoice will be supplied by LMI as required. APB shall make arrangements for the transport of Products from EXW LMI Savannah, Georgia to the destination designated by APB in the shipment notification. Payment in accordance with Article 6.0 of this Agreement shall be applicable from the date of Ship-in-Place and not the date of actual delivery to APB's Customers.

5

Master Agreement No. APB-LMI-001

4.4  Non-Excusable Delay 4.4.1 Delivery Performance

4.4.1                      Delivery Performance

Delivery shall be in accordance with the schedule set forth in the applicable Order. Any failure by LMI to meet a delivery schedule that is not an Excusable Delay as defined Article 15.0 shall be considered a "Non-Excusable Delay".

4.4.2                      Notification

If a Non-Excusable Delay is expected to occur or occurs that causes or may cause a delay in the performance by LMI of its obligations under the Agreement, LMI shall:

a.	notify APB of such Non-Excusable Delay immediately upon becoming aware of the same;
b.	describe the event causing the Non-Excusable Delay in reasonable detail;
c.	provide an evaluation of the obligations affected;
d.	indicate the probable duration and extent of such delay;
e.	notify APB of the measures that will be taken; and
f.	submit to APB an action plan to recover such delay.

4.4.3 Mitigation

If, as a consequence of a Non-Excusable Delay, LMI fails or anticipates that it shall fail to meet a delivery schedule, LMI shall use its best efforts, including overtime, to mitigate such delay. LMI shall be responsible for and shall, subject to the provisions of Section 4.4.4, pay all direct costs which may be incurred by APB as a consequence of the Non-Excusable Delay. LMI shall send the Product by another means of transportation and/or to a destination other than the one specified in the Agreement, at LMI's expense, in order to minimize delay

4.4.4                      APB's Rights

In the event of a Non-Excusable Delay during the Production Phase, APB may claim as liquidated damages the following:

a. *

b. *

(i) *

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

6

Master Agreement No. APB-LMI-001

(ii) *

(iii) *

The foregoing remedy is in addition to all other rights and remedies APB may have at law and/or under this Agreement, including under Article 14.0 "Events of Default and Remedies".

4.5                      Notice of Labor Disputes

LMI shall immediately notify APB of any actual or potential labor dispute that may disrupt the timely performance of an Order and/or impair the quality of any Product to be delivered. LMI shall include the substance of this Section 4.5, including this sentence, in any subcontract relating to an Order if a labor dispute involving the subcontractor would have the potential to delay the timely performance of such Order. Each subcontractor, however, shall only be required to give the necessary notice and information to its next higher-tier subcontractor.

5.0                      ON-SITE REVIEW AND RESIDENT REPRESENTATIVES

5.1                      Review

At APB's request, LMI shall provide at APB's facility or at a place designated by APB, a review explaining the status of the Order, actions taken or planned relating to the Order and any other relevant information. Nothing herein may be construed as a waiver of APB's rights to proceed against LMI because of any delinquency.

APB's authorized representatives may enter LMI's plant at all reasonable times to conduct preliminary inspections and tests of any Product and work-in-process. LMI shall include in its subcontracts issued in connection with an Order a like provision giving APB the right to enter the premises of LMI's subcontractors when requested by APB. LMI may accompany APB to LMI's subcontractors.

5.2                      Resident Representatives

APB may in its discretion and for such periods as it deems necessary assign resident personnel at LMI's facilities. LMI shall furnish, free of charge, all office space, secretarial service, and other facilities and assistance reasonably required by APB's representatives at LMI's plant. The resident team will provide communication and coordination to ensure timely performance of the Order. APB's resident team shall be allowed access to all work areas relevant to wing mod kit component production or kitting, order status reports and management review necessary to assure timely performance and conformance with the requirements of each Order. Notwithstanding such access, and all other inspections, reviews and the like contemplated by this Agreement, LMI shall be solely responsible to perform in accordance with each Order.

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

7

Master Agreement No. APB-LMI-001

6.0                      PAYMENT/PRICING

6.1                      Product Pricing

Estimated prices for Products scheduled for delivery under this Agreement are set forth in Attachment A. Prices are in United States dollars, EXW (INCOTERMS 2000) LMI Aerospace, Inc., Savannah, Georgia. Prices include an estimated Base Price and an estimated Nonrecurring Price. It is understood between the parties that the price estimates, which are provided by LMI, are based on a Kit of parts deemed similar to the 767 program. Within a reasonable time after receipt of engineering drawings and finalization of designs post flight test, LMI will submit its final Base Price and final Nonrecurring Price on a revised Attachment A which will be considered an amendment to this Agreement if accepted by APB. APB will indicate its acceptance by countersigning the revised Attachment A and returning it to LMI.

If the Base Price or the Nonrecurring Price for the final engineered parts is substantially higher than LMI's estimated price, then LMI and APB will review engineering changes on a part by part basis versus the quoted estimated price, and endeavor to resolve through discussion the price differences.

Under such provisions, if the parties are unable to reach agreement on final prices, APB may exercise its right to request price estimates from third parties to produce Products or components of Products. If APB is able to obtain a lower price quotation of either the Base Price or the Nonrecurring Price, then APB may elect to procure Products from third parties, and will not be obligated to purchase any further Shipsets under Section 2.3.

6.2                      Payment

Unless otherwise provided in the applicable Order, payment of the Base Price will be paid Net 30 days from date of invoice except as otherwise agreed to by the parties. Invoicing will take place on completion of the Product and submission of Certificate of Conformity ("C of C"). All payments will be made by check, and are subject to adjustment for shortages, credits and rejections.

6.3                      Amortization of Nonrecurring Price

Any applicable nonrecurring costs will be amortized over the first 100 Shipsets. Any subsequent nonrecurring costs (caused by engineering change, for example) will be mutually negotiated between the parties and amortized over the Shipsets remaining in the initial 100 Shipset buy.

7.0                      PACKING AND SHIPPING

7.1                      Packaging

The prices shown for Winglet Modification Kits in Attachment A include packaging costs and all materials and labor required to package Products. Packaging shall be furnished by LMI in accordance with D37520-0 through -4, "Boeing Supplier Part Protection Guide".

8

Master Agreement No. APB-LMI-001

7.2                      General

LMI shall prepare for shipment and suitably pack all Products to prevent damage or deterioration and comply with any special instructions stated in the applicable Order. APB shall pay no charges for preparation, packing, crating or cartage unless stated in the applicable Order. Consistent with EXW (Incoterms 2000), LMI shall be responsible for making Products available to the freight forwarder and loading the Products on departure and bear the risks and costs of such loading.

APB may elect, if reasonable conditions exist, to request LMI to prepay, and if APB so elects LMI shall prepay, shipping and freight-forwarder costs, and invoice APB separately for these additional costs. Where APB has not identified a carrier, APB shall request LMI to secure the lowest transportation rates and comply with the appropriate carrier tariff for the mode of transportation specified by APB.

7.3                      Requirements for each Shipment

Unless otherwise directed by APB, all standard routing shipments forwarded on one day must be consolidated to the extent practical. Each container must be consecutively numbered and marked as set forth herein and below. Container and Order numbers must be clearly set out on the applicable bill of lading. Two copies of the packing sheets must be attached to the No. 1 container of each shipment and one copy in all other individual containers. Each pack sheet must include as a minimum the following: (a) LMI's name, address and phone number; (b) Order and item number; (c) ship date for the Products; (d) total quantity shipped and quantity in each container, if applicable; (e) legible pack slip number; (f) nomenclature; (g) unit of measure; (h) name and address of consignee if other than APB; (i) warranty data and certifications as applicable; (j) rejection tag, if applicable; (k) LMI's Certificate of Conformity; and (1) identification of optional material used, if applicable.

7.4                      Tariff Declaration

LMI may not make any declaration concerning the value of the Products shipped, except on Products where the tariff rating or rate depends on the released or declared value, and in such event the value shall be released or declared as determined by APB

7.5                      Unit Container Markings

The following markings shall be included on each unit container: (a) LMI's name; (b) LMI's part number, if applicable; (c) APB part number, if applicable; (d) part nomenclature; (e) Order number or identification of ATP; (f) quantity of Products in container; (g) unit of measure; (h) serial number, if applicable; (i) date (quarter/year) identified as assembly or rubber cure date, if applicable; (j) precautionary handling instructions or marking as required.

7.6            Shipping Container Markings

The following markings/labels shall be included on each shipping container: (a) name and address of consignee; (b) name and address of LMI (as consignor); (c) Order number; (d) part number as shown on the Order; (e) quantity of Products in container; (f) unit of measure; (g) box number; (h) total number of boxes in shipment; and, (i) precautionary handling, labeling or marking as required.

9

Master Agreement No. APB-LMI-001

8.0                      QUALITY ASSURANCE, INSPECTION, REJECTION, & ACCEPTANCE

8.1                      QA/Inspection/PMA

All work performed under this Agreement shall be in accordance with the requirements of the FAA approved Master Drawing List for each Product as maintained by APB.

FAA conformity on the first two Shipsets of Product will be required prior to shipment. The Conformity inspection will be performed by an FAA designee. The FAA designee verifies and documents product configuration and compliance with engineering requirements. Thereafter, APB will issue a PMA licensing letter to LMI to produce Products in accordance with APB's STC. LMI is required to obtain FAA PMA for subsequent Shipsets of all Products prior to their shipment.

8.2                      Quality Management System

LMI shall maintain a Quality Management System that meets or exceeds AS9100 Rev. B/ISO 9001:2000, or equivalent quality system, as amended from time to time, which is incorporated herein and made a part hereof by this reference and as applicable to Customer and/or regulatory authority standards. As part of this Quality Management System, LMI shall provide and maintain without additional charge to APB, an inspection system that complies with all specifications stated in this Agreement or the applicable Order. The Quality Management System will meet or exceed the requirements of Title 14 of the Code of Federal Regulations (14CFR) § 21.303(h) (1) through (9).

LMI shall tender to APB for acceptance only Products that have been provided and processed by approved sources in accordance with all specifications reflected in engineering drawings. All controlled finished and special processes must be performed in accordance with LMI special process approval as defined in the applicable Quality Inspection Plan as required by Section 8.2.1. If applicable, any proprietary processing must be performed by Boeing D1-4426 approved sources.

LMI shall perform a verification of engineering drawing dimensional requirements on all Products or shall submit a statistically valid sampling plan to APB for approval. LMI's personnel shall perform the inspection, witness the inspection, or have an APB approved inspection delegation procedure.

8.2.1                   Supplier Quality Plan

A Supplier Quality Plan is required for all Products supplied under this Agreement that meets the standards of AS9100 Section 7.1. Prior to manufacture of the Products, LMI will provide a mutually agreed upon Quality Plan. Copies of the plan shall be made available to APB's Customer and government representative upon request.

8.2.2                   Inspection

As part of the Quality Plan, LMI shall prepare records evidencing all inspections made under the system and the outcome of such inspections. These records shall be complete and made available in a timely manner to APB upon request during performance of the work under the Order and for seven years afterwards.

10

Master Agreement No. APB-LMI-001

APB may perform reviews and evaluations as reasonably necessary to ascertain compliance with the requirements of this Agreement. Such reviews and evaluations shall be conducted in a manner that will not unduly delay work under any applicable Order. The parties acknowledge that, notwithstanding such reviews, LMI controls the day-to-day production, delivery and associated documentation of its work, and therefore, APB's right of review, whether exercised or not, does not release LMI of any of its obligations of testing, inspection, quality control and associated documentation.

8.3                      Federal Aviation Administration or Equivalent Government Agency Inspection

APB, APB's Customers and the FAA or any equivalent government agencies or regulatory agencies shall have the right to inspect and test the material and workmanship of all the Products, review relevant quality related records and audit LMI at all places and times including, when practical, during the period of manufacture or provision of services. If any such audit, inspection or test is made on the premises of LMI, LMI shall furnish, without additional charge to the foregoing parties, reasonable facilities and assistance for the safe and convenient performance of audit, inspection or test.

8.4                      APB's Inspection, Acceptance and Rejection

Nonconforming Product: Notwithstanding (i) prior inspection, (ii) payment for, or (iii) use of the Products ordered hereunder, APB shall have the following rights with respect to any Products that do not conform to all requirements of the Order:

(i) APB shall have the right to reject such Product(s). Rejection must occur within 60 days of delivery to APB's Customer; failure to reject within such period shall be deemed acceptance of the Product (but such failure to reject, or any other acceptance of the Products or inspections in connection therewith, shall be without prejudice to rights under LMI's warranty). All such rejected Product(s) shall be returned to LMI at LMI's risk and expense, transportation collection and declared at full value unless LMI advises otherwise, for full credit or refund, at APB's option. The rejected Product(s) returned to LMI shall not be replaced by LMI except upon written instructions from APB. Rejected Product(s) shall not again be tendered to APB for acceptance without written disclosure of prior rejection(s);

(ii) Nonconforming Products may be repaired by APB or by a third party selected by APB and retained by APB at an equitable reduction in price, provided that the parties have first discussed and determined the liability as being LMI's. Should the parties agree that APB can proceed with the repair of the nonconforming Product(s), all terms and conditions of the Order shall remain in full force and effect as to the Products furnished by LMI; and.

In the event of a dispute as to liability, APB or third party will proceed diligently with any reasonable repairs, having notified LMI of its intention to do so, pending final settlement of the dispute.

(iii) LMI will immediately notify APB if LMI or its subcontractors become aware of nonconforming Products after they have been shipped.

11

Master Agreement No. APB-LMI-001

8.5                      Certificate of Conformity (C of C)

LMI shall supply and include with each shipment a Certificate of Conformity (C of C) attesting to the release of the Products included in the shipment as follows:

· Supplier Name and address

· Date

· Packing Sheet/list or C of C number

· Order number

· Identification of "Authorization to Ship" documents (in absence of Order)

· Part Nomenclature

· Part Number

· Serial Numbers (if applicable)

· Quantity of material, parts or kits to ship

· Any applicable Discrepant Product document numbers, (i.e. APB or Customer rejection tag number)

· Authorized LMI representation, name or stamp and signature

· If applicable, an APB Source Inspection stamp and date of inspection.

All Products shall be marked with date of manufacture.

8.6                      Airworthiness Tag Requirement

LMI shall include with each shipment an FAA Airworthiness Tag 8130-3 executed by LMI as the designee for all APB designed products.

8.7                      Retention of Records; Compliance with Standards

LMI will retain on file all C of C's and evidence of conformance documents for all Product for seven years from delivery of Product. LMI affirms and represents that the Products meet and/or exceed all applicable APB, government, and/or LMI design control documents, inspection, validation, and functional test requirements, unless otherwise noted in APB disposition forms accompanying the Products. LMI confirms that any material supplied by APB for use in the specified manufacturing operations will be the only material used to perform such operations. For all raw materials being provided by LMI and incorporated into the Products, LMI shall maintain relevant chemical, physical and mechanical properties, test reports and evidence of conformance on file.

Copies of C of C's and other evidence of conformance documents shall be made available to APB, APB's Customer, and government representatives upon request and shall be retained for a period of seven years from delivery of Product. Such records shall not be discarded without APB's prior approval.

8.8                      Digital Data Control System

LMI shall employ a Digital Data control system to assure that the integrity of engineering and/or tooling configuration is maintained throughout LMI's Digital Data Control system from receipt of the electronic data through creation of derivatives, to product acceptance (Ref. Boeing D6-51991).

12

Master Agreement No. APB-LMI-001

8.9                      First Article Inspection

Products manufactured and supplied to APB under this Agreement require First Article Inspection ("FMI"). All First Article Inspection Reports ("FAIR") must be in the format as defined in Aerospace Standard SAE AS9102 current revision. If forms other than those contained in the standard are used, they must contain all "Required" and "Conditionally Required" information.

FAIRs are to be completed on new Products representative of the first production run. Prototype parts are not to be used for the FAIR. Partial First Article Inspections shall be performed when any of the events noted in section 5.3 of AS9102 occur.

All FAIRs shall be signed by authorized personnel, stamped and dated and, if required by Aerospace Standard SAE AS9102, shall be approved by APB.

8.10            Tool Control System

LMI shall maintain a formal, internal tool control system that allows for the proper segregation, maintenance and accountability of APB-owned tooling. Annual inventories of said tooling shall be performed with the results maintained in accordance with contractual requirements. Upon request, the results of said inventories shall be forwarded to APB for review.

8.11                      Direct Sales/Regulatory Approvals

Neither LMI nor any of its subcontractors or suppliers may sell any Product directly to anyone except APB unless APB's prior written authorization is obtained. If APB provides its authorization, it is LMI's responsibility and LMI agrees to obtain the necessary regulatory approvals and to mark and/or otherwise identify any Products so produced in accordance with all applicable regulations, provided that, if it is impossible for LMI to obtain such approval, APB and LMI agree to pursue another possible reasonable solution to minimize the impact.

9.0  PRODUCTION RATE

LMI will supply 767-300ER/F wing modification kits ordered by APB up to a rate of * Shipsets per month. Shipset requirements above this rate will be mutually negotiated between the parties.

10.0            CHANGES

10.1            Change Orders

The Material Representative may at any time by written change order make changes within the general scope of an Order in any one or more of the following: drawings, designs, specifications, APB-furnished data, including but not limited to Loft, Loads, Interface Control Drawing, shipping, packing, place of inspection, place of delivery, place of acceptance, adjustments in quantities, adjustments in delivery schedules, or the amount of APB furnished material. LMI shall proceed immediately to perform the Order as changed. If any such change causes an increase or decrease in the cost of and/or the time required for the performance of any part of the work, whether changed or not changed by the change order, an equitable adjustment calculated in accordance with Section 10.3 shall be made in the price of or the delivery schedule for those Products affected, and the applicable

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

13

Master Agreement No. APB-LMI-001

Order shall be modified in writing accordingly. Any claim by LMI for adjustment under this Article 10.0 must be received by APB in writing no later than 60 days from the date of receipt by LMI of the written change order or within such further time as the parties may agree in writing or such claim shall be deemed waived. Nothing in this Section 10.1 shall excuse LMI from proceeding with an Order as changed, including failure of the parties to agree on any adjustment to be made under this Article 10.0.

10.2           Examination of Records for Changes

LMI shall maintain complete and accurate records related to all change orders. Such records shall itemize accurately and completely all services performed, allowances claimed and costs incurred by LMI in the performance of each change order, including but not limited to those factors which comprise or affect direct labor hours, direct labor rates, material costs, burden rates and subcontracts. Such records and other data shall be capable of verification through audit and analysis by APB and be available to APB at LMI's facility for APB's examination and audit at all reasonable times from the date of the applicable change order until three years after final payment under such Order. LMI shall provide assistance to interpret such data if requested by APB. Such examination shall provide APB with complete information regarding LMI's performance for use in price negotiations with LMI relating to existing or future orders for Products, including but not limited to negotiation of equitable adjustments for changes and termination/obsolescence claims pursuant to Article 10.0. APB shall treat all information disclosed under this Section as confidential.

10.3            Computation of Equitable Adjustment

The Rates and Factors set forth in Attachment B, which by this reference are incorporated herein, shall be used to determine the equitable adjustment, if any, to be paid by APB pursuant to Article 10.0 for each individual change.

LMI shall include in each claim sufficient detail to explain the amount claimed, including detailed inventory schedules and a detailed break-down of all costs claimed separated into categories (materials, purchased parts, finished components, labor, burden, general and administrative), and to explain the basis for allocation for all other costs.

10.4                      Obsolescence

Claims by LMI to APB for obsolete or surplus material and work-in-process created by change orders issued by APB to LMI pursuant to this Section shall be subject to the procedures set forth in Section 10.3, except that LMI may not submit in any calendar year a claim for obsolete or surplus material resulting from an individual change order which when aggregated with the cost of other changes in that calendar year, and not to that point paid by APB, has a total claim value of Two Thousand Five Hundred Dollars ($2,500.00) or less.

10.5                      Configuration

Under the Agreement, design of the Wing Modification Machined Parts will be provided by APB or APB's design contractor. LMI will be expected to participate during the design phase to assure the released engineering is compatible with LMI processes and capabilities.

14

Master Agreement No. APB-LMI-001

10.5.1                  Configuration Changes

LMI and its subcontractors shall ensure that all applicable requirements including drawings, specifications, qualifications, etc. under the contract with APB are flowed down to all suppliers and subcontractors performing work on APB Products. LMI shall not make any configuration changes to any Products, which could affect form, fit, function, performance or price without APB's prior written consent. Notification and approval of configuration changes include those parts which are superseded by another part. All LMI configuration change requests shall be submitted to APB's Material Representative in writing for approval prior to configuration change processing.

10.6                      Pre-STC Expedite Costs/Issues

Both parties recognize that design changes may be required, both before and after flight test, that may require LMI to conduct expedite activities to meet flight test or initial production deadlines. LMI agrees that to the extent a design change released by APB requires a part change that is within LMI's published parts manufacturing lead time (as documented in file: "Copy of WingIet Parts 7-27-07Revb.xls"), LMI will not be entitled to reimbursement for expedite costs. To the extent a requested design change requires parts changes that are not within LMI's published part's lead time, LMI will notify APB in writing of the estimated cost to implement and expedite the design change, and submit a claim to APB for direct expedite costs according to Article 10.0, Changes.

10.7            Planning Schedule

Any planning schedule or quantity estimate provided or otherwise accepted by APB shall be used solely for production planning. APB may purchase Products in different quantities and specify different delivery dates as necessary to meet APB's requirements. Such planning schedule and quantity estimate shall be subject to adjustment from time to time. Any such adjustment is not a change under Article 10.0, but subject to Article 11.0 of this Agreement.

11.0            ACCELERATION/DECELERATION AT NO COST

Notwithstanding Article 10.0, APB may make changes in the delivery schedule without additional cost or change to the price stated in the applicable Order if (a) the delivery date of the Product under such Order is on or before the last date of the calendar year covered by the Order; and (b) APB provides LMI with written notice of such changes. Upon receipt of written notice of the schedule change, LMI shall make its best effort to implement the change as soon as possible. The schedule change shall be implemented no later than four months after notification of schedule acceleration or three months after notification of schedule deceleration. If notification is made to LMI less than the limits above, LMI may assert for costs in accordance with Article 10.0, Changes.

If APB requires production rates beyond LMI's reasonable ability to achieve, APB will, at its option, exercise its right to secure a second source for production.

12.0            PRODUCT SUPPORT AND ASSURANCE

12.1            Warranty

LMI expressly represents and warrants that each Product will:

15

Master Agreement No. APB-LMI-001

(a) be manufactured, repaired, tested, certified, weighed, inspected, shipped, sold, and delivered by LMI in accordance with the terms of this Agreement and

(b) be manufactured, repaired, tested, certified, weighed, inspected, shipped, sold, delivered and subjected to any process or procedure by LMI, in strict compliance with applicable laws, including Federal Aviation Regulations; and

(c) conform to its specification, be suitable for its intended purpose, be free from defects in workmanship, material and material selection, process of manufacture, free from liens and encumbrances, and shall conform to the applicable drawings and requirements of the Agreement and the applicable Order. Exceptions are for conditions caused by improper installation by APB or Customer, normal wear and tear, and failure to properly maintain and service the Product.

The Warranty will remain in effect for four years from the date the Product goes into service with the Customer, or five years from the date the Product is delivered to APB at the point of delivery (shipped in place), whichever occurs first.

LMI shall be obligated to promptly replace or repair such defective Products or correct any defective work on the Products, or provide authorization for third parties to effect such repairs at LMI's expense, at APB's sole discretion. LMI shall pay for any transportation charges incurred by APB and Product de-installation and installation charges resulting directly from the replacement or repair activity of such defective Products. APB shall notify LMI within a reasonable period after the detection of a defect.

In the event of a dispute as to whether a breach of Warranty has occurred, LMI agrees to proceed diligently with any reasonable repairs, replacement or correction directed by APB pending final settlement of the dispute. If it is determined that no such breach has occurred, APB shall pay LMI upon demand the reasonable price of the repairs, corrections or replacements made by LMI including reasonable profit.

APB's sole and exclusive warranty remedy against LMI is the repair or replacement of defective parts, refund of the purchase price as provided herein, or reimbursement for third party repairs, and no other remedy in respect of warranties shall be available to APB including direct, indirect, incidental or consequential damages for lost profits, lost sales, or any other incidental or consequential loss.

12.2  Insurance

12.2.1                    Products and Completed Operations Liability

LMI warrants and represents to APB at all times during the performance of any Order, and during the term of the Agreement, LMI will carry and maintain products and completed operations liability insurance in an amount not less that $*with respect to legal liability to a person or third party arising out of an accident.

Prior to the performance of any obligation set forth in this Agreement, LMI will provide APB with certificates of insurance reflecting full compliance with the insurance requirements stated in

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

16

Master Agreement No. APB-LMI-001

this Section. Annual renewal certificates will be submitted to APB before the expiration of the policy period. 

The amount of insurance obtained by a party will in no way limit the indemnification obligations of the party under this Agreement.

12.2.2                    Property Insurance

LMI shall obtain and maintain continuously in effect a property insurance policy covering loss or destruction of or damage to all property in which APB does or could have an insurable interest pursuant to this Agreement, including but not limited to Tooling, APB-furnished property, raw materials, parts, work-in process, incomplete or completed assemblies and all other Products or parts thereof, and all drawings, specifications, data and other materials relating to any of the foregoing in each case to the extent in the possession or under the effective care, custody or control of LMI, in the amount of full replacement value thereof providing protection against all perils normally covered in an "all risk" property insurance policy (including without limitation fire, windstorm, explosion, riot, civil commotion, aircraft, earthquake, flood or other acts of God). Any such policy shall be with insurers reasonably acceptable to APB and shall (i) provide for payment of loss thereunder to APB, as loss payee, as its interests may appear and (ii) contain a waiver of any rights of subrogation against APB, its subsidiaries, and their respective directors, officers, employees and agents.

12.2.2.1                 Certificate of Insurance

LMI shall provide to APB certificates of insurance reflecting full compliance with the requirements set forth in Section 12.2.1 and 12.2.2. Such certificates shall be kept current and in compliance throughout the period of this Agreement and shall provide for 30 days advanced written notice to APB in the event of cancellation, non-renewal or material change adversely affecting the interests of APB.

12.2.2.2                 Notice of Damage or Loss

LMI shall give prompt written notice to APB of the occurrence of any damage or loss to any property required to be insured herein. If any such property shall be damaged or destroyed, in whole or in part, by an insured peril or otherwise, and if no Event of Default shall have occurred and be continuing, then LMI may, upon written notice to APB, settle, adjust, or compromise any and all such loss or damage not in excess of $5,000 Dollars in any one occurrence, and $10,000 Dollars in the aggregate. LMI may settle, adjust or compromise any other claim by LMI only after APB has given written approval, which approval shall not be unreasonably withheld.

12.3            Indemnity

LMI will defend, indemnify and hold harmless APB from and against any and all claims, costs (including attorney fees), demands, proceedings and liabilities howsoever arising and of whatever nature, of any person or loss of or damage to any property, arising out or in respect of any Products provided or any work performed by LMI under this Agreement.

APB will defend, indemnify and hold harmless LMI from and against any and all claims, costs (including attorney fees), demands, proceedings and liabilities howsoever arising and of whatever

17

Master Agreement No. APB-LMI-001

nature, of any person or loss of or damage to any property, arising out of or in respect of any design defect of any Product.

12.4            Notice of Claim

If at any time a party becomes aware that a breach of this Agreement has occurred or that there is or may be a claim made against the party, the party will immediately notify the other party of such breach or claim. Notice under this Section shall be provided to the parties at the respective addresses identified in Section 27.1 of this Agreement unless otherwise specified.

13.0           TERMINATION FOR CONVENIENCE

13.1                      Basis for Termination; Notice

APB may, from time to time and at APB's sole discretion, terminate all or part of any Order issued hereunder, and/or written authorization to proceed as specified in Section 2.6 of this Agreement, by written notice to LMI. Any such written notice of termination shall specify the effective date and the scope of any such termination.

13.2                      Termination Instructions

On receipt of a written notice of termination pursuant to Section 13.1, unless otherwise directed by APB, LMI shall:

A. Immediately stop work as specified in the notice;

B. Immediately terminate its subcontracts and purchase orders relating to work terminated;

C. Settle any termination claims made by its subcontractors or suppliers; provided, that APB shall have approved the amount of such termination claims prior to such settlement;

D. Preserve and protect all terminated inventory and Products;

E. At APB's request, transfer title (to the extent not previously transferred) and deliver to APB or APB's designee all supplies and materials, work-in-process, Tooling and manufacturing drawings and data produced or acquired by LMI for the performance of this Agreement and any Order, all in accordance with the terms of such request;

F. Be compensated for such items to the extent provided in Section 13.3 below;

G. Return, or at APB's option and with prior written approval, destroy, all APB Proprietary Information and Materials in the possession, custody or control of LMI;

H. Take such other action as, in APB's reasonable opinion, may be necessary, and as APB shall direct in writing, to facilitate termination of this Order; and

I. Complete performance of the work not terminated.

18

Master Agreement No. APB-LMI-001

13.3            LMI's Claim

If APB terminates an Order in whole or in part pursuant to Section 13.1 above, LMI may submit a written termination claim to APB in accordance with the terms of this Section 13.3. In addition to the portion of the Base Price incurred by the LMI with respect to such terminated Order, LMI may include in each termination claim any unpaid portion of the amortized and incurred Nonrecurring Price to the extent provided by Attachment A. In no event shall the total of previously paid Nonrecurring Price and such claimed Nonrecurring Price exceed the Total Nonrecurring Price identified in Attachment A. Each termination claim shall be submitted to APB not later than six (6) months after LMI's receipt of the termination notice and shall be in the form prescribed by APB. LMI shall include in each claim sufficient detail to explain the amount claimed, including detailed inventory schedules and a detailed breakdown of all costs claimed separated into categories (e.g., materials, purchased parts, finished components, labor, burden, general and administrative), and to explain the basis for allocation of all other costs. Any costs incurred by LMI for inventory and work-in-process in accordance with the Orders prior to the termination, except those previously paid for, shall be reasonably compensated by APB at cost.

13.4            Failure to Submit a Claim

Notwithstanding any other provision of this Article 13.0, if LMI fails to submit a termination claim within the time period set forth above, LMI shall be barred from submitting a claim and APB shall have no obligation to pay LMI under this Article 13.0 or otherwise except for those Products previously delivered and accepted by APB and those claims submitted to APB within the provided time period in accordance with this Article 13.0.

13.5                       Partial Termination

Any partial termination of an Order shall not alter or affect the terms and conditions (including without limitation unit prices) of the Order or any Order with respect to Products not terminated. Termination of one Order shall not affect any other Order(s).

13.6                      Exclusions or Deductions

The following items shall be excluded or deducted from any termination claim submitted by LMI:

A. All un-liquidated advances or other payments made by APB to LMI pursuant to a terminated Order;

B. Any claim which APB has against LMI;

C. The agreed price for scrap allowance;

D. Except for normal spoilage and any risk of loss assumed by APB, the agreed fair value of property that is lost, destroyed, stolen or damaged.

19

Master Agreement No. APB-LMI-001

13.7            Partial Payment/Payment

Payment, if any, to be made under this Article 13.0 shall be made by APB to LMI 30 days after settlement between the parties or as otherwise agreed to between the parties.

13.8            LMI's Accounting Practices

LMI shall apply the "normal accounting practices" it has used in developing the price of the Product(s) in determining the allocable costs at termination. For purposes of this Section 13.8, LMI's "normal accounting practices" refers to LMI's method of charging costs as a direct charge, overhead expense, or general administrative expense.

13.9            Records

Unless otherwise provided in this Agreement or by law, LMI shall maintain all records and documents relating to the terminated portion of the Order for three (3) years after final settlement of LMI's termination claim.

14.0            EVENTS OF DEFAULT AND REMEDIES

14.1                      Events of Default

The occurrence of any one or more of the following events shall constitute an "Event of Default":

A. Any failure by LMI to deliver, when and as required by this Agreement or any Order, any Product, except as provided in Article 15.0 (Excusable Delay) and such failure shall continue unremedied for a period of 30 days or more following receipt by LMI of notice from APB specifying such failure;

B. Any failure by LMI to provide an acceptable Assurance of Performance within the time specified in Article 18.0, or otherwise in accordance with applicable law;

C. Any failure by LMI to perform or comply with any obligation set forth in Article 23.0 (Proprietary Information and Materials) and such failure shall continue un-remedied for a period of five days or more following receipt by LMI of notice from APB specifying such failure;

D. Any participation by LMI in the sale, purchase or manufacture of airplane parts under the scope of this Agreement without the required approval of the FAA and such failure shall continue un-remedied for a period of 30 days or more following receipt by LMI of notice from APB specifying such failure;

E. APB determines that LMI's Quality Management System or Quality Supply Plan inadequate, and LMI fails to address such inadequacy with 30 days of being notified of the same by APB;

20

Master Agreement No. APB-LMI-001

F. Any failure by LMI to perform or comply with any obligation set forth in this Agreement and such failure shall continue un-remedied for a period of 45 days or more following receipt by LMI of notice from APB specifying such failure; or

G. (a) the suspension, dissolution or winding-up of LMI's business, (b) LMI's insolvency, or its inability to pay debts, or its nonpayment of debts, as they become due, (c) the institution of reorganization, liquidation or other such proceedings by or against LMI or the appointment of a custodian, trustee, receiver or similar person for LMI's properties or business, (d) an assignment by LMI for the benefit of its creditors, or (e) any action of LMI for the purpose of effecting or facilitating any of the foregoing.

14.2                       Remedies

If any Event of Default shall occur:

A.    Cancellation

APB may, by giving written notice to LMI, immediately cancel this Agreement and/or any Order, in whole or in part, and APB shall not be required after such notice to accept the tender by LMI of any Products with respect to which APB has elected to cancel this Agreement, provided APB shall pay LMI for all Products ordered by APB and delivered by LMI to APB.

B.     Cover

APB may manufacture, produce or provide, or may engage any other persons to manufacture, produce or provide, any Products in substitution for the Products to be delivered or provided by LMI hereunder with respect to this Agreement or any Order and, in addition to any other remedies or damages available to APB hereunder or at law or in equity, APB may recover from LMI the difference between the price for each such Product and the aggregate expense, including, without limitation, administrative and other indirect costs, paid or incurred by APB to manufacture, produce or provide, or engage other persons to manufacture, produce or provide, each such Product.

C.     Rework or Repair

Where allowed by the applicable regulatory authority, APB or its designee may rework or repair any Product in accordance with Article 12.0.

D.    Setoff

APB may set off against and apply to the payment or performance of any obligation, sum or amount owing at any time to APB hereunder or under any Order, all deposits, amounts or balances held by APB for the account of LMI and any amounts owed by APB to LMI.

E.     Tooling and other Materials

LMI shall upon the request of APB, immediately transfer and deliver to APB or APB's designee title and possession to any or all (i) Tooling, (ii) APB-furnished material, (iii) raw materials, parts, work-in-process, incomplete or completed assemblies, and all other Products or parts thereof in the possession or under the effective control of LMI or any of its subcontractors (iv) Proprietary Information and Materials of APB including without limitation planning data, drawings and other Proprietary Information and Materials relating

21

Master Agreement No. APB-LMI-001

to the design, production, maintenance, repair and use of Tooling, in the possession or under the effective control of LMI or any of its subcontractors, in each case free and clear of all liens, claims or other rights of any person. In consideration of APB's acquisition of title to the Tools, data and material, the termination settlement shall take into account any damage payable by LMI to APB as a result of any event of default and such amount shall be accounted to a set off against the unrecovered Nonrecurring Price.

LMI shall be entitled to receive from APB reasonable compensation for any item accepted by APB which has been transferred to APB pursuant to this Section 14.E (except for any item the price of which shall have been paid to LMI prior to such transfer, and except for items covered by 14.E (ii) and (iv); provided, however, that such compensation shall not be paid directly to LMI, but shall be accounted for as a setoff against any damages payable by LMI to APB as a result of any Event of Default.

F.     Remedies Generally

No failure on the part of APB in exercising any right or remedy hereunder, or as provided by law or in equity, shall impair, prejudice or constitute a waiver of any such right or remedy, or shall be construed as a waiver of any Event of Default or as acquiescence therein. No single or partial exercise of any such right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No acceptance of partial payment or performance of any of LMI's obligations hereunder shall constitute a waiver of any Event of Default or a waiver or release of payment or performance in full by LMI of any such obligation. All rights and remedies of APB hereunder and at law and in equity shall be cumulative and not mutually exclusive and the exercise of one shall not be deemed a waiver of the right to exercise any other.

G.     Contractual Liability

LMI shall be liable to APB for the timely and proper performance of its obligations under this Agreement and, except to the extent of the indemnities and specific remedies as set out in the Agreement, shall be liable for all direct costs, direct losses, damages and liabilities, including without limitation costs and expenses incidental thereto such as but not limited to legal fees which may be incurred by APB as a consequence of the failure by LMI to comply with its obligations under the Agreement or as a consequence of the termination of the Agreement. APB agrees to provide LMI with the breakdown of the said costs, losses, damages and liabilities referenced above in this Section 14.2.

15.0            EXCUSABLE DELAY

If delivery of any Product is delayed by unforeseeable circumstances beyond the control and without the fault or negligence of LMI or of its suppliers or subcontractors (any such delay being hereinafter referred to as "Excusable Delay"), the delivery of such Product shall be extended for a period to be determined by APB after an assessment by APB of alternate work methods. Excusable Delays may include, but are not limited to, acts of God, war, riots, acts of government, fires, floods, epidemics, quarantine restrictions, freight embargoes, strikes or unusually severe weather, but shall exclude among other things, LMI's noncompliance with any rule, regulation or order promulgated by any governmental agency, or nonperformance of LMI suppliers. However, the above notwithstanding, APB expects LMI to continue production, recover lost time and support all schedules as established

22

Master Agreement No. APB-LMI-001

under this Agreement or any Order. If delay in delivery of any Product is caused by the default of any of LMI's subcontractors or suppliers, such delay shall not be considered an Excusable Delay unless such delay is caused for reasons the same as those considered to be Excusable Delay for LMI. If delivery of any Product is delayed by any Excusable Delay for more than three (3) months, APB may, without any additional extension, cancel this Agreement or all or part of any Order with respect to the delayed Products, and exercise any of its remedies in accordance with Section 14.2, except for 14.2.B, "Cover", provided however, that APB shall not be entitled to monetary damages or specific performance to the extent LMI's breach is the result of an Excusable Delay.

16.0   SUSPENSION OF WORK

APB may at any time, by written order to LMI, issued pursuant to this Article 16.0, require LMI to stop all or any part of the work called for by this Agreement for up to one hundred twenty (120) days hereafter referred to as a "Stop Work Order". On receipt of a Stop Work Order, LMI shall promptly comply with its terms and take all reasonable steps to minimize the occurrence of costs arising from the work covered by the Stop Work Order during the period of work stoppage. Within the period covered by the Stop Work Order (including any extension thereof) APB shall either (i) cancel the Stop Work Order or (ii) terminate or cancel the work covered by the Stop Work Order in accordance with the provisions of Articles 13.0 or 14.0. In the event the Stop Work Order is canceled by APB or the period of the Stop Work Order (including any extension thereof) expires, LMI shall promptly resume work in accordance with the terms of this Agreement or any applicable Order.

If the Stop Work Order has resulted in a change in the schedule or cost of performance, an equitable adjustment shall be made in the price and/or delivery schedule, according to Section 10.3, and the Order or this Agreement, as appropriate, will be modified in writing accordingly. LMI must assert any claim for adjustment within sixty (60) days from the date of receipt of the Stop Work Order.

17.0 TERMINATION OR CANCELLATION AND INDEMNITY AGAINST SUBCONTRACTOR CLAIMS

APB shall not be liable for any loss or damage resulting from any termination pursuant to Section 13.0 except as expressly provided in Section 13.3, or any cancellation under Section 14.0, except to the extent that such cancellation shall have been determined to have been wrongful, in which case such wrongful cancellation shall be deemed a termination pursuant to Section 13.0 and therefore shall be limited to the payment to LMI of the amount or amounts identified in Section 13.3. As subcontractor claims are included in LMI's termination claim pursuant to Section 13.3, LMI shall indemnify APB and hold APB harmless from and against (i) any and all claims, suits and proceedings against APB by any subcontractor or supplier of LMI in respect of any such termination pursuant to Section 13.0 and (ii) and any and all costs, expenses, losses and damages incurred by APB in connection with any such claim, suit or proceeding.

18.0            ASSURANCE OF PERFORMANCE

18.1            LMI to Provide Assurance

If APB determines, at any time or from time to time, that it is not sufficiently assured of LMI's full, timely and continuing performance hereunder, or if for any other reason APB has reasonable grounds for insecurity, APB may request, by notice to LMI, written assurance (hereafter an

23

Master Agreement No. APB-LMI-001

"Assurance of Performance") with respect to any specific matters affecting LMI's performance hereunder, that LMI is able to perform all of its respective obligations under this Agreement when and as specified herein. Each Assurance of Performance shall be delivered by LMI to APB as promptly as possible, but in any event no later than 30 calendar days following APB's request therefore and each Assurance of Performance shall be accompanied by any information, reports or other materials, prepared by LMI, as APB may reasonably request. APB may suspend all or any part of APB's performance hereunder until APB receives an Assurance of Performance from LMI satisfactory in form and substance to APB.

18.2            Meetings and Information

APB may request one or more meetings with senior management or other employees of LMI for the purpose of discussing any request by APB for Assurance of Performance or any Assurance of Performance provided by LMI. LMI shall make such persons available to meet with representatives of APB as soon as may be practicable following a request for any such meeting by APB and LMI shall make available to APB any additional information, reports or other materials in connection therewith as APB may reasonably request.

19.0                       LEAD TIMES

APB shall issue an initial Order for the first two Shipsets of Products. Thereafter, Products for APB requirements, assuming no break in the Production Phase, will be ordered at least 26 weeks prior to the scheduled date of delivery from LMI to APB. Provided, however, LMI shall request of APB as required written authorization to proceed as defined in Section 2.6 for the purchase of long lead-time materials, in sufficient time to support the scheduled deliveries.

20.0            PERFORMANCE VISIBILITY AND REVIEWS

When requested by APB, LMI shall provide all necessary program performance data, and when so requested, LMI shall prepare and conduct a program performance review specific to the scope of this program, pursuant to any Order or program.

21.0            RESPONSIBILITY FOR APB PROPERTY

On delivery to LMI of any materials, parts, Tooling or other property, title to any of which is held by APB, LMI shall assume the risk of and shall be responsible for any loss thereof or damage thereto, as long as they are in the custody and control of LMI, and/or its supplier(s). APB shall retain ownership of such materials, parts, Tooling or other property, and shall extend full permission to LMI for the proper and intended use of such property in the exclusive execution of this Agreement. In accordance with the provisions of an Order, but in any event on completion thereof, LMI shall return such property to APB in the condition in which it was received except for reasonable wear and tear, and except to the extent that such property has been incorporated in Products delivered under such Order or has been consumed in the normal performance of work under such Order.

22.0            LIMITATION OF LMI'S RIGHT TO ENCUMBER ASSETS

LMI warrants to APB that LMI has good title to all inventory, work-in-process, tools,-equipment and materials to be supplied by LMI in the performance of its obligations under any Order ("Inventory"),

24

Master Agreement No. APB-LMI-001

and that pursuant to the provisions of such Order, it will transfer to APB title to such Inventory, whether transferred separately or as part of any Product delivered under the Order, free of any liens, charges, encumbrances or rights of others, provided that LMI reserves the right to physically possess and use all inventory during the terms of this Agreement.

23.0            PROPRIETARY INFORMATION AND MATERIALS

23.1            Protection of Proprietary Information

As used in this Agreement:

"Materials" means any materials containing Proprietary Information.

“Proprietary Information" means all proprietary, confidential or trade secret information disclosed by either party to the other or entrusted to either party by a third party. This information includes, but is not limited to, information relating to inventions, computer technology and programming, computer software, research, development, engineering, manufacturing, purchasing, accounting, marketing or selling. This information may be contained in materials such as engineering and tool drawings and design, tools and tooling models, samples, electronic and non-electronic data, specifications, reports, calculation, compilations, manuals, patent applications or computer programs, whether or not such materials bear proprietary markings, or tangible items conveying or embodying such information, or may be in the nature of unwritten knowledge or know-how;

"Background Proprietary Information" means any Proprietary Information belonging to a party which is or was developed prior to or outside of, and not in the course of work under this Agreement and which is disclosed by either party to the other in the course of work under this Agreement and includes Background Inventions;

"Background Invention(s)" means any invention(s) owned by either party prior to or outside or not for the purposes of work under this Agreement which becomes or is the subject of a patent application or issued patent and which is disclosed by either party to the other in the course of work under this Agreement;

"Project Proprietary Information" means any Proprietary Information developed in the course of work under this Agreement and includes Project Inventions;

"Project Invention(s)" means any invention(s) conceived in the course of work under this Agreement and which becomes the subject of one or more patent applications.

Each of APB and LMI shall keep confidential and protect from disclosure to third parties all Background Propriety Information and Project Proprietary Information of the other. Except as otherwise provided in this Agreement, neither APB nor LMI shall disclose to any person, firm or corporation such information of the other party unless the other party provides its prior written consent.

APB and LMI shall each use the other party's Background Proprietary Information and Project Proprietary Information only in the performance of and for the purpose of this Agreement and/or any

25

Master Agreement No. APB-LMI-001

Order (consistent with the foregoing, LMI shall not manufacture Products or Spare Parts for, or sell Products or Spare Parts to, any party other than APB). Notwithstanding the foregoing and the prior paragraph, APB shall have the right to use and disclose such information of LMI for the purposes of testing, certification, use, sale, or support of any Product delivered under this Agreement, or any airplane including a Product; and provided that APB shall obtain an appropriate non-disclosure covenant from such receiving party.

Upon (i) either party's request or (ii) in the event of completion, termination or cancellation of this Agreement, each party shall return, subject to the provisions of Section 23.1 herein, all Background Proprietary Information and all Project Proprietary Information of the other party, and all materials comprising or derived from such information to the other party, unless specifically directed otherwise in writing by the other party.

Each party shall not, without the prior written authorization of the other party, sell or otherwise dispose of (as scrap or otherwise) any parts or other materials containing, conveying, embodying, or made in accordance with or by reference to any Background Proprietary Information and Project Proprietary Information of the other party, provided that this provision is not intended to prevent APB from selling Products to Customers. Prior to disposing of such parts or materials as scrap, each party shall render them unusable. Each party shall have the right to audit the other party's compliance with this Article 23.0.

LMI may disclose Background Proprietary Information and Project Proprietary Information of APB to its subcontractors as required for the performance of an Order, provided that each such subcontractor first assumes, by written agreement to the benefit of both LMI and APB, the same obligations imposed upon LMI under this Article 23.0. LMI shall be liable to APB for any breach of such obligation by such subcontractor.

The provisions of this Article 23.0 and Section 23.1 are effective in lieu of, and will apply notwithstanding the absence of, any restrictive legends or notices applied to the relevant information and shall survive the performance, completion, termination or cancellation of this Agreement or any Order.

This Article 23.0 supersedes and replaces any and all other prior agreements or understandings between the parties to the extent that such agreements or understandings relate to obligations of APB or LMI to the other relative to Background Proprietary Information or Project Proprietary Information, regardless of whether disclosed to the receiving party before or after the effective date of this Agreement.

Each party shall retain exclusive ownership rights in its own Background Proprietary Information and its own Project Proprietary Information, solely and independently developed by the party, subject to usage rights, licenses provided by this Article 23.0.

All Project Proprietary Information jointly developed by APB and LMI during work under this Agreement shall be owned as follows:

(i) All Project Proprietary Information consisting of design and engineering documents (including Engineering Drawings and Reports) related to the Product, shall belong to APB. LMI hereby assigns all rights it may have in such Project Proprietary Information to APB, and LMI shall not use, or disclose to any party any such Project Proprietary Information;

Information to APB, and LMI shall not use, or disclose to any party any such Project Proprietary Information;

(ii) All other Project Proprietary Information shall be owned by APB. APB agrees to assign to LMI a worldwide, non-exclusive, royalty free license to use such information.

(iii) Notwithstanding item (ii) above, any development and/or improvements made to each party's Background Proprietary Information will be the retained solely by the originating party, will be treated as such party's Background Proprietary Information, and is not to be considered Project Proprietary Information.

The restrictions on the receipt and use by each party of the other party's Background Proprietary Information and the other party's Project Proprietary Information shall not apply to Proprietary Information which goes into the public domain through no fault of the receiving party.

23.2            License of LMI's Background Proprietary Information and Inventions

(a)    LMI hereby grants to APB a non-exclusive, royalty-free, worldwide right and license, without right of sub-license, (i) to use LMI's Background Proprietary Information and Inventions and LMI's Project Proprietary Information and Inventions (collectively, "LMI Materials") in connection with the development and support of the Product, (ii) to sell, lease, transfer, or otherwise convey to third parties the right to use the Product acquired from LMI and incorporating LMI's Materials.

(b)    Anything to the contrary in this Agreement notwithstanding, if this Agreement is terminated by APB pursuant to Article 13.0 or Article 14.0 hereof, APB shall have a non-exclusive, royalty-free, worldwide right and license, to use LMI Materials to produce the Products by itself.

(c)    If APB requires production rates beyond LMI's reasonable ability to achieve (i.e.: capacity or labor constraints) APB has the right to secure a second source for production and for that purposes shall have the rights under (b) and the right sub-license the LMI Materials to a third party to produce the Products.

(d)    Except as provided for in this Article 23.0, APB shall have no right to use, nor shall APB disclose to any third party, LMI's Background Materials in any manner.

(e)    LMI shall execute and deliver, promptly after receiving a request from APB, a license agreement in a form and substance satisfactory to APB, acting reasonably.

23.3            Limitation of License

Background Proprietary Information and Project Proprietary Information conveyed to a party under this Agreement are licensed to the receiving party only for the limited purposes set forth in this Article 23.0. No disclosure of Background Proprietary Information and Project Proprietary Information will be construed as granting (i) a license under any patent, patent application, or copyright, or (ii) any right of ownership in such materials or information.

27

Master Agreement No. APB-LMI-001

24.0            COMPLIANCE WITH LAWS

24.1            LMI's Obligation

LMI shall comply with all laws, including, but not limited to, any statute, rule, regulation, judgment, decree, order, or permit applicable to its performance under this Agreement. LMI shall (1) notify APB of any obligation under this Agreement which is prohibited under applicable law, at the earliest opportunity but in all events sufficiently in advance of LMI's performance of such obligation so as to enable the identification of alternative methods of performance, and (2) notify APB at the earliest possible opportunity of any aspect of its performance which becomes subject to additional regulation or which LMI reasonably believes will become subject to additional regulation during the performance of this Agreement.

24.2            Export Controls

LMI acknowledges that all information, drawings, tooling, data, specifications, and other items provided by APB to LMI, and all products , items, data, drawings, information, and services made or derived from the same, are subject to U.S. and other export control laws. In addition to the other limitations and restrictions contained in this Agreement, LMI agrees that it shall not export, re-export, or provide access to any such information, drawings, tooling data, specifications, items, Products or services referred to in the prior sentence to non-U.S. persons or individuals in violation of U.S. export control laws.

25.0            INTEGRITY IN PROCUREMENT

APB's policy is to maintain high standards of integrity in procurement. APB's employees must ensure that no favorable treatment compromises their impartiality in the procurement process. Accordingly, APB's employees must strictly refrain from soliciting or accepting any payment, gift, favor or thing of value, which improperly influences their judgment with respect to either issuing an Order or administering this Agreement. Consistent with this policy, LMI agrees not to provide or offer to provide any employees of APB any payment, gift, favor or thing of value for the purpose of improperly obtaining or rewarding favorable treatment in connection with any Order or this Agreement. LMI shall conduct its own procurement practices and shall ensure that its suppliers conduct their procurement practices consistent with these standards. If LMI has reasonable grounds to believe that this policy may have been violated, LMI shall immediately report such possible violation to the Material Representative.

26.0            INFRINGEMENT

LMI represents and warrants that each and every Product, in the form to be delivered to APB, is and will be free from any known claim for U.S. patent infringement and that any affixed labels or trademarks are free from any known claim for copyright or trademark infringement. LMI shall indemnify APB and save it harmless against such infringement liability based upon APB's possession or resale, provided that: (i) LMI is promptly notified by APB of any such claim for such infringement; (ii) such infringement is claimed specifically against the Product "as delivered" by LMI to APB and unchanged by any acts of APB from such "as delivered" state; and (iii) such infringement was not a result of use or sale of the Product in combination with other items and would not have occurred from the Product by itself. In the event of suit, LMI shall, at LMI's

28

Master Agreement No. APB-LMI-001

election, have sole charge and direction thereof, in which event APB shall provide LMI reasonable assistance in the defense thereof as LMI may require. APB shall have the right to be represented in such suit by advisory counsel at APB's expense.

27.0 NOTICES

27.1  Addresses  

To APB:	Attention:	Procurement Specialist
		Aviation Partners Boeing 3415 South 116th Street Seattle, Washington 98168 Phone:  206-762-1171 extension xxx Fax:       206-242-9347
To LMI:	Attention:	___________________________ LMI Savannah Phone:______________ Fax:________________

27.2                      Effective Date

The date on which any such communication is received by the addressee is the effective date of such communication.

27.3            Approval or Consent

With respect to all matters subject to the approval or consent of either party, such approval or consent shall be requested in writing and is not effective until given in writing. With respect to APB, authority to grant approval or consent is limited to the Material Representative.

28.0            PUBLICITY

LMI will not, and will require that its subcontractors and suppliers of any tier will not, (i) cause or permit to be released any publicity, advertisement, news release, public announcement, or denial or confirmation of the same, in whatever form, regarding any Agreement or Order or Products, or the program or Customer to which they may pertain, or (ii) use, or cause or permit to be used, the APB name or any APB trademark (or the name or trademark of any affiliate of APB) in any form of promotion or publicity without APB's prior written approval.

29.0            RESPONSIBILITY FOR PERFORMANCE

29.1            Flowdown of Requirements

LMI shall be responsible for the requirements of this Agreement and any Order referencing this Agreement. LMI shall bear all risks of providing adequate facilities and equipment to perform each Order in accordance with the terms thereof. LMI shall include as part of its subcontracts those elements of the Agreement which protect APB's rights including but not limited to right of entry

29

Master Agreement No. APB-LMI-001

provisions, proprietary information and rights provisions, quality control provisions, and management and control of APB assets. In addition, LMI shall provide to its subcontractors sufficient information to clearly document that the work being performed by LMI's subcontractor is to facilitate performance under this Agreement or any Order. Sufficient information may include but is not limited to Order number, ATP description, or the name of the Material Representative.

29.2            Performance During Disputes

If a dispute between LMI and APB arises under this Agreement or any Order, each party agrees to continue with the performance of the Agreement and any Order under dispute, including the delivery of Products and payment for Products at the Order price, pending resolution of the dispute.

29.3            Disputes

In the event of any dispute over the terms of this Agreement or any Order issued under this Agreement, LMI and APB shall use its best efforts to resolve the matter without commencing legal proceedings. Disputes will be settled by individuals who have been designated by their respective parties. As a prerequisite to legal proceedings, except in any case in which a party must seek injunctive relief in order to avoid irreparable harm, any dispute which cannot be settled promptly by such individuals shall be referred for resolution by an officer or other senior representative of each of the parties, each of whom shall have the authority to settle the matter in controversy.

If the officers or other senior management representatives of the parties to whom any dispute has been referred for resolution are unable to resolve such dispute within 30 days of reference of the dispute, or such longer period as the parties may agree, the dispute shall be resolved through binding arbitration conducted in accordance with the American Arbitration Association ("AAA"). The AAA shall administer the arbitration under its procedures and the provisions of this Article shall govern. Any award rendered by the arbitrator shall be in writing, set forth the reasons for the award based upon the law, and shall be final and binding upon the parties. Any judgment upon such award may be entered and enforced in any court of competent jurisdiction.

29.4            Subcontracting

LMI shall maintain complete and accurate records regarding all subcontracted items and/or processes. LMI's use of subcontractors shall comply with LMI's quality assurance system approval for said subcontractors. No subcontracting by LMI shall relieve LMI of its obligation under this Agreement or the applicable Order.

Where required by the requirements of the Order, no raw material and/or material process may be incorporated in a Product unless: (a) LMI uses a source approved by APB or (b) APB has surveyed and qualified LMI's receiving inspection personnel and laboratories to test the specified raw materials an/or material process. No waiver of survey and qualification requirements will be effective unless granted by APB's Engineering and Quality Control Departments. Utilization of an APB-approved raw material source does not constitute a waiver of LMI's responsibility to meet all specification requirements.

30

Master Agreement No. APB-LMI-001

29.5                      Reliance

APB's entering into this Agreement is in part based upon APB's reliance on LMI's ability, expertise and awareness of the intended use of the Products. LMI agrees that APB and APB's Customers may rely on LMI as an expert, and LMI will not deny any responsibility or obligation hereunder to APB or APB's Customers on the grounds that APB or APB's Customers provided recommendations or assistance in any phase of the work involved in producing or supporting the Products, including but not limited to APB's acceptance of specifications, test data or the Products.

29.6            Assignment

In addition to assignment of any of LMI's rights or obligations under this Agreement, the following shall be included as "assignments": (i) a consolidation or merger of LMI; (ii) a change directly or indirectly in the ownership or voting rights of more than 50% of the issued and outstanding stock of or equity interest in LMI; (iii) any assignment or transfer of this Agreement by LMI which would otherwise occur by operation of law, merger, consolidation, reorganization, assignment, transfer, or other significant change in corporate or proprietary structure; and (iv) the sale, assignment or transfer of all or substantially all of the assets of LMI.

LMI shall notify APB reasonably in advance of any event of assignment.

This Agreement and each Order shall inure to the benefit of and be binding on each of the parties hereto and their respective successors and assigns. In the event that the assignment identified herein reasonably appears to APB to materially affect the ability of LMI to discharge its obligations under this Agreement, APB shall be entitled to disapprove of the assignment and in such cases terminate this Agreement in accordance with Article 14.0.

LMI may assign claims for monies due or to become due under any Order provided that APB may recoup or setoff any amounts covered by any such assignment against any indebtedness of LMI to APB or any claim by APB against LMI, whether arising before or after the date of the assignment or the date of this Agreement, and whether arising out of any such Order or any other agreement between the parties. APB may settle all claims arising out of any Order, including termination claims, directly with LMI and will not be obligated to deal directly in any way with LMI's assignee.

30.0            PRODUCT SUPPORT

30.1                      Policy

APB provides its Customers with worldwide product support. LMI acknowledges that its fulfillment of its obligations under this Agreement, including but not limited to this Article 31.0, is crucial to enable APB to support its Customers.

30.2            Scope

The requirements set forth in this Article apply to Products provided by LMI for installation on Aircraft or for use in the maintenance and operations support of Aircraft.

31

Master Agreement No. APB-LMI-001

30.3            AOG Response

LMI will employ its best efforts to provide the earliest possible delivery of any Spare Part designated AOG by APB. Such effort includes but is not limited to working 24 hours a day, seven days a week and use of premium transportation. LMI shall respond, and when possible, specify the delivery date and time of any such AOG Spare Part, within four hours of receipt of an AOG Spare Part request.

30.4            Routine / Class II Response

LMI shall expend reasonable business efforts (i.e., excluding overtime, expedite, or premium efforts) to provide delivery within standard lead-time of any Spare Part designated Routine (or Class II) by APB. LMI shall respond, and when possible, specify the delivery date and time of any such Routine Spare Part, within one business day of receipt of a Routine Spare Part request.

30.5            Designation by APB

APB will endeavor to order Spares as Routine or Class II classification; however, in cases where APB Customers require parts classified as "AOG", APB will so indicate to LMI and LMI shall perform all duties as required under Section 30.3.

30.6                      Reclassification or Re-exercises

APB may from time to time as it considers appropriate instruct LMI to re-prioritize or reclassify an existing Spare Part Order in order to improve or otherwise change the established shipping schedule. LMI shall expend the effort required as set forth above in the definitions of the Spare Part Order to meet the revised requirement. LMI's commitment of a delivery schedule shall be given in accordance with that set forth above for the applicable classification, but in no case shall it exceed 24 hours from notification by APB.

30.7            Spare Parts Pricing

The price for all in production spares and details shall be per the latest Bill of Material kit price for each part. The cost of packaging associated with the spare is considered part of the Spares price. LMI may charge an appropriate handling fee for each Spares request, regardless of the number of individual parts associated with each request. LMI Spares handling fees may be assessed as follows:

Spares Requests During Normal Business Hours                                                                                                    $*

Spares Requests Evenings and Weekends                                                                                                               $*

Out of production Spares will be priced as mutually negotiated between APB and LMI at the time of the order.

30.8            Packaging of Spare Parts

LMI shall package Spare Parts in accordance with ATA 300. Repairable components shall be packaged one each in reusable containers. Expendable components shall be packaged and identified as specified in ATA 300. Styrofoam dunnage such as pellets, peanuts, popcorn, etc., shall not be utilized.

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

32

Master Agreement No. APB-LMI-001

30.9            Special Handling

The price for all effort associated with the handling and shipment preparation of Spare Parts is deemed to be included in the price of the Spare Part. Spare Parts shall be shipped FOB EXW (INCOTERMS 2000) LMI, Savannah. Shipping instructions will be provided to LMI at time of the Spare Parts order, or as appropriate. If APB directs delivery of Spare Parts to a delivery point other than EXW LMI, APB shall reimburse LMI for shipping charges, including insurance, paid by LMI from the plant to the designated delivery point. Such charges shall be shown separately on all invoices.

30.10                       LMI's Spares Point of Contact

LMI shall provide a point of contact for Spare Part Orders to facilitate prompt order processing. This point of contact is as follows:

Supplier	Commercial Account Manager
Phone:	912-748-8973
FAX:	912/748-9821
EMAIL:	________________________

30.11                      Communications Response Times

LMI shall respond to communication from APB within the following time periods:

Telephone	Within 8 hours
Wire (Telex, etc.)	Within 24 hours
Letter	Within 10 calendar days
Request for Quotation	Within 10 calendar days
AOG or Routine/Class II	As specified above in Article 13.0

30.12                      General Product Support Requirements

30.12.1                   Resolution of Product Warranty Claims

LMI, on receipt of a written request for assistance to resolve a product warranty claim, shall provide a written response to each written notice of a defect submitted under this Section 31.12 within ten working days from the date of receipt. In the event LMI disallows any such claim, LMI shall provide a reasonable explanation of such disallowance to APB and/or Customer.

LMI shall perform warranty Correction in accordance with Section 12.1 of this Agreement. LMI shall furnish APB and/or Customer with all the data and information in its possession relevant to the warranty claim. LMI shall provide to APB and/or Customer LMI's findings as to the cause of the problem, and upon determination of an interim or final solution, shall provide to APB and/or Customer a plan and schedule for Correction.

33

Master Agreement No. APB-LMI-001

30.12.2                   Technical Assistance Requests - Product Manufacture

APB may request LMI's assistance regarding the Product manufacture, which falls outside the warranty claim process. Upon request by APB's Program Manager, LMI shall provide to APB technical assistance pertaining to the manufacture of the Product. This assistance may be in the form as is reasonably determined by LMI at the time of the request. LMI shall make best commercially reasonable effort to support in a timely manner. Any costs or expense incurred by LMI's employees in providing assistance will be borne by APB.

30.12.3                   Agreement to Manufacture and Sell

LMI shall manufacture and sell Spare Parts and Products to APB only, per the terms of this Agreement.

31.0            TOOLING

A current Certified Tool List, Attachment C, will be submitted to APB by LMI and updated each time tools are added or deleted by LMI. The Certified Tool List will include all program Tooling created to support this contract, including all Tool Designs, Tool Drawings, NC tapes, Tooling Masters, Soft and Hard Production Tooling, Assembly Fixtures, Inspection Fixtures and program-specific Shop Aides. Title to Tooling passes to APB at First Article Delivery for each program.

The Tooling identified in the Certified Tool List, Attachment C, shall be capable of supporting the maximum rate identified.

LMI shall adhere to the documents listed below, which are incorporated herein and made a part hereof by this reference, to design, fabricate, validate, control and maintain all program Tooling:

· D33200, Supplier Tooling Document

· D33011, Tool Design Manual

· D33181, Tool Procedure Manuals

· D33041, Tool Identification Codes

· D32082, Trim Tool Document

· D32101, Plastics Tooling Document

Notwithstanding anything contained in this Agreement, if APB declares that an event of default has occurred, APB may direct LMI to deliver, and LMI will deliver, at no charge to APB, all Tooling to the location directed by APB and in accordance with the schedule provided by APB.

32.0            APB-OWNED TOOLING

In the event APB furnishes Tooling to LMI, LMI shall comply with the Terms and Conditions applicable to any Blanket Tooling Purchase Control Order in effect at the time.

No replacement or rework of any APB-owned Tooling shall be performed without APB's prior written consent. APB shall notify LMI of any action required for discrepant Tooling. LMI will be responsible for routine tool maintenance and repairs, and replacement of APB-owned Tools shall be for the account of APB.

34

Master Agreement No. APB-LMI-001

33.0            STATUS REPORTS/REVIEWS

When requested by APB, LMI shall update and submit, as a minimum, monthly status reports on data requested by APB using a method mutually agreed upon by APB and LMI.

When requested by APB, LMI shall provide to APB a manufacturing milestone chart identifying the major purchasing, planning and manufacturing operations for the applicable Product(s).

34.0            APB-FURNISHED MATERIAL AND DATA

A Bonded Stores Agreement shall be entered into by APB and LMI for any APB furnished equipment or materials. APB may elect to supply components to LMI for inclusion into the end item kit BOM, at APB's discretion. Any such components will be identified and coordinated with LMI prior to delivery of first article machined parts kits.

APB shall furnish LMI with all the technical information which is necessary for LMI to fulfill its responsibility and as set forth in drawings and applicable Technical Statements of Work in a timely manner.

35.0            INVENTORY AT CONTRACT COMPLETION

Subsequent to LMI's last delivery of Product(s), Products which contain, convey, embody or were manufactured in accordance with or by reference to APB's proprietary materials including but not limited to finished goods, work-in-process and detail components (hereafter "Inventory") which are in excess of Order quantity shall be made available to APB for purchase. In the event APB, in its sole discretion, elects not to purchase the Inventory, LMI may scrap the Inventory. Prior to scrapping the Inventory, LMI shall mutilate and/or render it unusable. LMI shall maintain, pursuant to their quality assurance system, records certifying destruction of the applicable Inventory. Said certification shall state the method and date of mutilation and destruction of the subject Inventory. APB or applicable regulatory agencies shall have the right to review and inspect these records at any time it deems necessary. In the event LMI elects to maintain the Inventory, LMI shall maintain accountability for the inventory and LMI shall not sell or provide the Inventory to any third party without prior specific written authorization from APB. Failure to comply with these requirements shall be a material breach and grounds for default pursuant to Article 14.0.

36.0            CONFIGURATION CONTROL OF PRODUCTS

After the issuance of the STC, LMI agrees not to make any change in materials or design details which would affect the Product or any component part thereof including without limitation (a) part number identification, (b) physical or functional interchangeability, or (c) repair and overhaul procedures and processes and material changes which affect these procedures, without prior written approval of APB. LMI will place this Article 36.0 clause in all its subcontracts for LMI identified purchased equipment whether such equipment is supplied to LMI as an end item or as a component part of an end item.

35

Master Agreement No. APB-LMI-001

37.0            NON-WAIVER

APB's failure at any time to enforce any provision of an Order or this Agreement does not constitute a waiver of such provision or prejudice APB's right to enforce such provision at any subsequent time.

38.0            HEADINGS

Section headings used in this Agreement are for convenient reference only and do not affect the interpretation of the Agreement.

39.0            PARTIAL INVALIDITY

If any provision of any Order or this Agreement is or becomes void or unenforceable by force or operation of law, the other provisions shall remain valid and enforceable.

40.0            APPLICABLE LAW; JURISDICTION

This Agreement and each Order, including all matters of construction, validity and performance, shall in all respects be governed by, and construed and enforced in accordance only with the law of the State of Washington, without reference to any rules governing conflicts of law. LMI hereby irrevocably consents to and submits itself exclusively to the jurisdiction of the applicable courts of the State and federal courts in Washington for the purpose of any suit, action or other judicial proceeding arising out of or connected with any Order or the performance or subject matter thereof. LMI hereby waives and agrees not to assert by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that (a) LMI is not personally subject to the jurisdiction of the above-named courts, (b) the suit, action or proceeding is brought in an inconvenient forum or (c) the venue of the suit, action or proceeding is improper. The U.N. Convention for the International Sale of Goods shall not apply to this Agreement.

41.0            AMENDMENT

Subject to the exceptions expressly set forth in this Agreement, oral statements and understandings are not valid or binding. Except as otherwise provided in Sections 10.0 and 11.0, no Order may be changed or modified except in writing, signed by LMI and the Material Representative.

42.0            LIMITATION

LMI may not (except to provide an inventory of Products to support delivery acceleration and to satisfy reasonable replacement and Spares requirements) manufacture or fabricate Products or procure any goods in advance of the reasonable flow time required to comply with the delivery schedule in the applicable Order except as otherwise expressly authorized in writing by APB. Notwithstanding any other provision of an Order, LMI is not entitled to any equitable adjustment or other modification of such Order for any manufacture, fabrication, or procurement of Products not in conformity with the requirements of the Order, unless APB's written consent has first been obtained. Nothing in this Article 43.0 shall be construed as relieving LMI of any of its obligations under the Order.

36

Master Agreement No. APB-LMI-001

43.0            LITIGATION

In the event that any taxing authority has claimed or does claim payment for taxes or duties, LMI shall promptly notify APB, and LMI shall take such action as APB may direct to pay or protest such taxes or to defend against such claim. The actual and direct expenses, without the addition of profit and overhead, of such defense and the amount of such taxes as ultimately determined as due and payable shall be paid directly by APB or reimbursed to LMI. If LMI or APB is successful in defending such claim, the amount of such taxes recovered by LMI, which had previously been paid by LMI and reimbursed by APB or paid directly by APB, shall be immediately refunded to APB.

43.1                      Rebates

If any taxes paid by APB are subject to rebate or reimbursement, LMI shall take the necessary actions to secure such rebates or reimbursement and shall promptly refund to APB any amount recovered.

44.0            ENTIRE AGREEMENT / ORDER OF PRECEDENCE / SURVIVAL

44.1            Entire Agreement

This Agreement (including all Orders), sets forth the entire understanding between APB and LMI with respect to, and supersedes, any and all other prior agreements, understandings and communications between APB and LMI related to its subject matter. The rights and remedies afforded to APB pursuant to this Agreement are in addition to any other rights and remedies afforded by law or otherwise.

44.2            Incorporated by Reference

In addition to the documents previously incorporated herein by reference, the documents listed below are by this reference made a part of this Agreement:

Engineering Drawing by Part Number and, if applicable, related Outside Production Specification Plan (OPSP).

Any other exhibits or documents agreed to by the parties to be a part of this Agreement.

44.3            Order of Precedence

In the event of a conflict or inconsistency between any of the terms of the following documents, the following order of precedence shall control:

1.                Order (excluding Agreement)

2.                Engineering Drawing by Part Number and, if applicable, related drawing deviations as requested by Buyer

3.                This Agreement

4.                Any other exhibits or documents the parties agree shall be part of the Agreement.

37

Master Agreement No. APB-LMI-001

44.4            SURVIVAL

The provisions of Sections 12.1 (through the terms of the warranty), 12.3, 29.3, and Articles 17.0, 23.0, 26.0, 27.0, 28.0, 39.0, 40.0, 41.0, 43.0, 44.0, and other provisions that by their terms survive termination or expiration of this Agreement, and obligations that have accrued prior to expiration or termination of this Agreement, shall survive termination or expiration of this Agreement.

EXECUTED as of the date and year first written above by the duly authorized representatives of the parties.

APB WINGLETS COMPANY, LLC	LMI AEROSPACE, INC.
Name:	Name:
Title:	Title:
Date:	Date:

38

Master Agreement No. APB-LMI-001 

ATTACHMENT A

Pricing

(Estimated. To be updated and finalized pursuant to Section 6.1)

Base Price

For first 100 Shipsets                                                                                              $*

Base Price is the price per Shipset. Prices are estimates until all detail drawings have been released. Firm pricing based on released engineering will be finalized pursuant to Section 6.1 of this Agreement.

Pricing identified above is the kit price per Shipset, exclusive of nonrecurring costs. APB's Order to LMI shall indicate part number(s) required for each Shipset of Products.

Nonrecurring Price

Total Nonrecurring Costs                                                                                     $*

Nonrecurring Price (amortized over 100 Shipsets)                                            $*

Prices are estimates until all detail drawings have been released. Firm pricing based on released engineering will be finalized pursuant to Section 6.1 of this Agreement.

Spares Pricing

Spare parts will be priced according to Article 31.0, Product Support.

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

39 

Master Agreement No. APB-LMI-001 

ATTACHMENT B

Rates & Factors

The following rates and factors will be used on all price change negotiations during the period of performance of this Agreement.

Production Labor:	$ */hour
(includes direct labor rate of $ */hour, Labor burden of *%, G&A, and profit
Direct Engineering Labor Rate	N/A
Material Burden:	*%
G&A	*%
Profit	*%

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

40 

Master Agreement No. APB-LMI-001 

ATTACHMENT C

Certified Tooling List

(to be provided by LMI once APB-owned tooling is complete and accepted by APB QA)

Tool Number	Nomenclature	Tool Code	Unit No.	Location
XYZ	Holding Fixture	HF	1	Savannah

41

Master Agreement No. APB-LMI-001 

EX-10.10

Exhibit 10.10

VOUGHT

Aircraft Industries, Inc.

Page 1 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO 9314 W JEFFERSON BL DALLAS, TX  75211

SHIP VIA SEE TRAFFIC ROUTING GUIDE AT WWW.VOUGHTAIRCRAFT.COM/SUPPLIERS/

F.O.B. SELLER PLANT

INSPECTION SEE EACH ITEM

A/C M002

TERMS NET 30 DAYS

PRIORITY RATING DO-A1

THIS PURCHASE  ORDER CONFIRMS NONE

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: REQUIRED DEPT.            86600            ZONE            7PO

NOTE SEE REMARKS

SELLER NO. 53420

BUS 8

PO TYP B3

S/C 9X

BUYER CODE KAKE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

CLAUSE G504: THIS ORDER IS ISSUED BY:

VOUGHT AIRCRAFT INDUSTRIES, INC.

POST OFFICE BOX 655907

DALLAS, TX 75265-5907

CLAUSE K301: REMITTANCE INSTRUCTIONS: SELLER'S INVOICE(S) MUST INCLUDE: COMPLETE PURCHASE ORDER NUMBER (INCLUDING SUFFIX), PURCHASE ORDER ITEM NUMBER(S), PART NUMBER(S), PART SERIAL NUMBER(S) (IF SERIALIZED), UNIT OF MEASURE, AND UNIT PRICE. MAIL ORIGINAL INVOICE TO:

VOUGHT AIRCRAFT INDUSTRIES, INC.

ATTN: A/P, M/S 220-12

P 0 BOX 655907

DALLAS TX 75265-5907

CLAUSE G356: F.O.B. ORIGIN. SELLER MUST SHIP STRICTLY IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE VOUGHT STANDARD ROUTING GUIDE. THE VOUGHT STANDARD ROUTING GUIDE MAY BE FOUND AT BUYER'S INTERNET SITE: HTTP://WWW.VOUGHTAIRCRAFT.COM/SUPPLIERS/ (NOTE: THE WEBSITE MUST BE ENTERED USING LOWER CASE CHARACTERS.) FAILURE TO COMPLY WITH SHIPPING INSTRUCTIONS AS SET FORTH IN THE ROUTING GUIDE MAY RESULT IN REJECTION OF INVOICE, DELAYS IN PAYMENT OF SHIPPING CHARGES, AND/OR DISALLOWANCE OF SHIPPING CHARGES IN EXCESS OF THOSE BUYER WOULD HAVE INCURRED HAD SELLER COMPLIED WITH SHIPPING INSTRUCTIONS.

CLAUSE G420: THIS LONG TERM AGREEMENT/PRICING AGREEMENT ("AGREEMENT") IS ISSUED TO DOCUMENT PRICING AND TERMS AND CONDITIONS APPLICABLE TO THE LONG TERM AGREEMENT BETWEEN BUYER AND SELLER. DO NOT SHIP OR INVOICE AGAINST THIS DOCUMENT. AUTHORIZATION TO MAKE PURCHASE ORDER ("PO" OR "ORDER") DELIVERIES WILL BE PROVIDED BY SEPARATE ORDERS USING BUYER'S STANDARD PO FORM, AS NEEDED, WHICH SHALL REFERENCE THIS AGREEMENT. THE TERMS AND CONDITIONS OF ORDERS ISSUED PURSUANT TO THIS AGREEMENT SHALL BE BINDING, EXCEPT AS THEY MAY CONFLICTWITH PROVISIONS OF THIS AGREEMENT, IN WHICH EVENT THE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL PREVAIL UNLESS OTHERWISE SPECIFICALLY NOTED ON THE ORDER.

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

VOUGHT

Aircraft Industries, Inc.

Page 2 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                        ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

IN CONSIDERATION OF THE MUTUAL COVENANTS SET FORTH HEREIN, BUYER AND SELLER AGREE AS FOLLOWS: SELLER AGREES TO SELL TO BUYER THE PRODUCTS AT THE PRICES IDENTIFIED BELOW. SELLER AGREES THE PRICES LISTED HEREIN SHALL REMAIN FIRM FORDELIVERIES FROM THE DATE OF THIS AGREEMENT THROUGH 12/31/2012. THE ESTIMATED TOTAL VALUE OF THIS AGREEMENT IS $51,886,186.00. THE VALUE IS BASED UPON BUYER'S ESTIMATE AS TO THE AMOUNT OF EACH PRODUCT BUYER WILL REQUIRE FROM SELLER: IN NO EVENT, HOWEVER, SHALL BUYER BE OBLIGATED TO PURCHASE ANY SPECIFIC QUANTITY OF ANY PRODUCT FROM SELLER UNTIL SUCH TIME AS AN ORDER IS ISSUED TO SELLER. BUYER'S PURCHASES HEREUNDER SHALL NOT BE LESS THAN THE TOTAL SUM OF $1,971,555.00 DURING THE TERM OF THIS AGREEMENT.

BUYER WILL ALLOW SELLER THE LEAD TIMES ("LT") SPECIFIED IN THE COLUMNS LABELED LT1 BELOW FOR DELIVERY OF THE FIRST ARTICLE AFTER RECEIPT OF ORDER AND/OR MATERIAL ("ARO/ARM") AND LT2 BELOW FOR SUBSEQUENT DELIVERIES ARO/ARM. IF ANY ORDER ISSUED PURSUANT TO THIS AGREEMENT CALLS FOR DELIVERIES BEYOND THE LAST DAY OF THIS AGREEMENT AS STATED ABOVE, THE PROVISIONS OF THIS AGREEMENT SHALL REMAIN VALID AND FULLY APPLICABLE TO SUCH ORDER UNTIL FINAL DELIVERY THEREUNDER; HOWEVER DELIVERIES BEYOND THE DATE MUST BE SCHEDULED WITHIN 90 DAYS OF THE LAST DAY OF THIS AGREEMENT.

NOTICES OR COMMUNICATIONS GIVEN OR REQUIRED UNDER THIS AGREEMENT AND ORDERS WILL BE IN WRITING AND RECEIVED AT THE FOLLOWING ADDRESSES:

BUYER AT THE ADDRESS ABOVE, ATTN: RHONDA HAILEY

SELLER AT THE ADDRESS ABOVE, ATTN:                                                                                     DAVE WRIGHT

IN THE LISTING BELOW, "U/M" MEANS UNIT OF MEASURE; "UP" MEANS UNIT PRICE; "LT1" MEANS THE LEAD TIME, IN WEEKS, BUYER WILL ALLOW AFTER RECEIPT OF ORDER AND/OR MATERIAL ("ARO/ARM") FOR DELIVERY OF THE FIRST ARTICLE; "LT2" MEANS THE LEAD TIME, IN WEEKS, BUYER WILL ALLOW FOR SUBSEQUENT DELIVERIES; AND "N/RP" MEANS NONRECURRING PRICE.

PART NUMBER	LT1	LT2	U/P	EST LTA QTY
*	*	*	$*	*

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 3 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                       ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

* * * $* *

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.    INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.    IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                             LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 4 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                      ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

* * * $* *

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 5 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.           ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

* * * $* *

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.    INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.    IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 6 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                       ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

* * * $* *

NO NON-RECURRING CHARES FOR THIS LTA

CLAUSE 1871.004: QUALITY REQUIREMENTS INVOKED BY THIS PROCUREMENT ARE LOCATED WITHIN BUYER'S SUPPLIER QUALITY ASSURANCE REQUIREMENTS (SQAR) MANUAL POSTED ON THE BUYER'S WEB SITE AT WWW.VOUGHT.COM/SUPPLIERS/ (NOTE: THE WEB SITE MUST BE ENTERED USING LOWER CASE CHARACTERS). WHEN A NEW REVISION OF SQAR IS POSTED TO BUYER'S WEB SITE, SELLER SHALL HAVE 60 CALENDAR DAYS FROM THE DATE THE REVISION IS POSTED ON THE WEB SITE TO COMPLY WITH THE REQUIREMENTS CONTAINED WITHIN THE LATEST REVISION OF THE SQAR.

CLAUSE T602: THIS PURCHASE ORDER ("ORDER") IS ISSUED SUBJECT TO BUYER'S STANDARD NOTES IDENTIFIED IN THE ORDER WHICH ARE INCORPORATED HEREIN BY REFERENCE. THE FULL TEXT OF APPLICABLE STANDARD NOTES MAY BE FOUND AT BUYER'S INTERNET SITE: HTTP://WWW.VOUGHTAIRCRAFT.COM/SUPPLIERS/ (NOTE: THE WEB SITE MUST BE ENTERED USING LOWER CASE CHARACTERS).

THE COMPOSITION OF STANDARD NOTE NUMBERS IS AS FOLLOWS:

T602.002

SUBJECT – ONE ALPHA CHARACTER ---------

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                             LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 7 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                        ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

BASIC NUMBER – THREE DIGITS ---------

REVISION NUMBER – THREE DIGITS ---------

(THE REVISION NUMBER INDICATES THE STANDARD NOTE REVISION APPLICABLE TO THIS ORDER.)

THE INTERNET SITE LISTS STANDARD NOTES BASED ON THE SUBJECT (ALPHA CHARACTER). QUESTIONS CONCERNING ACCESS TO STANDARD NOTES AND OTHER TERMS AND CONDITIONS APPLICABLE TO THIS ORDER SHOULD BE IMMEDIATELY REFERRED TO THE BUYER.

001 NON-MATERIAL CODED ITEM                                                                           5                      1           LT                                .0100

SEE XREF PN             &# 160;      01

009999999999

  0%                      PLUS                      TOLERANCE

RESALE OR EXEMPT                                                                          0%                      MINUS

   INSPECTION CODES:  7K                            PREFERD PERFM

  SHIPPING SCHEDULE

      1           LT           09-05-08

1500 1321 M685747                                                                                                PROJECT 1D = SK

SHIP TO DALLAS, TX

PRIORITY RATING: DO-A1

ITEM NOTE NUMBERS:

063013

APPLICABLE CONTRACT NUMBERS:

NONCONTRACT CHARGE

STANDARD NOTES FOLLOW:

PRICING REFLECTS THE AGREED TO ASSEMBLY SPECIFIC UNIT PRICES BASED ON A MONTHLY BUILD RATE OF (7) SHIPSETS PER MONTH (REPRESENTING THE COMBINED TOTAL OF ALL 3 CABIN MODELS), BEGINNING IN 2009 AND RUNNING THROUGH 2012. IN THE EVENT THAT THE MONTHLY BUILD RATE OVER A GIVEN CALENDAR YEAR INCREASES TO *.

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 8 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                        ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

CLAUSE T521: THE FOLLOWING TERMS AND CONDITIONS APPLY HERETO:

(1) TERMS T-1 (01-07), ENTITLED "PURCHASE ORDER TERMS AND CONDITIONS GOVERNMENT FIXED PRICE - SUPPLY;"

(2) PROGRAM ADDENDUM 229 (04-08), ENTITLED `"ADDITIONAL GENERAL CONDITIONS - GOVERNMENT - FIXED - PRICED SUPPLY FOR H-60 AND S-70 HELICOPTER PROGRAMS;" AND

(3) TERMS T-13 (04-05), ENTITLED "PURCHASE ORDER TERMS AND CONDITIONS (PACKAGING, PACKING, MARKING AND BAR CODING)."

CLAUSE T444: NOTICE: BY ACCEPTING THIS ORDER, SELLER CERTIFIES THAT ALL REPRESENTATIONS AND CERTIFICATIONS, APPLICABLE TO THIS ORDER, INCLUDED IN THE "SUBCONTRACTOR ANNUAL COMPLIANCE CERTIFICATION" AND THE "SUPPLIER CAPABILITY QUESTIONNAIRE" REMAIN VALID. IF SELLER'S STATUS UNDER ANY OF THE APPLICABLE REPRESENTATIONS AND CERTIFICATIONS HAS CHANGED, SELLER MUST COMPLETE AND SUBMIT TO BUYER A NEW "SUBCONTRACTOR ANNUAL COMPLIANCE CERTIFICATION" OR "SUPPLIER CAPABILITY QUESTIONNAIRE" PRIOR TO TAKING ANY ACTION INDICATING ACCEPTANCE AS STATED ON THE FACE OF THE ORDER.

G392.002

G358.001

G240.008

G396.000

CLAUSE G422: NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, INCLUDING, BUT NOT LIMITED TO, THE TERMINATION FOR CONVENIENCE AND CHANGES CLAUSES, SELLER AGREES THAT BUYER SHALL NOT BE LIABLE FOR COSTS INCURRED FOR: (1) PROCUREMENT OF MATERIALS IN ADVANCE OF STANDARD INDUSTRY LEAD TIMES IN EFFECT AT THE TIME OF MATERIAL PROCUREMENT; AND (2) PLACING ANY PRODUCT IN PRODUCTION IN ADVANCE OF SELLER'S STANDARD LEAD TIME FOR THE PRODUCT.

T248.001 (09-19-2008)

CLAUSE G743:                                FOR EACH SELLER NONCONFORMANCE REPORT SUBMITTED TO BUYER'S

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

VOUGHT

Aircraft Industries, Inc.

Page 9 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                       ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

MATERIALS REVIEW BOARD ("MRB") FOR DISPOSITION, BUYER SHALL BE ENTITLED TO DEBIT SELLER'S ACCOUNT BY AN AMOUNT OF $*, EFFECTIVE IMMEDIATELY.

R101.000

CLAUSE G735: ALL CARTONS MUST BE MARKED ON OUTSIDE WITH BUYER'S PURCHASE ORDER NUMBER, PART NUMBER, QUANTITY AND NUMBER OF CARTONS IN SHIPMENT.

G261.000

CLAUSE V174: FOR RESALE OR TAX EXEMPT USE. DO NOT BILL STATE OR LOCAL SALES OR USE TAX FOR DELIVERY OR PERFORMANCE IN CALIFORNIA, FLORIDA, GEORGIA, SOUTH CAROLINA, TENNESSEE, OR TEXAS BECAUSE BUYER MAINTAINS A CURRENT REGISTRATION NUMBER WITH THESE STATES. IF A CURRENT RESALE OR EXEMPTION CERTIFICATE IS NEEDED, SEND REQUEST TO BUYER'S PROCUREMENT REPRESENTATIVE.

G248.000

CLAUSE F112: UNLESS OTHERWISE SPECIFIED ON THE ORDER, MAKE PER LATEST VOUGHT SUPPLIER PLANNING, ENGINEERING DATA AND SPECIFICATIONS RECEIVED FROM BUYER. IN THE EVENT A LATER REVISION WOULD INVOLVE AN INCREASE IN COST, BUYER'S WRITTEN APPROVAL MUST BE OBTAINED. WHEN MASTER DIMENSION DATA ("MDD") OR OTHER DIGITAL DATA SETS ARE USED, SELLER SHALL PROVIDE OBJECTIVE EVIDENCE TO ASSURE THAT PART INSPECTION DATA IS GENERATED INDEPENDENT OF THAT USED BY MANUFACTURING. WHENEVER OPTIONAL MANUFACTURING METHODS ARE PERMITTED, SELLER CERTIFICATION MUST IDENTIFY THE METHOD USED AND THE ENGINEERING REVISION LEVEL.

CLAUSE T572: TERMS T-55 (R. 7-00), "PURCHASE ORDER TERMS AND CONDITIONS (PROPERTY CONTROL) (GOVERNMENT - FIXED - PRICE)," IS BY THIS REFERENCE MADE A PART HEREOF.

*** NOTICE ***

TERMS T-55 APPLIES TO ALL SPECIAL TOOLING OR SPECIAL TEST EQUIPMENT (ST/STE) AS DEFINED IN THE DOCUMENT WHETHER ACQUIRED BY SELLER OR PROVIDED BY BUYER, BUYER'S CUSTOMER, OR THE GOVERNMENT AND INCLUDES ST/STE TRANSFERRED FROM ANOTHER BUYER SUBCONTRACTOR TO SELLER. DISPOSITION OR RETENTION INSTRUCTIONS

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                             LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

* The text noted by asterisks has been redacted in connection with a request to the Securities and Exchange Commission for confidential treatment of such text pursuant to Rule 24b-2.  A copy of this Agreement including the redacted information has been submitted to the Securities and Exchange Commission as part of such request.

VOUGHT

Aircraft Industries, Inc.

Page 10 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                        ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

RELATIVE TO BUYER PROVIDED ST/STE SHALL BE GIVEN TO SELLER UPON CONTRACT COMPLETION. FAR 52.245-2 "GOVERNMENT PROPERTY (FIXED PRICE CONTRACTS)" APPLIES TO THIS ORDER AS MODIFIED AND SET FORTH IN CONDITION 6 OF TERMS T-55.

D111.000(PER RELEASE PURCHASE ORDER)

CLAUSE S117: ADJUSTMENT OF SCHEDULES. SUBSEQUENT TO THE AWARD OF THIS PURCHASE ORDER, NOTWITHSTANDING THE REQUIRED DELIVERY SCHEDULE SET FORTH HEREIN, THE DATE BUYER ACTUALLY NEEDS THE PRODUCT TO BE DELIVERED ('`SHIP DATE") MAY CHANGE. BUYER'S AUTOMATED PURCHASE ORDER RESCHEDULE SYSTEM (APORS), ACCESSIBLE TO THE SELLER FOR INFORMATION PURPOSES ONLY ON VOUGHT'S SUPPLIER PORTAL, REFLECTS BUYER'S MOST CURRENT NEED DATE FOR SHIPMENT OF PRODUCT ("SHIP DATE").

SELLER'S DELIVERY OF PRODUCT IN ACCORDANCE WITH THE APORS REVISED SCHEDULE IS NOT A CONTRACT REQUIREMENT AND THE APORS REVISED SHIP DATES DO NOT CONSTITUTE A CONTRACT CHANGE NOTICE. SELLER IS REQUESTED TO MAKE EVERY EFFORT TO MEET THE REVISED DELIVERY SCHEDULE WHEN IT CAN DO SO AT NO INCREASE IN ITS COSTS OF PERFORMANCE. DELIVERY TO THE APORS REVISED SCHEDULE WILL NOT BE SUBJECT TO EQUITABLE ADJUSTMENT.

IF SELLER CANNOT MEET THE REVISED SHIP DATE WITHOUT INCURRING ADDITIONAL COSTS TO DO SO, SELLER SHOULD SO INFORM BUYER.

T465.001 MINIMUM/MAXIMUM ("MIN/MAX") INVENTORY.

QUANTITIES, SCHEDULES, AND NOTICE. NOTWITHSTANDING STANDARD NOTE S115, WHICH PERTAINS TO BUYER'S AUTOMATED PURCHASE ORDER RESCHEDULING SYSTEM, AND ANY OTHER SCHEDULE INFORMATION SET FORTH ELSEWHERE IN THIS ORDER/AGREEMENT, SELLER HEREBY ACKNOWLEDGES AND AGREES THAT SELLER SHALL BE RESPONSIBLE FOR DETERMINING SPECIFIC PRODUCT DELIVERY QUANTITIES AND SHIPPING SCHEDULES AS SET FORTH HEREIN BELOW DURING THE TERM OF THIS ORDER/AGREEMENT. AS A MATERIAL CONDITION OF THIS ORDER/AGREEMENT, SELLER SHALL ENSURE BUYER'S INVENTORY STOCK LEVEL OF EACH PRODUCT COVERED BY THIS ORDER/AGREEMENT IS AT ALL TIMES EQUAL TO OR GREATER THAN THE MINIMUM QUANTITY OR EQUAL TO OR LESS THAN THE MAXIMUM QUANTITY (HEREINAFTER THE "MIN/MAX RANGE") SPECIFIED IN THE ORDER/AGREEMENT AND PUBLISHED ON BUYER'S SUPPLIER WEB PORTAL INTERNET SITE. TO ACCESS THE WEB PORTAL GO TO

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                             LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

VOUGHT

Aircraft Industries, Inc.

Page 11 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                      ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

HTTP://WWW.VOUGHTAIRCRAFT.COM/SUPPLIERS/ (NOTE: THE WEB ADDRESS MUST BE INPUT USING LOWER CASE CHARACTERS); THEN, CLICK ON "WEB PORTAL."

AS A MINIMUM, SELLER SHALL:

1. CONTACT BUYER'S PROCUREMENT REPRESENTATIVE TO REQUEST ASSIGNMENT OF A WEB PORTAL PASSWORD, IF NOT PREVIOUSLY ASSIGNED.

2. ACCESS BUYER DATA ON THE WEB PORTAL IN ORDER TO MONITOR BUYER'S PRODUCT USAGE.

3. ANALYZE BUYER DATA TO DETERMINE SELLER'S FABRICATION AND DELIVERY REQUIREMENTS.

4. ENSURE AN UNINTERRUPTED FLOW OF PRODUCT(S) TO BUYER'S IDENTIFIED MANUFACTURING FACILITY(IES) TO MAINTAIN BUYER'S PRODUCT INVENTORY LEVELS WITHIN THE MIN/MAX RANGE.

IN ADDITION TO THE REMEDIES ALREADY AVAILABLE TO BUYER UNDER THE TERMS AND CONDITIONS OF THIS ORDER/AGREEMENT:

1. UNAUTHORIZED OVERSHIPMENTS MAY BE RETURNED AT SELLER'S EXPENSE. SELLER SHALL BE LIABLE FOR ALL STORAGE/HANDLING CHARGES INCURRED AS A RESULT OF OVERSHIPMENTS.

2. IF SELLER IS UNABLE TO MAINTAIN BUYER'S INVENTORY LEVEL ABOVE THE MINIMUM LEVEL FOR ANY REASON, OTHER THAN A CHANGE DIRECTED BY BUYER, BUYER SHALL HAVE THE OPTION TO (1) CANCEL THIS ORDER/AGREEMENT, OR (2) FILL SUCH ORDER/AGREEMENT OR ANY PORTION THEREOF, FROM SOURCES OTHER THAN SELLER AND TO REDUCE SELLER'S ORDER/AGREEMENT QUANTITIES ACCORDINGLY AT NO INCREASE IN UNIT PRICE, WITHOUT ANY PENALTY TO BUYER. THIS CONDITION SHALL NOT LIMIT BUYER'S RIGHTS UNDER THE TERMI­NATION FOR DEFAULT CLAUSE CONTAINED HEREIN.

3. ALL PARTIES EXPRESSLY AGREE THAT TIME IS OF THE ESSENCE IN THE PERFORMANCE OF THIS ORDER/AGREEMENT.

4. PAYMENT DUE DATES, INCLUDING DISCOUNT PERIODS, WILL BE CALCULATED FROM THE DATE OF ACCEPTANCE OF PRODUCTS OR CORRECT INVOICE, WHICHEVER IS LATER. BUYER HAS THE RIGHT, WITHOUT LOSS OF DISCOUNT PRIVILEGES, TO PAY INVOICES COVERING PRODUCTS SHIPPED IN EXCESS OF THE MAXIMUM QUANTITY LEVEL ON THE DATE THAT THE EXCESS PRODUCT WOULD HAVE OTHERWISE BEEN AUTHORIZED FOR DELIVERY, WHEN BUYER, IN ITS SOLE DISCRETION, DECIDES NOT TO RETURN ANY PRODUCT QUANTITY EXCEEDING THE MAXIMUM QUANTITY LEVEL TO SELLER. PAYMENT SHALL NOT CONSTITUTE ACCEPTANCE OF PRODUCTS.

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                             LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

VOUGHT

Aircraft Industries, Inc.

Page 12 of 12

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                       ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

INDEMNITY FOR DISRUPTION. SELLER AGREES TO INDEMNIFY AND HOLD HARMLESS BUYER FOR ALL COSTS, INCLUDING WITHOUT LIMITATION DELAY AND DISRUPTION COSTS, ATTORNEY FEES, AND EXPEDITE CHARGES, INCURRED BY BUYER AS A RESULT OF SELLER'S FAILURE TO PROVIDE PRODUCT(S) AS SET FORTH ABOVE; PROVIDED HOWEVER, SELLER SHALL NOT BE REQUIRED TO INDEMNIFY BUYER FOR SELLER'S FAILURE CAUSED BY INACCURATE OR INCOMPLETE BUYER DATA. SELLER SHALL NOTIFY BUYER WITHIN TWENTY-FOUR (24) HOURS OF DISCOVERING OR HAVING REASON TO BELIEVE THAT ANY BUYER DATA MAY BE INACCURATE OR INCOMPLETE.

TERMINATION OR OBSOLESCENCE LIABILITY. NOTWITHSTANDING ANY OTHER PROVI­SION OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, THE TERMINATION FOR CONVENIENCE AND CHANGES CLAUSES, BUYER SHALL INCUR NO TERMINATION OR OBSOLESCENCE LIABILITY FOR ACTIONS TAKEN BY SELLER IN ADVANCE OF THE LEAD TIMES SPECIFIED IN THE ORDER/AGREEMENT. ANY TERMINATION OR OBSOLESCENCE CLAIM FOR SELLER'S COSTS OR EXPENSES INCURRED WITHIN THE LEAD TIMES SPECI­FIED IN THE ORDER/AGREEMENT SHALL BE MADE PURSUANT TO THE CHANGES CLAUSE HEREOF.

  NOT TO EXCEED

 GRAND TOTAL                         51886186.00

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

VOUGHT

Aircraft Industries, Inc.

Page 1

SELLER:

LMI AEROSPACE INC

P.O. BOX 900

ST. CHARLES MO  63302 0900

DATE 1/21/008 PURCHASE ORDER NO. 117-801538AZ

PURCHASE ORDER

SHIP TO

SHIP VIA

F.O.B.

INSPECTION

A/C

TERMS

PRIORITY RATING

THIS PURCHASE  ORDER CONFIRMS

RETURN ACCEPTANCE COPY TO BUYER’S ADDRESS, ATTN: DEPT.                       ZONE

NOTE

SELLER NO.

BUS

PO TYP

S/C

BUYER CODE

ITEM

PART NO.                       DESCRIPTION

DC

QUANTITY

UM

SHIP. SCHED.

UNIT PRICE

ITEM TOTAL

A C C O U N T I N G  D A T A

(SPECON)                                                                 (ACCT)                                (WPA SALES ORDER)

001           1500 NON-MATERIAL CODED                        5           1 LT            132-1  20000  .01

   NONCONTRACT CHARGE

ADDITIONAL PROVISIONS	1.     OFFER AND ACCEPTANCE. THIS ORDER IS BUYER’S OFFER TO SELLER AND ACCEPTANCE BY SELLER IS EXPRESSLY LIMITED TO ITS TERMS AND ANY CHANGES OR ADDITIONAL PROVISIONS OF SELLER ARE HEREBY OBJECTED TO AND ARE NOT BINDING UNLESS ACCEPTED IN WRITING BY BUYER.  SELLER’S BEGINNING PERFORMANCE, SHIPPING ANY GOODS, OR RETURNING THE SIGNED ACCEPTANCE COPY SHALL CONSTITUTE ACCEPTANCE OF THIS ORDER 2.    ROUTING INSTRUCTIONS MUST BE STRICTLY FOLLOWED IN ACCORDANCE WITH PACKING AND SHIPPING INSTRUCTIONS REFERENCED IN THE ORDER. 3.     INVOICES ARE SUBJECT TO THE PROVISIONS OF THIS ORDER. 4.     IF A PRIORITY RATING IS SET FORTH ABOVE, SELLER MUST COMPLY WITH 15 CFR PART 700.	Vought Aircraft Industries, Inc.          By:_________________________                                                           L.D. SMITH                            LDS                 COMPUTER GENERATED SIGNATURE
SELLER COPY

FORM 37-3

EX-21.1

Exhibit 21.1

Subsidiaries of Registrant

Subsidiary	Jurisdiction
LMI Finishing, Inc.	Missouri
LMI Services, Inc.	Missouri
Leonard’s Metal, Inc.	Missouri
Precise Machine Partners, L.L.P.	Texas
Precise Machine Company	Missouri
Tempco Engineering, Inc.	Missouri
Versaform Corporation	California
D3 Technologies, Inc.	California

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-338090) and Form S-3 (No. 333-147283) of LMI Aerospace, Inc. of our reports dated March 13, 2009, relating to the Consolidated Financial Statements and financial statement schedule, and the effectiveness of LMI Aerospace, Inc.’s internal control over financial reporting, which appear in this Form 10-K for the year ended December 31, 2008.

/s/ BDO Seidman, LLP

Chicago, Illinois

March 13, 2009

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Ronald S. Saks, certify that:

1.            I have reviewed this annual report on Form 10-K of LMI Aerospace, Inc.;

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(s) 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent certified public accountants 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: March 13, 2009	/s/ Ronald S. Saks
	Ronald S. Saks
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Lawrence E. Dickinson, certify that:

1.           I have reviewed this annual report on Form 10-K of LMI Aerospace, Inc.;

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(s) 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 most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s independent certified public accountants 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: March 13, 2009	/s/ Lawrence E. Dickinson
	Lawrence E. Dickinson
	Chief Financial Officer and Secretary

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of LMI Aerospace, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company, does hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Annual 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.

Date: March 13, 2009	/s/ Ronald S. Saks
	Ronald S. Saks
	President and Chief Executive Officer (Principal Executive Officer)
Date: March 13, 2009	/s/ Lawrence E. Dickinson
	Lawrence E. Dickinson
	Secretary and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to LMI Aerospace, Inc. and will be retained by LMI Aerospace, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.