-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, To5FMPOvN1CZ1bArTKnl0WTT9h16GmF15Wp2uOcUg5YW8goQIbRSpkqVhdOkHEWI C19Qh+RSreLJXusK/hzQRA== 0001011240-98-000014.txt : 19980504 0001011240-98-000014.hdr.sgml : 19980504 ACCESSION NUMBER: 0001011240-98-000014 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 19 FILED AS OF DATE: 19980429 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEONARDS METAL INC CENTRAL INDEX KEY: 0001059562 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431309065 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-51357 FILM NUMBER: 98604677 BUSINESS ADDRESS: STREET 1: P O BOX 900 CITY: ST CHARLES STATE: MO ZIP: 63302 BUSINESS PHONE: 3149466525 MAIL ADDRESS: STREET 1: P O BOX 900 CITY: ST CHARLES STATE: MO ZIP: 63302 S-1 1 FORM S-1 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on April 29, 1998 Registration No. 333- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 LMI AEROSPACE, INC. (Exact Name of Registrant as Specified in Its Charter) Missouri 3728 43-1309065 (State or Other Primary Standard Industrial (I.R.S. Employer Jurisdiction of Classification Code Number Identification Number) Incorporation or Organization) 3600 Mueller Road, St. Charles, Missouri 63302 (314) 946-6525 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Lawrence E. Dickinson Chief Financial Officer P.O. Box 900, St. Charles, Missouri 63302 (314) 946-6525 Fax: (314) 949-1576 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service) Copies of all correspondence to: Douglas J. Bates, Esq. Steven Schwartz, Esq. Gallop, Johnson & Neuman, L.C. Much Shelist Freed Denenberg 101 South Hanley Road, 16th Floor Ament Bell & Rubenstein, P.C. St. Louis, Missouri 63105 200 N. LaSalle Street, Suite 2100 (314) 862-1200 Chicago, Illinois 60601-1095 Fax: (314) 862-1219 (312) 346-3100 Fax: (312) 621-1750 Approximate date of commencement of proposed sale to public. As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or investment reinvestment plans, check the following box. |_| If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.|_| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_| CALCULATION OF REGISTRATION FEE
====================================================================================================================== Amount Proposed Maximum Proposed Maximum Title Of Each Class Of To Be Offering Price Aggregate Offering Amount Of Securities To Be Registered Registered(1) Per Share(2) Price(2) Registration Fee - ---------------------------------------------------------------------------------------------------------------------- Common Stock, par value $.02 per share 2,645,000 $14.00 $37,030,000 $10,924 ====================================================================================================================== (1) Includes 345,000 shares which the Underwriters have the option to purchase from the Company to cover over-allotments, if any. (2) Estimated solely for the purpose of calculating the amount of the registration fee.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION, DATED APRIL 29, 1998 2,300,000 Shares [LOGO] LMI AEROSPACE, INC. Common Stock All of the 2,300,000 shares of Common Stock, par value $0.02 per share (the "Common Stock"), offered hereby (the "Offering"), are being offered by LMI Aerospace, Inc., a Missouri corporation (the "Company"). Prior to the Offering, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price will be between $12.00 and $14.00 per share. See "UNDERWRITING" for information relating to the factors considered in determining the initial public offering price. The Company has filed an application to designate the Common Stock for quotation on the Nasdaq National Market under the proposed symbol "LMIA." For a discussion of certain risks that should be considered by prospective purchasers of the Common Stock offered hereby, see "RISK FACTORS" commencing on page 7. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. =============================================================================== Underwriting Price to Discounts and Proceeds Public Commissions(1) to Company(2) - ------------------------------------------------------------------------------- Per Share....... $ $ $ Total (3)....... $ $ $ =============================================================================== (1) The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as aended (the "Securities Act"). See "UNDERWRITING." (2) Before deducting estimated expenses of the Offering of $550,000, all of which will be paid by the Company. (3) The Company has granted the Underwriters a 45-day option to purchase up to an aggregate of 345,000 additional shares of Common Stock at the price to the public less underwriting discounts and commissions for the purpose of covering over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $___, $___ and $___, respectively. See "UNDERWRITING." The Common Stock is being offered by the Underwriters, subject to prior sales, when, as and if issued to and accepted by them and subject to certain conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders, in whole or in part. It is expected that the delivery of certificates representing the Common Stock will be made against payment therefor on or about ____________________, 1998. EVEREN Securities, Inc. George K. Baum & Company The date of this Prospectus is ________________, 1998 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. 2 Caption 1. The Company is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components used in aircraft, such as those shown below. 2. A leading edge wing skin manufactured by the Company being installed at a Boeing facility. 3. Coordinate Measuring Machine (CMM), a CNC multi-axis touch probe machine used for measuring close tolerances. Shown here measuring critical characteristics of leading edge components for the Boeing 737 Next Generation. 4. The Company's Zimmerman, CNC, 5-axis router mill is shown above. 5. Door panel component manufactured by the Company for a Lockheed Martin F-16. 6. Wing leading edge slat being stretch formed on the Company's CNC leading edge press. 7. The Company manufactures and assembles 21 detail parts to produce this 747 window frame. 8. The Company is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components used in aircraft, such as those shown above. CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT POSITIONS, OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING." 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and the Consolidated Financial Statements and the Notes thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all share and per share data (other than the historical financial statements contained herein) reflects a 2.29 to 1 stock dividend payable on June 1, 1998 to shareholders of record on May 1, 1998. Unless otherwise indicated, the information in this Prospectus assumes that the Underwriters' over-allotment option will not be exercised. Unless the context otherwise requires, references to the Company are to LMI Aerospace, Inc., a Missouri corporation, and its wholly-owned subsidiaries, Leonard's Metal, Inc., a Missouri corporation, and LMI Finishing, Inc., an Oklahoma corporation. The Company LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components for use by the aerospace industry. For approximately 50 years the Company has been engaged in manufacturing components for a wide variety of aerospace applications. Components manufactured by the Company include leading edge wing slats, flaps and lens assemblies; cockpit window frame assemblies; fuselage skins and supports; and passenger and cargo door frames and supports. The Company maintains multi-year contracts with leading original equipment manufacturers ("OEMs") and primary subcontractors ("Primes") of commercial, corporate, regional and military aircraft. Such contracts, which govern virtually all of the Company's sales, designate the Company as the sole supplier of the aerospace components sold under the contracts. Customers include Boeing, Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The Company manufactures approximately 14,000 parts for integration into such models as Boeing's 737, 747, 757, 767 and 777 commercial aircraft, Gulfstream's G-IV and G-V corporate aircraft, Canadair's RJ regional aircraft, and Lockheed Martin's F-16 and C-130 military aircraft. In addition to supplying quality components, the Company provides its customers with value-added services, including engineered tool design, production and repair; heat treating; chemical milling; assembly; and metal finishing processes, such as polishing and painting. The Company believes that such value-added services provide significant benefits to its customers including: (i) reduced administrative costs resulting from the Company's ability to serve as a single point of purchase for a wide array of required products and services, (ii) faster, more efficient production rates, and (iii) greater consistency in meeting scheduled delivery dates. As a result, the Company believes that its value-added services are an increasingly important factor in the selection of the Company to provide aerospace components. For the five-year period ended December 31, 1997, the Company's revenue increased at a compound annual rate of 32% from $18.4 million to $55.1 million. During the same period operating income increased from $279,000 to $9.6 million. Net income, which was generally breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million in 1997. At December 31, 1997, the Company's backlog of customer orders scheduled for delivery within the next twelve months increased to a record level of $40.5 million from $34.1 million at December 31, 1996. The Company believes that it is well positioned to benefit from several industry trends, including: (i) increased new aircraft production; (ii) increased outsourcing by OEMs and Primes; (iii) a decrease in the number of preferred suppliers of aerospace components; and (iv) increased consolidation of aerospace component suppliers. 4 The Industry The aerospace components industry is enjoying favorable trends driven by strong growth in production of new commercial, corporate and regional aircraft. Aircraft manufacturers are currently experiencing record levels of new orders. The market for new commercial aircraft is estimated at $50 billion, the market for corporate jet aircraft is estimated at $6 billion and the market for regional jet aircraft is estimated at $3 billion. According to Boeing's 1997 Current Market Outlook (the "Boeing Report"), annual deliveries of commercial aircraft can be expected to increase from approximately 400 in 1996 to more than 700 in 1998, increasing the worldwide fleet of aircraft from 11,500 at the end of 1996 to over 16,000 at the end of 2001 and over 23,000 at the end of 2016. Additionally, expenditures for new commercial aircraft production are expected to total approximately $490 billion for the period from 1996 to 2006. Such increases result from the need of aircraft operators to accommodate a projected 75% increase in global air travel through the year 2006. The demand for commercial aircraft is rapidly increasing as a result of the following: (i) increasing profitability of airline operators; (ii) a worldwide increase in miles flown by existing aircraft; and (iii) the need to modify or replace older aircraft to comply with more stringent governmental noise and safety regulations. According to the Allied Signal Annual Business Aviation Outlook dated September 1997 (the "Allied Report"), 2,300 new corporate jet aircraft are expected to be delivered from 1997 through 2001, a 61% increase over the previous five-year period. The demand for corporate aircraft is rapidly increasing as a result of the following: (i) the introduction of new, larger and more efficient aircraft; (ii) the growing popularity of fractional aircraft ownership; (iii) the minimal availability of used aircraft; (iv) the need for long-range flights to expanding international markets; (v) the increased demand for more expedient travel; and (vi) the continued surge in corporate profitability and the U.S. stock market. Regional jets, 32-70 seat passenger jets, are the most rapidly growing market segment in commercial aircraft. Annual deliveries are estimated to double from 96 units in 1997 to more than 210 by 2000. The demand for regional jets is rapidly increasing as a result of the following: (i) ability to pull passengers into major airline hubs or bypass hubs altogether; (ii) expanded frequency of service on routes served by larger jets; (iii) break even load factors are much lower on regional airlines than on majors; (iv) extended range relative to previously utilized regional turboprops; and (v) ability to service routes which would otherwise be unprofitable if served by larger jets. In addition to demand related to production of new aircraft, the aerospace components industry is benefiting from an increasing demand for aftermarket components resulting from the growing number of aircraft in service. Growth Strategy The Company's primary objective is to expand its position as a leading components supplier to the aerospace industry through the application of a comprehensive business strategy combining various customer service, operating and growth objectives. Capitalize on Favorable Industry Trends. The Company believes its strong market position and alignment with many of the leading OEMs and Primes will enable it to benefit from several industry trends, allowing it to increase production capabilities and expand operations to meet anticipated increases in demand. The Company believes that it is well-positioned to take advantage of the current trends and expected growth in the aerospace components industry as a result of its ability to maintain consistent on-time delivery, its key customer relationships, its status as a supplier of value-added content, its ability to deliver consistent component quality, the active involvement of its employees and its geographic proximity to its customers. See "BUSINESS--Competitive Strengths." Pursue Strategic Acquisitions. The Company seeks to leverage its core competencies in existing and related markets by identifying and pursuing complementary acquisitions in the aerospace industry that offer strategic value, such as cost savings, increased manufacturing capacity, increased process 5 capability and/or new customer relationships. The Company believes that the fragmented nature of the industry for aerospace components should provide the Company with additional opportunities to exploit industry consolidation trends. Expand Aftermarket Presence. The Company intends to increase its penetration of the aerospace components aftermarket by expanding its product and service offerings in response to the inventory needs of aftermarket participants, tailoring its delivery procedures to meet the specific requirements of this market and increasing its sales and marketing efforts to increase awareness by such participants of the Company's capabilities. Diversify Customer Base. The Company believes that opportunities exist to establish additional relationships with OEMs, Primes and distributors of aerospace products not currently supplied by the Company. In addition, the Company is currently marketing its capabilities to unserved business units of its current customers. Expand Integration Capabilities. The Company intends to grow by increasing the array of manufacturing, assembly and finishing services which it can offer existing and prospective customers by expanding its capability to integrate parts into higher level aerospace components. The Company believes that such integration capability will enhance its reputation as a single point of purchase for the aerospace industry. Furthermore, the Company believes that by expanding its integration capabilities, it will increase its relative importance to its customers and expand its revenue content per plane. The Company's executive offices are located at 3600 Mueller Road, St. Charles, Missouri 63302, and its telephone number is (314) 946-6525. The Offering Common Stock offered by the Company..................... 2,300,000 shares (1) Common Stock to be outstanding after the Offering.............. 8,208,471 shares (1) (2) Use of Proceeds ................ To repay certain debt, pursue strategic acquisitions, expand manufacturing capacity, finance working capital requirements, and fund other general corporate purposes. See "USE OF PROCEEDS." Proposed Nasdaq National Market Symbol................... LMIA (1) Does not include up to 345,000 shares of Common Stock issuable upon full exercise of the Underwriters' over-allotment option. (2) Based on shares outstanding as of March 31, 1998. Excludes 1,271,585 shares of Common Stock reserved, as of the date of this Prospectus, for issuance in connection with the Company's stock based compensation plan. Also excludes 131,600 new shares of Common Stock issued on May 1, 1998, as compensation to, or purchased by, Lawrence J. LeGrand, Chief Operating Officer of the Company. See "MANAGEMENT -- Benefit Plans," "CAPITALIZATION" and "PRINCIPAL SHAREHOLDERS." Forward-Looking Statements Any forward-looking statements set forth in this Prospectus are necessarily subject to significant uncertainties and risks. When used in this Prospectus, the words "believes," "anticipates," "intends," "plans," "projects," "estimates," "expects" and similar expressions are intended to identify forward-looking statements. Actual results could be materially different from those reflected in such forward-looking statements as a result of various factors, including, but not limited to, those matters discussed under the caption "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS". Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 6 SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Year Ended December 31, ---------------------------------------------------------------------- (in thousands, except Shares and per share data) 1993(1) 1994 1995 1996 1997 ------- ---- ---- ---- ---- Statement of Operations Data: Net sales........................ $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080 Cost of sales.................... 15,041 17,274 20,366 26,725 38,932 ------ ------ ------ ------ ------ Gross profit..................... 3,342 3,437 5,058 8,291 16,148 Selling, general & administrative expense......... 3,063 3,337 3,883 5,256 6,549 ------ ----- ----- ----- ----- Income from operations........... 279 100 1,175 3,035 9,599 Interest expense................. (347) (522) (1,038) (1,123) (1,020) Other (expense) income(2), net... 293 263 (48) 15 10 ----- ------ ------- ------ ------ Income (loss) before income taxes......................... 225 (159) 89 1,927 8,589 Provisions for income taxes...... 381 (62) 52 740 3,306 ------ -------- ------ ------ ------ Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283 ======= ======= ======= ======= ======= Net income (loss) per common share:(3) Basic......................... $ (0.03) $(0.02) $0.01 $0.21 $0.91 Diluted....................... $ (0.03) $(0.02) $0.01 $0.20 $0.89 Weighted average shares outstanding.................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 Other Financial Data: EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 Capital expenditures............. 1,732 4,746 1,736 1,316 3,856 Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3% EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4% 7 December 31, 1997 ----------------- (in thousands) Actual As Adjusted(5) Balance Sheet Data: ------ -------------- Cash and equivalents............. $ 244 $ 23,591 Working capital.................. 11,256 35,104 Total assets..................... 33,269 56,977 Total long-term debt, excluding current portion ............... 9,274 5,864 Stockholders' equity............. 16,751 44,008 (1) On December 31, 1993, the Company elected to change from a Subchapter S corporation to a C corporation. As a result of this change in tax status, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of the assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense represents the recognition of deferred tax assets and liabilities at December 31, 1993. (2) Other (expense) income includes income from insurance proceeds (net of related flood expense) of $280 and $255 in 1993 and 1994, respectively. (3) Complete pro forma presentation is not shown above as adjustments are not material. Pro forma net income of $5,398 (versus historical net income of $5,283 shown above) is the amount net income would have been if the $3.9 million debt anticipated to be retired with the offering proceeds had been retired at the beginning of the period. Pro forma net income per common share of $0.66 and $0.66, basic and diluted, respectively, reflects the increase in the number of shares of Common Stock to be sold in the Offering, and the increase in net income due to the debt retirement. (4) EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator used by many investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA as presented may not be comparable to similarly titled indicators reported by other companies because not all companies necessarily calculate EBITDA in an identical manner and therefore it is not necessarily an accurate means of comparison between companies. EBITDA is not intended to represent cash flows or funds available for management's discretionary use for the periods listed nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for indicators of performance prepared in accordance with generally accepted accounting principles. (5) Adjusted to give effect to the receipt of the net proceeds from the sale by the company of 2,300,000 shares of Common Stock to be sold in this Offering (at an assumed initial public offering price of $13.00 per share) and the application of the estimated net proceeds to working capital and repayment of a portion of certain debt (after deduction of underwriting discounts and commissions and estimated offering expenses payable by the Company) as set forth in "USE OF PROCEEDS" and "CAPITALIZATION."
8 RISK FACTORS Prospective investors should consider carefully the following factors, in addition to the other information contained in this Prospectus, in evaluating an investment in the Common Stock offered hereby. Customer Concentration A significant portion of the Company's sales is dependent, directly or indirectly, on relationships with various business units of The Boeing Company ("Boeing"). During 1995, 1996 and 1997, direct sales to business units of Boeing, including Boeing Seattle, Boeing Wichita and Boeing North American, accounted for approximately 45%, 46% and 59% of the Company's sales, respectively. In addition, during the same time periods sales to Boeing vendors for integration and shipment to Boeing's business units accounted for approximately 19%, 20% and 17% of the Company's sales, respectively. Aggregate direct sales during the same periods to the Company's three largest customers accounted for approximately 74%, 73% and 81% of sales, respectively. The Company expects that a small number of large customers will continue to account for a substantial portion of its sales for the foreseeable future. Although substantially all of the Company's sales are made pursuant to multi-year contracts, such contracts are terminable upon 30 days notice by the customer and typically do not require the customer to purchase any specific quantity of products. See "BUSINESS -- Customers." As a result, the Company's business, financial condition or results of operations could be materially adversely affected by the decision of a single customer to reduce or terminate its orders with the Company. In addition, there can be no assurance that sales to customers that have in the past accounted for significant sales individually or as a group will continue, or if continued, will reach or exceed historical levels in any future periods. Aerospace Industry The Company derives all of its sales and operating income from the services and components that it provides to its customers in the aerospace industry. As a result the Company's business is directly affected by certain characteristics and trends of the aerospace industry that affect its customers, such as (i) fluctuations in the aerospace industry's business cycle, (ii) varying fuel and labor costs, (iii) intense price competition and regulatory scrutiny, (iv) 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 (v) changes in military budgeting and procurement for certain military aircraft. In the event that such characteristics and trends adversely affect customers in the aerospace industry, they would reduce the overall demand for the Company's products and services, thereby decreasing the Company's sales and operating income. There can be no assurance that characteristics and trends that might affect the aerospace industry will not adversely affect the Company's results of operations. See "BUSINESS -- Industry Outlook." Dependence Upon Key Management Personnel The Company's long-term success and growth strategy depend on its senior management. The Company has entered into written employment agreements with all of its senior management personnel and maintains key man life insurance policies on the lives of certain of such personnel. However, the loss of service of one or more of the Company's senior management personnel could have a material adverse effect on the Company's business, financial condition or results of operation. See "MANAGEMENT." Need to Attract and Retain Qualified Personnel The Company's success and future growth will also depend on management's ability to attract, hire, train, integrate and retain qualified personnel in all areas of its business. Competition for such personnel is intense and the Company's inability to adequately staff its operations with such personnel could render the Company less efficient, thereby slowing its rate of production. If the Company is unable to attract, hire, train, integrate and retain such qualified personnel, the Company's business, financial condition or results of operations could be materially and adversely affected. 9 Strategic Acquisitions A key element of the Company's growth strategy is expansion through the acquisition of complementary businesses involved in the aerospace industry. The Company's ability to expand by acquisition is dependent on, and may be limited by, the availability of suitable acquisition candidates and the Company's capital resources. See "BUSINESS -- Growth Strategy," "USE OF PROCEEDS," and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources." Acquisitions involve risks that could adversely affect the Company's operating results, including assimilation of the operations and personnel of acquired companies, the potential amortization of intangible assets, the potential loss of key employees of the acquired companies and the incurrence of substantial, additional indebtedness in funding such acquisitions. Furthermore, although the Company will investigate the business operations and assets of entities that it acquires, there may be liabilities that the Company fails or is unable to discover, and for which the Company as a successor owner or operator may be liable. The Company evaluates acquisition opportunities from time to time, but the Company has not entered into any commitments or binding agreements to date. There can be no assurance that the Company will be able to consummate acquisitions on satisfactory terms, or at all, or that it will be successful in integrating any such acquisitions into its operations. Competition Components for new aircraft and replacement components for existing aircraft are provided by a large fragmented group of companies, including certain business units of or affiliated with the Company's customers. However, the Company is unaware of any single company with which it competes in all of the Company's processes. The Company believes that participants in the aerospace components industry compete primarily with respect to reliability of delivery, price and quality. The Company also believes that competition in its industry will increase substantially as a result of industry consolidations and trends toward favoring greater outsourcing of components and reducing the number of preferred suppliers. Certain of the Company's competitors, including business units affiliated with the Company's customers, have substantially greater financial, production and other resources than the Company. These competitors (i) may have the ability to adapt more quickly to changes in customer requirements and industry conditions or trends, (ii) may have stronger relationships with customers and suppliers and (iii) greater name recognition than the Company. There can be no assurance that competitive pressures will not materially and adversely affect the Company's business, financial condition or results of operation. See "BUSINESS - Competition" and "-Industry Outlook." Raw Materials Most of the Company's aerospace components are manufactured from aerospace quality aluminum sheet metal and extrusion. From time to time the Company, and the aerospace components industry as a whole, has experienced shortages in the availability of aerospace quality aluminum sheet metal and extrusion. Such shortages could inhibit the Company's ability to deliver products to its customers on a timely basis. In an attempt to secure adequate supplies the Company has entered into a multi-year aluminum sheet metal supply agreement with Aluminum Company of America ("ALCOA"), a dominant domestic supplier of aerospace quality aluminum, and is negotiating similar agreements regarding extrusion with Tiernay Metals, Inc., a distributor, and Universal Alloy Corp., a producer. However, there can be no assurance that the Company will be able to purchase sufficient aerospace quality aluminum sheet metal or extrusion to meet its production needs in the future, or that such materials will be available on satisfactory terms or at reasonable prices. Any such material shortage or price escalation could have a material adverse effect on the business, financial condition or results of operation of the Company. See "BUSINESS - Suppliers and Procurement Practices." Governmental Regulations; Environmental Compliance The Company's 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 ("EPA"), the United States Occupational Safety and Health Administration ("OSHA") and the Federal Aviation Administration ("FAA"). Among other matters these agencies impose requirements that regulate the operation, handling, transportation and disposal of hazardous materials generated or used by the Company during the normal course of its operations, govern the health and safety of the Company's employees and require the Company to meet certain standards and licensing requirements for aerospace components. This extensive regulatory framework 10 imposes significant compliance burdens and risks on the Company and, as a result, may substantially affect its operational costs. See "BUSINESS - Regulatory Matters." In addition, the Company may become liable for the costs of removal or remediation of certain hazardous substances released on or in its facilities without regard to whether or not the Company knew of, or caused, the release of such substances. The Company believes that it currently is in material compliance with applicable laws and regulations and is not aware of any material environmental violations at any of its current or former facilities. There can be no assurance, however, that its prior activities did not create a material environmental situation for which the Company could be responsible or that future uses or conditions (including, without limitation, changes in applicable environmental laws and regulation, or an increase in the amount of hazardous substances generated or used by the Company's operations) will not result in any material environmental liability to the Company or result in a material adverse effect to the Company's financial condition or results of operations. See "BUSINESS - Regulatory Matters." Product Liability Although the Company is not engaged in the design of any part, component or sub-assembly, the Company's business exposes it to possible claims of personal injury, death or property damage which may result from the failure or malfunction of any component or subassembly fabricated by the Company. The Company currently has in place aviation products liability and premises insurance, which the Company believes provides coverage in amounts and on terms that are generally consistent with industry practice. The Company has not experienced any product liability claims related to its products. However, the Company may be subject to a material loss, to the extent that a claim is made against the Company that is not covered in whole or in part by insurance, which could have a material adverse effect on the Company's business, financial condition or results of operations. In addition, there can be no assurance that insurance coverages can be maintained in the future at a cost acceptable to the Company. Discretionary Use of Proceeds The Company has no specific plan for approximately $23.4 million of the net proceeds of this Offering after the retirement of $3.9 million of Company debt. The Company is raising such funds to increase its working capital and for other general corporate purposes, including the acquisition of currently unidentified complementary businesses. Consequently, the Board will have broad discretion over the use of most of the net proceeds of this Offering for the foreseeable future. See "USE OF PROCEEDS." Natural Disasters One of the facilities of the Company has experienced damage due to floods in the past. Although the Company maintains standard blanket flood loss insurance on all of its facilities, a flood or other natural disaster could have a material adverse effect on its business or operating results. Control by Principal Shareholders Upon completion of this Offering directors and executive officers will beneficially own approximately 52.7% of the then outstanding shares of Common Stock (50.1% if the Underwriter's over-allotment option is exercised in full). See "PRINCIPAL SHAREHOLDERS." As a result, such shareholders acting together will have the ability to exercise effective voting control of the Company over any matter being voted on by the Company shareholders, including the election of all of the Company's directors and any merger, sale of assets or other change of control of the Company. See "AUTHORIZED AND OUTSTANDING CAPITAL STOCK." Absence of Prior Market; Determination of Offering Price Prior to the Offering there has been no public market for the Common Stock. Although the Company has applied for quotation of the Common Stock on the Nasdaq National Market, there can be no assurance that an active or liquid trading market will develop upon completion of the Offering or, if developed, that it will be sustained. The initial public offering price of the Common Stock was determined by negotiations among the Company and the Representatives and does not necessarily bear any relationship to assets, book value, earnings history or other established criteria of value. Investors may not be able to resell their shares at or above the initial public offering price. See "UNDERWRITING." 11 Volatility of Market Price The market price of the Common Stock could be subject to wide fluctuations in response to quarterly variations in operating results, changes in financial estimates by security analysts or failure of the Company to meet such estimates and other events or factors. In addition, the stock market has experienced volatility that has affected the market prices of equity securities of many companies. The resulting changes in such market prices are often unrelated to the operating performance of such companies. Accordingly, market volatility could adversely affect the market price of the Common Stock. Anti-Takeover Provisions The Company's Restated Articles of Incorporation (the "Articles") and Amended and Restated Bylaws (the "Bylaws") contain certain provisions that reduce the probability of a change of control or acquisition of the Company, even if the current directors and executive officers were to reduce significantly their percentage ownership of the Common Stock as a group. These provisions include, but are not limited to (i) the ability of the Board to issue preferred stock in one or more series with such rights, obligations and preferences as the Board may determine, without any further vote or action by the shareholders; (ii) advance notice procedures for shareholders to nominate candidates for election as directors of the Company and for shareholders to submit proposals for consideration at shareholders' meetings; (iii) the staggered election of directors; and (iv) restrictions on the ability of shareholders to call special meetings of shareholders. In addition, the Company is subject to Section 459 of the General and Business Corporation Law of Missouri, which, under certain circumstances, may prohibit a business combination between the Company and a shareholder owning 20% or more of the outstanding voting power of the Company. This provision may have the effect of delaying, deterring, or preventing certain potential acquisitions or a change in control of the Company. See "AUTHORIZED AND OUTSTANDING CAPITAL STOCK - Preferred Stock," " - Special Provisions of the Articles, Bylaws and Missouri Law" and "PRINCIPAL SHAREHOLDERS." Shares Eligible for Future Sale Upon completion of the Offering, 702,885 shares of Common Stock will be eligible for sale to the public by persons who are not "affiliates" of the Company. All the remaining shares of Common Stock outstanding are "restricted" within the meaning of Rule 144 under the Securities Act ("Rule 144") and may not be sold in the absence of registration under the Securities Act or an exemption therefrom. Moreover, all shares of Common Stock outstanding prior to this Offering are subject to agreements which prohibit, without the prior consent of the Representatives, the sale or other disposition of such shares prior to December 31, 1998. Sales of substantial amounts of Common Stock in the public market following the Offering, or the perception that such sales may occur, could adversely affect the market price of the Common Stock. These factors also could make it more difficult for the Company to raise funds through future offerings of Common Stock. See "SHARES ELIGIBLE FOR FUTURE SALE." Dilution Purchasers of Common Stock in this Offering will experience immediate and substantial dilution in the net tangible book value of the Common Stock. See "DILUTION" and "PRINCIPAL SHAREHOLDERS." Year 2000 Compliance The Company has recently installed information systems and software in all of its locations, other than at its Tulsa location, which possess the capability of accurately processing dates including the year 2000 or any subsequent year ("Year 2000 Compliant"). The Company has determined that it will need to upgrade its software to render the Tulsa facility's systems Year 2000 Compliant and expects to complete such upgrade/replacement within the next 12 months. There can be no assurance that such upgrade/replacement will begin as planned or, if begun, will be completed in a timely and cost-effective manner. If the upgrade/replacement is not completed when planned, the inability of the Tulsa location's software to accurately process dates may adversely affect the Company's production schedule. The Company has not discussed these compliance issues with its suppliers or customers and does not know whether such suppliers 12 or customers are, or have taken any actions with respect to becoming, Year 2000 Compliant. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Year 2000 Compliance." USE OF PROCEEDS The net proceeds to the Company from the sale of the 2,300,000 shares of Common Stock offered hereby are estimated to be $27.3 million ($31.4 million if the Underwriters' over allotment option is exercised in full), after deducting the estimated expenses of the Offering and assuming an initial public offering price of $13.00 per share. The Company anticipates using such net proceeds to repay certain debt, pursue strategic acquisitions, expand manufacturing capacity, finance working capital requirements and fund other general corporate purposes. Specifically, the Company anticipates using $3.9 million of the proceeds to retire $3.5 million of term debt with Magna Bank, N.A. (the "Bank") and a mortgage for $0.4 million held by the Oklahoma Industrial Finance Authority secured by the Company's Tulsa, Oklahoma facility. Pending the use of the net proceeds from the sale of the shares of Common Stock as described above, such funds will be used to reduce temporarily the principal balance under the Company's credit facility, as amended, with the Bank, dated as of March 30, 1998 (the "Credit Facility"), which provides for the availability of up to $15.0 million of borrowings until March 31, 2000. At March 31, 1998, the outstanding principal balance under the Credit Facility was $1.5 million, the effective interest rate thereon was 7.09% and the unused availability thereunder was approximately $13.5 million. After application of the net proceeds of this Offering to the temporary repayment of the outstanding principal balance on the Credit Facility, the Company intends to make additional borrowings under the Credit Facility for the foregoing purposes. The unused net proceeds from the sale of Common Stock and the Credit Facility may be used to support the Company's strategies to acquire businesses or develop additional products and services. Although the Company has had and expects to have discussions with potential acquisition candidates it does not have any present agreements or understandings with respect to any specific acquisitions. Changes in the proposed use of net proceeds may be made in response to, among other things, changes in the Company's plans and its future revenues and expenditures, as well as changes in general industry conditions and technology. Furthermore, no general corporate purpose has been specifically identified by the Company at this time. The Company believes that the net proceeds of this Offering, cash flow from operations, trade credit and its existing line of credit will be sufficient to meet its immediate cash needs and finance its plans for expansion for the indefinite future. This belief is based upon certain assumptions regarding the Company's business and cash flow as well as prevailing industry and economic conditions. The Company's capital requirements may vary significantly, depending on how rapidly management seeks to expand the business and the expansion strategies elected. DIVIDEND POLICY Subsequent to the Offering the Company intends to retain any future earnings for use in the operation and expansion of its business. As a result the Company does not anticipate declaring any dividends on its Common Stock in the foreseeable future. Any future determination with regard to the payment of dividends will be at the discretion of the Board and will be dependent upon the Company's future earnings, financial condition, capital requirements and other relevant factors. Currently the Credit Facility prohibits the payment of cash dividends on the Common Stock without the Bank's prior written consent. 13 DILUTION The net tangible book value of the Company's Common Stock as of December 31, 1997, was approximately $16.6 million or $2.81 per share. Net tangible book value per share represents the Company's total tangible assets less total liabilities, divided by the total number of shares of Common Stock outstanding. After giving effect to the sale of the 2,300,000 shares of Common Stock offered by the Company hereby and the receipt of the estimated net proceeds therefrom of $27.3 million, the pro forma net tangible book value of the Company as of December 31, 1997, would have been approximately $43.9 million or $5.35 per share. This represents an immediate increase in net tangible book value of $2.54 per share to existing shareholders and an immediate dilution in net tangible book value of $7.65 per share to investors in the Offering. The following table illustrates the per share dilution as of December 31, 1997. Assumed initial public offering price per share ...................................... $ 13.00 Net tangible book value per share as of December 31, 1997 ........................ $2.81 Increase per share attributable to investors in the Offering ................... 2.54 ----- Pro forma net tangible book value per share after the Offering ............................. 5.35 ------- Dilution in net tangible book value per share to investors in the Offering ................... $ 7.65 ======= The following table sets forth on a pro forma basis as of December 31, 1997 the number of shares purchased from the Company, the total consideration paid and the average price per share paid by the existing shareholders and investors in the Offering:
Shares Purchased Total Consideration ---------------- ------------------- Average Price Paid Number Percent Amount Percent Per Share ------ ------- ------ ------- ---------- Existing shareholders .......... 5,908,471 72.0% $ 3,246,224 9.79% $ 1.82 Investors in the Offering ...... 2,300,000 28.0% 29,900,000 90.21% $13.00 --------- ---- ---------- ------- Total.................. 8,208,471 100.0% $ 33,146,224 100.0%
The foregoing table excludes 131,600 new shares of Common Stock issued on May 1, 1998 as compensation to or purchased by Lawrence J. LeGrand, Chief Operating Officer of the Company, and assumes an initial public offering price of $13.00 and that none of the currently outstanding rights to purchase Common Stock will be exercised. At March 31, 1998, options to purchase 243,377 shares at a weighted average exercise price of $2.41 per share were outstanding. To the extent any of these options are exercised, there will be further dilution to investors in the Offering. See "CAPITALIZATION" and Note 8 to the Consolidated Financial Statements. 14 CAPITALIZATION The following table sets forth as of December 31, 1997, the cash and cash equivalents, short-term debt and capitalization of the Company (i) on an actual basis; and (ii) as adjusted to give effect to the sale by the Company of 2,300,000 shares of the Common Stock offered hereby and the application of the estimated net proceeds therefrom. This table should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included elsewhere in this Prospectus. December 31, 1997 ----------------- (in thousands, except share data) Actual As Adjusted(1) ------ -------------- Cash and cash equivalents............................. $ 244 $ 23,591 ====== ========== Short-term debt, including current portion of long-term debt . . . . ................ $ 817 $ 317 ====== ========== Long-term debt, less current portion................ $9,274 $ 5,864 ------ ---------- Stockholders' equity: Preferred Stock, $0.02 par value; 2,000,000 shares authorized; none issued or outstanding actual and as adjusted............... -- -- Common Stock, $0.02 par value; 28,000,000 shares authorized, 5,908,471(2) issued and outstanding actual; 8,208,471(2) issued and outstanding as adjusted ......................... 118 164 Additional paid-in capital........................ 1,543 28,754 Retained earnings ................................ 15,090 15,090 ------- -------- Total stockholders' equity.............. 16,751 44,008 ------- -------- Total capitalization................. $26,024 $49,872 ======= ======= (1) Reflects the sale by the Company of 2,300,000 shares of the Common Stock offered hereby at an assumed public offering price of $13.00 per share less underwriting discounts and commissions and estimated offering expenses and the application of the estimated net proceeds therefrom. See "USE OF PROCEEDS." (2) Reflects shares of Common Stock outstanding as of December 31, 1997. Excludes 1,271,585 shares of Common Stock reserved, as of the date of this Prospectus, for issuance upon exercise of options granted under the Company's stock based compensation plan. Also excludes 131,600 new shares of Common Stock issued on May 1, 1998 as compensation to, or purchased by, Lawrence J. LeGrand, Chief Operating Officer of the Company. See "MANAGEMENT -- Benefit Plans." 15 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following table sets forth selected statement of operations, balance sheet and other operating data of LMI Aerospace, Inc. and its subsidiaries. The selected statement of operations and balance sheet data are derived from the audited consolidated financial statements of the Company. The consolidated financial statements for the years ended December 31, 1995, 1996 and 1997, have been audited by Ernst & Young LLP, independent auditors. The selected consolidated financial data should be read in conjunction with the consolidated financial statements of the Company, including the notes thereto, and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included elsewhere herein.
Year Ended December 31, ---------------------------------------------------------------------- (in thousands, except Shares and per share data) 1993(1) 1994 1995 1996 1997 ------- ---- ---- ---- ---- Statement of Operations Data: Net sales........................ $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080 Cost of sales.................... 15,041 17,274 20,366 26,725 38,932 ------ ------ ------ ------ ------ Gross profit..................... 3,342 3,437 5,058 8,291 16,148 Selling, general & administrative expense......... 3,063 3,337 3,883 5,256 6,549 ------ ----- ----- ----- ----- Income from operations........... 279 100 1,175 3,035 9,599 Interest expense................. (347) (522) (1,038) (1,123) (1,020) Other (expense) income(2), net... 293 263 (48) 15 10 ----- ------ ------- ------ ------ Income (loss) before income taxes 225 (159) 89 1,927 8,589 Provision for income taxes......... 381 (62) 52 740 3,306 ------ -------- ------ ------ ------ Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283 ======= ======= ======= ======= ======= Net income (loss) per common share(3): Basic......................... $ (0.03) $(0.02) $0.01 $0.21 $0.91 Diluted....................... $ (0.03) $(0.02) $0.01 $0.20 $0.89 Weighted average shares outstanding.................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 16 Other Financial Data: EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 Capital expenditures............. 1,732 4,746 1,736 1,316 3,856 Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3% EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4% December 31, --------------------------------------------------------------------- (in thousands) 1993 1994 1995 1996 1997 ---- ---- ---- ---- ------------------------- Actual As Adjusted(5) Balance Sheet Data: ------ -------------- Cash and equivalents............. $ 483 $ 151 $ 181 $ 205 $ 244 $ 23,591 Working capital.................. 6,111 6,933 8,919 8,626 11,256 35,104 Total assets..................... 18,724 25,454 27,370 29,046 33,269 56,977 Total long-term debt, excluding current portion ............... 7,000 11,620 12,674 10,735 9,274 5,864 Stockholders' equity............. 9,220 9,147 9,966 11,161 16,751 44,008 (1) On December 31, 1993, the Company elected to change from a Subchapter S corporation to a C corporation. As a result of this change in tax status, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of the assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Income tax expense represents the recognition of deferred tax assets and liabilities at December 31, 1993. (2) Other (expense) income includes income from insurance proceeds (net of related flood expense) of $280 and $255 in 1993 and 1994, respectively. (3) Complete pro forma presentation is not shown above as adjustments are not material. Pro forma net income of $5,398 (versus historical net income of $5,283 shown above) is the amount net income would have been if the $3.9 million debt anticipated to be retired with the offering proceeds had been retired at the beginning of the period. Pro forma net income per common share of $0.66 and $0.66, basic and diluted, respectively, reflects the increase in the number of shares of Common Stock to be sold in the Offering, and the increase in net income due to the debt retirement. (4) EBITDA represents earnings before interest, income taxes, depreciation and amortization. EBITDA is presented because it is a widely accepted financial indicator used by many investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA as presented may not be comparable to similarly titled indicators reported by other companies because not all companies necessarily calculate EBITDA in an identical manner and therefore it is not necessarily an accurate means of comparison between companies. EBITDA is not intended to represent cash flows or funds available for management's discretionary use for the periods listed nor has it been presented as an alternative to operating income as an indicator of operating performance and should not be considered in isolation or as a substitute for indicators of performance prepared in accordance with generally accepted accounting principles. 17 (5) Adjusted to give effect to the receipt of the net proceeds from the sale by the company of 2,300,000 shares of Common Stock to be sold in this Offering (at an assumed initial public offering price of $13.00 per share) and the application of the estimated net proceeds to working capital and repayment of a portion of certain debt (after deduction of underwriting discounts and commissions and estimated offering expenses payable by the Company) as set forth in "USE OF PROCEEDS" and "CAPITALIZATION."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with "Selected Consolidated Financial Information," the Consolidated Financial Statements and the Notes thereto and the other financial information included elsewhere in this Prospectus. History The business of the Company was founded by the Leonard family in 1948. For 50 years the Company has continued to grow as a supplier of precision metal components to the aerospace industry. In January 1984, the present principal shareholders of the Company acquired a controlling ownership and established a strategy for growth and market expansion. Part of that strategy was to establish facilities near the Company's principal customers. As a result, the Company opened its Wichita, Kansas facility near Boeing Wichita in 1984 and in 1988, opened its Auburn, Washington facility near Boeing Seattle. The Company continued its expansion in 1989 by adding a second manufacturing center to its principal location in St. Charles, Missouri to handle increasing work volume and expand its technical capabilities. In 1995, the Company continued its strategy of opening facilities near customers and expanded its value-added service capability by establishing its chemical milling and metal finishing operation, LMI Finishing, Inc., in Tulsa, Oklahoma in close proximity to Boeing North American. As a result of its expansion and at the conclusion of the most recent cyclical downturn in the aerospace industry, the Company was positioned to capitalize on the rapid growth in production of commercial, corporate and regional aircraft that began in 1995. In connection with the Company's acquisition strategy, the Company changed its name to LMI Aerospace, Inc. and established Leonard's Metal, Inc., a wholly-owned subsidiary, to operate the present fabrication business of the Company. Overview LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components for use by the aerospace industry. The Company has been engaged in manufacturing components for a wide variety of aerospace applications. Components manufactured by the Company include leading edge wing slats, flaps and lens assemblies; cockpit window frame assemblies; fuselage skins and supports; and passenger and cargo door frames and supports. The Company maintains multi-year contracts with leading original equipment manufacturers ("OEMs") and primary subcontractors ("Primes") of commercial, corporate, regional and military aircraft. Such contracts, which govern virtually all of the Company's sales, designate the Company as the sole supplier of the aerospace components sold under the contracts. Customers include Boeing, Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The Company manufactures approximately 14,000 parts for integration into such models as Boeing's 737, 747, 757, 767 and 777 commercial aircraft, Canadair'S RJ regional aircraft, Gulfstream's G-IV and G-V corporate aircraft, and Lockheed Martin's F-16 and C-130 military aircraft. 18 Net sales consist primarily of sales of aerospace components manufactured or assembled by the Company to OEMs and Primes. Virtually all of the Company's net sales are governed by multi-year contracts which designate the Company as the sole supplier of the components supplied by the Company. Such net sales are recorded when finished components are shipped. Included in cost of sales are: (i) direct manufacturing costs of components sold, such as aluminum sheet metal, extrusion and other materials; labor required to fabricate, assemble and finish the components; and purchased outside services such as forming, milling, painting and finishing not performed by the Company, and (ii) manufacturing overhead, including indirect labor, fringe benefits, supplies, maintenance, depreciation, insurance and other miscellaneous items. Selling, general and administrative expenses consist primarily of compensation and related benefits to certain administrative employees, communications and professional fees. For the five-year period ended December 31, 1997, the Company's revenue increased at a compound annual rate of 32% from $18.4 million to $55.1 million. During the same period, operating income increased from $279,000 to $9.6 million. Net income, which was generally breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million in 1997. At December 31, 1997, the Company's backlog of customer orders scheduled for delivery within the next twelve months increased to a record level of $40.5 million from $34.1 million at December 31, 1996. In 1994, the Company implemented "lean manufacturing" techniques to improve the efficiency and productivity of its operations. Through lean manufacturing, the Company seeks to eliminate waste generated in the movement of people, in the use of materials and products, in lengthy set-ups, in production breaks and by misused space. The Company's lean manufacturing techniques include: one piece work flow as opposed to batch processing, pull versus push production control and scheduling systems, and simple, but disciplined, housekeeping and organization techniques. The Company believes such techniques, implemented through the Company's team structure and reinforced with employee stock ownership and its incentive bonus programs, have contributed to its improved performance. Results of Operations The following table sets forth selected statements of operations data for the periods indicated expressed as a percentage of net sales: Year Ended December 31, -------------------------------------- 1995 1996 1997 ---- ---- ---- Net sales 100.0% 100.0% 100.0% Cost of sales 80.1 76.3 70.7 ----- ----- ----- Gross profit 19.9 23.7 29.3 Selling, general and administrative expense 15.3 15.0 11.9 ----- ----- ----- Income from operations 4.6 8.7 17.4 Interest expense (4.1) (3.2) (1.8) Other expense, net (0.2) -- -- ----- ---- ---- Income before income tax 0.3 5.5 15.6 Provision for income taxes 0.2 2.1 6.0 --- ----- ----- Net income 0.1% 3.4% 9.6% ===== ===== ===== 19 Year Ended December 31, 1997 compared to Year Ended December 31, 1996 Net Sales. Net Sales for 1997 increased 57.3% to $55.1 million from $35.0 million for 1996. This increase in net sales was primarily due (i) to increased orders from customers for components historically fabricated by the Company resulting from increased demand for commercial and corporate/regional aircraft, (ii) orders for components not previously fabricated by the Company and (iii) successful re-negotiation of prices for certain components and assemblies fabricated for the Company's customers. Net sales also were favorably impacted by the 1995 introduction of metal finishing services. The Company has implemented several programs designed to increase its manufacturing capacity. Gross Profit. Gross profit in 1997 increased 94.8% to $16.1 million (or 29.3% of net sales) from $8.3 million (or 23.7% of net sales) in 1996. This improvement in gross profit was primarily due to: (i) the increase in sales volume, resulting in a greater absorption of fixed costs, (ii) beneficial impacts from the Company's employment of lean manufacturing techniques, (iii) expanded employee training programs and (iv) targeted capital investment over recent years. Direct manufacturing cost of components sold increased to $17.2 million (31.2% of sales) in 1997 from $11.1 million (31.7% of sales) in 1996. Additionally, in manufacturing overhead, indirect labor and fringe benefits included in cost of sales increased by $4.7 million to $14.4 million in 1997 (26.1% of net sales) from $9.7 million (27.7% of net sales) in 1996. Selling, general and administrative expenses. Selling, general and administrative expenses increased $1.2 million to $6.5 million (11.9% of net sales) in 1997 from $5.3 million (15.0% of net sales) in 1996. Costs for wages, salaries and related fringe benefits included in selling, general and administrative expenses accounted for $1.0 million of this increase, rising to $4.1 million (7.4% of net sales) in 1997 from $3.1 million (8.9% of net sales) in 1996. Also included in 1996 selling, general and administrative expenses was an estimated expense of $250,000 for legal and remediation costs related to a parcel of property purchased by the Company in 1992 that was subsequently found to contain limited environmental contaminants (the "Clean Up Costs"). The Company believes that such expense was a one time cost. A portion of such costs was related to legal fees incurred as a result of a lawsuit brought by the Company against the former owners of the contaminated property for breach of contract. As of the date of this Prospectus, no judgment had been rendered. The remainder of such costs was primarily incurred as a result of certain monitoring and clean up activities conducted by the Company in accordance with the Missouri Department of Natural Resources Voluntary Cleanup Program (the "Voluntary Compliance"). See Note 10 to the Consolidated Financial Statements. Interest Expense. Interest expense decreased slightly to $1.0 million in 1997 from $1.1 million in 1996. Such decrease resulted primarily from decreased borrowings. In early 1998, the Company negotiated a new lending agreement which replaced the outstanding revolving credit agreement, subordinated debt, and demand note to a shareholder, substantially reducing the Company's cost of borrowing. Provision for Income Taxes. The effective income tax rate for 1997 and 1996 was 38.5% and 38.4%, respectively, resulting in total tax expense of $3.3 million in 1997 and $0.7 million in 1996. Net Income. As a result of the foregoing the net income of the Company increased 445.1% to $5.3 million (or 9.6% of net sales) in 1997 from $1.2 million (or 3.4% of net sales) in 1996. Year Ended December 31, 1996 compared to Year Ended December 31, 1995 Net Sales. Net Sales increased 37.7% in 1996 to $35.0 million from $25.4 million in 1995. This increase was driven by an overall improvement in the commercial aircraft market and sales to a new customer in the corporate/regional market. Gross Profit. Gross profit in 1996 increased 63.9% to $8.3 million (23.7% of net sales) from $5.1 million (19.9% of net sales) in 1995. This improvement resulted from a dramatic turnaround in operations in the Company's subsidiary in Tulsa, Oklahoma. The Company opened the subsidiary in 1995 and experienced a negative gross profit of $0.4 million. During 1996, the subsidiary earned a gross profit of $0.6 million, an improvement of $1.0 million. The remaining improvement was due to better absorption of fixed expenses generated by the increase in net sales. 20 Selling, general and administrative expenses. Selling, general and administrative expenses increased $1.4 million in 1996 to $5.3 million (15.0% of net sales) from $3.9 million (15.3% of net sales) in 1995. Costs for wages, salaries and related fringe benefits increased $1.0 million to $3.1 million (8.9% of net sales) in 1996 from $2.1 million (8.3% of net sales) in 1995. Also included in 1996 selling, general and administrative expenses was the Clean Up Costs. The Company believes that such expense was a one time cost. A portion of such costs was related to legal fees incurred as a result of a lawsuit brought by the Company against the former owners of the contaminated property for breach of contract. As of the date of this Prospectus, no judgment had been rendered. The remainder of such costs were primarily incurred as a result of the Voluntary Compliance. The Company believes that all material costs related to this contaminated property have been accrued. See Note 10 to the Consolidated Financial Statements. Interest Expense. Interest expense increased slightly to $1.1 million in 1996 from $1.0 million in 1995, primarily as a result of the establishment of an asset based credit facility used to support the Company's growth in net sales. Provision for Income Taxes. Income tax expense for 1996 and 1995 was $0.7 million and $0.05 million, respectively. Net Income. As a result of the foregoing, the net income of the Company increased to $1.2 million (or 3.4% of net sales) in 1996 from a break even position in 1995. Liquidity and Capital Resources In March 1998, the Company amended its Credit Facility to allow the Company, among other things, to borrow up to $15.0 million. Under the Credit Facility the Company may choose an interest rate calculated at either LIBOR plus an applicable margin or at the prime rate plus an applicable margin. The margin applicable to LIBOR varies from 1.4% to 2.4% and the margin applicable to the prime rate varies from -0.5% to 0.25%, in each case based upon the Company's ratio of total indebtedness to earnings before interest, taxes, depreciation, and amortization. At March 31, 1998 the effective interest rate under the Credit Facility was 7.09%, and the Company had borrowings of $1.5 million and additional availability of approximately $13.5 million. The Credit Facility contains certain covenants, including, among other things, maintaining a tangible net worth of at least $15.0 million which minimum shall increase as of the end of each fiscal year by an amount equal to 75% of the after-tax net income and maintaining a consolidated EBITDA of at least $10.5 million. 21 The Company's ability to make scheduled principal or interest payments or to refinance its indebtedness will depend upon its future operating performance and cash flow, which are subject to prevailing economic conditions, prevailing interest rate levels, and financial, competitive, business and other factors, many of which are beyond its control, as well as the availability of borrowings under the Credit Facility or successor facility. The Company has historically made significant capital expenditures to allow for growth. This trend is expected to continue in 1998 as the Company plans additional capital investment of approximately $4.0 million. Also, additional working capital will be needed pursuant to the strategic initiative of the Company to provide higher value added capabilities through fabrication and the subcontracting of components for assemblies required by its customers. The Company's working capital needs are generally funded through cash flows from operations and a revolving credit agreement. The Company generated $2.7 million and $5.8 million in cash from operating activities in 1996 and 1997, respectively, which was used, in part, to finance investment in property, plant and equipment of $1.3 million and $3.9 million, respectively in such years. Also, in such periods, the Company used cash from operating activities to pay down indebtedness. The Company believes that its existing financing facilities together with its cash flow from operations will provide sufficient capital to fund operations, make the required debt repayments and meet anticipated capital spending needs. However, there can be no assurance that the Company will continue to generate sufficient cash flow at or above current levels. If the Company is unable to generate sufficient cash flow from operations in the future to service its indebtedness, it may be required to refinance all or a portion of its existing indebtedness or to obtain additional financing. There can be no assurance that any such refinancing would be possible or that any additional financing could be obtained at all or on favorable terms. Year 2000 Compliance Many information systems and software were designed and developed without consideration to the impact of the next millennium and accordingly, may not be Year 2000 Compliant. As a result of a recent upgrade/replacement, the information systems and software at all of the Company's locations, other than Tulsa, are Year 2000 Compliant. The Company will need to upgrade and/or replace the software used by the Tulsa facility in order to render such systems Year 2000 Compliant. The Company expects to complete implementation of the upgrade/replacement within the next 12 months and estimates the cost will not be material. The Company has not discussed these compliance issues with its suppliers or customers and does not know whether such suppliers or customers are, or have taken any actions with respect to becoming, Year 2000 Compliant. 22 BUSINESS General LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components for use by the aerospace industry. For approximately 50 years, the Company has been engaged in manufacturing components for a wide variety of aerospace applications. Components manufactured by the Company include leading edge wing slats, flaps and lens assemblies; cockpit window frame assemblies; fuselage skins and supports; and passenger and cargo door frames and supports. The Company maintains multi-year contracts with leading original equipment manufacturers ("OEMs") and primary subcontractors ("Primes") of commercial, corporate, regional and military aircraft. Such contracts, which govern virtually all of the Company's sales, designate the Company as the sole supplier of the aerospace components sold under the contracts. Customers include Boeing, Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The Company manufactures approximately 14,000 parts for integration into such models as Boeing's 737, 747, 757, 767 and 777 commercial aircraft, Gulfstream's G-IV and G-V corporate aircraft, Canadair's RJ regional aircraft, and Lockheed Martin's F-16 and C-130 military aircraft. In addition to supplying quality components the Company provides its customers with value-added services, including engineered tool design, production and repair; heat treating; chemical milling; assembly; and metal finishing processes, such as polishing and painting. The Company believes that such value-added services provide significant benefits to its customers including: (i) reduced administrative costs resulting from the Company's ability to serve as a single point of purchase for a wide array of required products and services, (ii) faster, more efficient production rates, and (iii) greater consistency in meeting scheduled delivery dates. As a result, the Company believes that its value-added services are an increasingly important factor in the selection of the Company to provide aerospace components. For the five-year period ended December 31, 1997, the Company's revenue increased at a compound annual rate of 32% from $18.4 million to $55.1 million. During the same period operating income increased from $279,000 to $9.6 million. Net income, which was generally breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million in 1997. At December 31, 1997, the Company's backlog of customer orders scheduled for delivery within the next twelve months increased to a record level of $40.5 million from $34.1 million at December 31, 1996. The Company believes that it is well positioned to benefit from several industry trends, including: (i) increased new aircraft production; (ii) increased outsourcing by OEMs and Primes; (iii) a decrease in the number of preferred suppliers of aerospace components; and (iv) increased consolidation of aerospace component suppliers. Industry Outlook The aerospace components industry currently is enjoying favorable trends driven by strong growth in production of new commercial, corporate and regional aircraft. As OEMs searched for cost cutting opportunities during the aerospace industry recession of the early part of this decade, aerospace component manufacturers, including the Company, were forced to accept lower-priced, smaller orders to maintain market share, which resulted in lower profit margins. However, in recent years, aerospace component manufacturers have benefitted as production rates in the aerospace industry have increased. These increased production rates have created capacity constraints among OEMs and Primes, resulting in longer lead times for scheduled product delivery. Accordingly, OEMs and Primes are actively seeking to negotiate multi-year contracts with qualified aerospace components suppliers, like the Company, in an attempt to assure adequate production capacity for required components. The Company believes that there are numerous barriers to entry into the aerospace components industry. These barriers include: (i) proven expertise in close tolerance manufacturing techniques; (ii) required compliance with increasingly stringent quality standards imposed by OEMs and Primes; (iii) implementation of the publicly announced plans of OEMs and Primes to reduce the number of preferred suppliers of aerospace components; and (iv) significant initial capital investment and tooling requirements necessary for the manufacture of certain aerospace components. The Company believes the following trends are affecting the aerospace components industry: 23 Increased Demand for New Aircraft. Aircraft manufacturers are currently experiencing record levels of new orders. The market for new commercial aircraft is estimated at $50 billion, the market for corporate jet aircraft is estimated at $6 billion and the market for regional jet aircraft is estimated at $3 billion. According to Boeing's 1997 Current Market Outlook (the "Boeing Report"), annual deliveries of commercial aircraft can be expected to increase from approximately 400 in 1996 to more than 700 in 1998, increasing the worldwide fleet of aircraft from 11,500 at the end of 1996 to over 16,000 at the end of 2001 and over 23,000 at the end of 2016. Additionally, expenditures for new commercial aircraft production are expected to total approximately $490 billion for the period from 1996 to 2006. Such increases result from the need of aircraft operators to accommodate a projected 75% increase in global air travel through the year 2006. The demand for commercial aircraft is rapidly increasing as a result of the following: (i) increasing profitability of airline operators; (ii) a worldwide increase in miles flown by existing aircraft; and (iii) the need to modify or replace older aircraft to comply with more stringent governmental noise and safety regulations. According to the Allied Signal Annual Business Aviation Outlook dated September 1997 (the "Allied Report"), 2,300 new corporate jet aircraft are expected to be delivered from 1997 through 2001, a 61% increase over the previous five-year period. The demand for corporate aircraft is rapidly increasing as a result of the following: (i) the introduction of new, larger and more efficient aircraft; (ii) the growing popularity of fractional aircraft ownership; (iii) the minimal availability of used aircraft; (iv) the need for long-range flights to expanding international markets; (v) the increased demand for more expedient travel; and (vi) the continued surge in corporate profitability and the U.S. stock market. Regional jets, 32-70 seat passenger jets, are the most rapidly growing market segment in commercial aircraft. Annual deliveries are estimated to double from 96 units in 1997 to more than 210 by 2000. The demand for regional jets is rapidly increasing as a result of the following: (i) ability to pull passengers into major airline hubs or bypass hubs altogether; (ii) expanded frequency of service on routes served by larger jets; (iii) break even load factors are much lower on regional airlines than on majors; (iv) extended range relative to previously utilized regional turboprops; and (v) ability to service routes which would otherwise be unprofitable if served by larger jets. In addition to demand related to production of new aircraft, the aerospace components industry is benefiting from an increasing demand for aftermarket components resulting from the growing number of aircraft in service. Increased Outsourcing. Suppliers of aerospace components, including the Company, have benefitted from an accelerating trend for OEMs and Primes to outsource a greater percentage of the components required to produce new aircraft. Boeing has indicated that it intends to increase from 48% to 52% the portion of each aircraft purchased from outside sources. Outsourcing allows OEMs and Primes to focus their resources on assembly and integration by employing the expertise of aerospace components suppliers, such as the Company, which have developed specialized tooling and manufacturing and finishing techniques and have achieved economies of scale unavailable to individual OEMs and Primes. Such a focus benefits the OEMs and Primes by: (i) increasing the production rates achievable by the OEMs and Primes through the integration of higher level sub-assemblies and components, and (ii) limiting their capital investment by eliminating the need for sophisticated equipment, machinery and systems required to manufacture certain components. As OEMs and Primes continue to become more cost and value conscious, the Company anticipates that the trend toward outsourcing will continue to accelerate. 24 Reduction in Number of Preferred Suppliers. In an attempt to increase quality and service, reduce purchasing costs and streamline purchasing decisions, OEMs and Primes have formed relationships with an increasingly smaller number of preferred suppliers. The Company believes that during the last few years OEMs and Primes have significantly reduced the number of component suppliers with which they do business. In each case to date where the Company had an established relationship, the Company has benefitted from such reduction in suppliers. The Company believes that due to its strong customer relationships and its long-standing reputation for quality and reliability, OEMs and Primes will continue to select the Company as one of their preferred suppliers. Industry Consolidation. Suppliers of aerospace components have been undergoing consolidation. The Company believes that several factors are contributing to this consolidation, including: (i) the high level of fragmentation within the industry; (ii) the consolidation of the OEM and Prime industry; (iii) an effort by OEMs and Primes to reduce their supplier bases; and (iv) the increased demands placed on suppliers to provide value-added content and services. Competitive Strengths The Company has been providing products and services to the aerospace industry for approximately 50 years and believes it has gained a reputation for consistent high quality and reliability. Because of its strong market position, the Company believes that it enjoys broader name recognition, closer customer relations and greater business opportunities than are available to many of its competitors. The Company also believes that it is well-positioned to take advantage of the current trends and expected growth in the aerospace components industry as a result of the following competitive strengths: Consistent On-Time Delivery. The Company's manufacturing systems and procedures undergo continuous review and refinement to ensure the timely and consistent delivery of aerospace components to its customers. The Company's work center teams, together with its process engineering group, employ lean manufacturing techniques to design efficient administrative and manufacturing processes in order to meet customers' component specifications and scheduling requirements. These systems and procedures have allowed the Company to establish a reputation for reliability with its customers and provided a foundation for the Company's growth. Key Customer Relationships. The Company actively seeks to develop close relationships with its customers and as a result enjoys multi-year contracts with many of its customers, including certain of the Boeing business units, Lockheed Martin, Northrop Grumman, Learjet, Canadair and PPG. Such contracts, which govern virtually all of the Company's sales, designate the Company as the sole supplier of the aerospace components sold under the contracts. The Company believes that its strong customer relationships provide it with a significant competitive advantage in obtaining and securing new business opportunities. Supplier of Value-Added Content. The Company manufactures formed, close tolerance aluminum and specialty alloy components designed for a variety of harsh, demanding environments, which often require high tensile strength, toughness, durability and resistance to corrosion and metal fatigue. To meet these demands and enhance its reputation as a single point of purchase to the aerospace industry, the Company has developed significant capabilities to deliver value-added content and services. Such capabilities include tool making, heat treating, assembly, chemical milling and metal finishing processes such as polishing and painting. The Company believes that such services provide significant benefits to its customers including: (i) reduced administrative costs resulting from the Company's ability to serve as a single point of purchase for a wide array of required products and services, (ii) faster, more efficient production rates, and (iii) greater consistency in meeting scheduled delivery dates. As a result, the Company believes that its value-added services are an increasingly important factor in the selection of the Company to provide aerospace components. Consistent Component Quality. The Company has implemented a series of programs designed to maintain and continually improve the quality of the components manufactured. The Company's quality assurance and control team is composed of approximately 50 persons and is charged with implementing the Company's vigorous auditing and testing program. In March 1998, the Company 25 received certification of compliance with Boeing's new and stringent D1-9000 (Rev. A) quality standards. The Company believes that the substantial expense necessary to meet the stringent quality demands of OEMs and Primes represents a barrier to entry into the aerospace components industry. Active Employee Involvement. The Company believes that it benefits significantly from the creative and intellectual resources of its employees and aggressively seeks to involve its employees in all aspects of its business. Through continual education and training, stock ownership, incentive based compensation (including profit sharing and bonus programs) and a work center team organization, the Company has developed a skilled and flexible work force capable of adapting quickly to the varied demands of its customers. The Company further believes that such extensive employee involvement enables the Company to continually improve its processes and efficiency, maintain consistent on-time delivery, provide quality products and control costs. Geographic Proximity to Customers. Consistent with its strategic plan, as opportunities for significant growth have occurred, the Company has located its facilities in close geographic proximity to the principal production facilities of its customers. The Wichita facility is close to Boeing Wichita; the Auburn facility is near Boeing Seattle; and the Tulsa facility is close to Boeing North American. Geographic proximity to customers provides the Company with opportunities for strengthening customer relationships by allowing for quicker responses to customer demands. Customers' needs for offload work, emergency spares and replacement components which require a very quick turn time, can be met more easily and both shipping time and costs are reduced. Additionally, close proximity facilitates interaction between the engineering and production personnel of the Company and its customers and allows for a more efficient resolution of production issues. Growth Strategy The Company's primary objective is to expand its position as a leading components supplier to the aerospace industry through the application of a comprehensive business strategy combining various customer service, operating and growth objectives. Capitalize on Favorable Industry Trends. The Company believes its strong market position and alignment with many of the leading OEMs and Primes will enable it to benefit from several industry trends, allowing it to increase production capabilities and expand operations to meet anticipated increases in demand. Pursue Strategic Acquisitions. The Company seeks to leverage its core capabilities in existing and new markets by identifying and pursuing complementary acquisitions in the aerospace industry that offer strategic value, such as cost savings, increased manufacturing capacity, increased process capability and/or new customer relationships. The Company believes that the fragmented nature of the industry for aerospace components should provide the Company with additional opportunities to exploit industry consolidation trends. Expand Aftermarket Presence. Historically the Company's components have been supplied primarily for use in the construction of new aircraft. The Company believes that a substantial opportunity exists for sales growth through greater emphasis on the market for components used in the repair and maintenance of existing aircraft. In 1997 industry sources estimated the global aviation aftermarket to be $47 billion annually and projected that it would grow to $60 billion by the year 2000. The Company intends to increase its penetration of the aerospace components aftermarket by expanding its product and service offerings in response to the inventory needs of aftermarket participants, tailoring its delivery procedures to meet the specific requirements of this market and increasing its sales and marketing efforts to increase awareness by such participants of the Company's capabilities. Diversify Customer Base. The Company believes that opportunities exist to establish additional relationships with OEMs, Primes and distributors of aerospace products not currently supplied by the Company. In addition, the Company is currently marketing its capabilities to unserved business units of its current customers. Expand Integration Capabilities. The Company intends to grow by increasing the array of manufacturing, assembly and finishing services which it can offer existing and prospective customers by expanding its capability to integrate parts into higher level aerospace components. The Company believes 26 that such integration capability will enhance its reputation as a single point of purchase for the aerospace industry. Furthermore, the Company believes that by expanding its integration capabilities it will increase its relative importance to its customers and expand its revenue content per plane. Customers The Company manufacturers and supplies approximately 14,000 parts to leading OEMs and Primes of commercial, corporate, regional and military aircraft, primarily under multi-year contracts. Such contracts designate the Company as the sole supplier of the aerospace components sold under the contracts. Customers include the following leading OEMs and Primes: Commercial Platforms ---------- --------- Boeing 737 Classic, 737 Next Generation ("737NG"), 707, 727, 747, 757, 767 and 777 Northrop Grumman 747, 757 and 767 PPG 737NG, 747, 767, 777 and MD-80 National Machine 737NG Canadair 767 Corporate and Regional Gulfstream G-IV and G-V Canadair Regional Jet and Challenger 604 Learjet Models 31, 45 and 60 DeHavilland CL415 and Dash-8 Boeing 737 Business Jet Nordam Citation V, VII, VIII, Ultra, Bravo and Excel, Lear 60, and Beech 400A PPG Citation III, VII, X and Excel Northrop Grumman G-IV Military Lockheed Martin F-16 and C-130 Boeing AWACS, F-18 and F-15 The Company has a long-standing relationship with Boeing, which has steadily grown to include several Boeing business units, including Boeing Seattle, Boeing North American, and Boeing Helicopter. During 1995, 1996 and 1997, direct sales of Boeing business units accounted for a total of approximately 45%, 46% and 59% of the Company's sales, respectively. According to industry sources, Boeing holds more than a 50% share of the worldwide commercial aircaft market. Each of Boeing's business units operate to a significant degree as autonomous manufacturers, and as such, the Company has entered into one or more multi-year contractual relationships with many of the Boeing business units with which it does business. In general, these agreements provide for: (i) payment on a net 30 day basis; (ii) termination for convenience upon 30 days notice; (iii) reasonable manufacturing lead time for delivery of components; (iv) limitations on and specifications for the scope of work to be performed; and (v) pricing of components by quotes. In addition, these contracts are typically "requirements" contracts under which the purchaser commits to purchase a given portion of its requirements of a particular component from the Company. Specific orders are placed with the Company on a periodic basis covering delivery dates as far in the future as the year 2000. The Company believes that its relationship with Boeing extends beyond the expressed language of the multi-year contracts and primarily is based on the perceived benefits of the relationship. Products The Company is a leading fabricator, finisher and integrator of formed, close tolerance aluminum and specialty alloy components for use by the aerospace industry. For approximately 50 years, the Company has been engaged in manufacturing components for a wide variety of aerospace applications. All components are fabricated from designs prepared and furnished by its customers. The following table describes some of the Company's principal products (consisting of manufactured components and assemblies) and the models into which they are integrated: 27 Product Aircraft Platform ------- ----------------- Wing leading edge skins, flapskins 737 NG Detail interior components Boeing 737 Classic, 737 NG, 707, 727, 747, 757, 767, 777 and C-130 Wing panels and floorbeams 747 Door assembly structural details 737 Classic, 737 NG, 747 and 757, Challenger 604, Regional Jet, F-16 and C-130 Thrust reversers and engine G-IV, CL415, 737 Classic and 777 nacelles/cowlings Cockpit window frames and landing 737NG, 747, 767, 777, Citation III, light lens assembly VII and Excel, DC-8 and 9, MD-80, KC-10 and F-16 Fuselage and wing skin Models 45 and 60 Dash-8 737 Classic, 737 NG, 747, 757, 767, 777, C-130 and F-16 Structural sheet metal & Various models extruded components Once a customer submits specifications for a product, the Company utilizes its 40 person engineering and planning group to evaluate and develop the tooling requirements, design the manufacturing process and prepare a product flow plan. The Company utilizes an advanced computer assisted design system to translate customer provided specifications into computer numerical control ("CNC") instructions for use with many of the Company's forming and milling equipment. Manufacturing Processes The manufacturing facilities are organized on a work center basis focusing on a particular manufacturing 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, the Company collects, maintains and evaluates data, including customer design inputs, process scheduling, material inventory, labor, inspection results and completion and delivery dates. The Company's information systems employ this data in order to provide more accurate pricing and scheduling information to its customers as well as to establish production standards used to measure internal performance. Consistent with the Company's strategy of continually emphasizing quality, all employees participate in an on-going training program which combines classroom, hands-on and on-the-job instruction. New employees attend an extensive orientation seminar to acquaint them with the aerospace components industry and the Company's quality expectations, history, mission, safety procedures and other rules. To motivate employees to meet and exceed the Company's production efficiency objectives, management has implemented a bonus program under which the bonus amount payable by the Company is based on the amount of sales per paid manhour and the value of product produced. Furthermore, through the use of lean manufacturing techniques, the Company seeks to eliminate waste generated in the movement of people, in the use of materials and products, in lengthy set-ups, in production breaks and by misused space. The Company's lean manufacturing methods include: (i) one piece work flow as opposed to batch processing, (ii) pull versus push production control and scheduling systems, and (iii) disciplined, housekeeping and organization techniques. The Company believes that its training and motivation programs, combined with extensive use of lean manufacturing techniques, have greatly increased the Company's efficiency, manufacturing capacity and profitability. 28 In manufacturing close tolerance components, the Company uses several forming processes to shape or "form" a "work piece" (aluminum, stainless steel or titanium sheet metal and extrusion) into components by applying pressure through impact, stretching or pressing the raw material (sheet metal or extrusion) to cause conformance 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. Forming processes include: drop hammer, bladder press, sheet metal and extrusion stretch, skin stretch, stretch draw, hot joggle and brake forming. The following are more detailed descriptions of several of the Company's processes: Drop Hammer Forming. The Company utilizes drop hammer forming to shape work pieces by placing them between a mated die and a moving punch. The work piece is placed on the working surface of the die and is formed into a component through repeated impacts of the punch on the work piece. The impact causes the work piece to take the shape of the punch and die. This process provides an economical means of producing parts ranging in size from a few inches up to ten feet in length with complex, compound contours. The Company has one of the largest capacities for drop hammer forming in the aerospace components industry. Bladder Forming. The bladder forming process (fluid cell press) utilizes a bladder filled with hydraulic fluid which is placed under pressure to form the component. The work piece is placed on top of a die which rests on a table. A rubber blanket is then placed over the work piece and the table is moved into the press. As the bladder is placed under pressure, it expands to cover the rubber blanket and forces it and the work piece to conform to the shape of the die. The Company employs bladder forming for components with formed simple contours. Stretch Forming. The stretch forming process involves the stretching and wrapping of a work piece along the surface of a precisely shaped die. To obtain the desired component shape, opposite ends of the material are held in the jaws of the stretch form machine, then hydraulically stretched and wrapped to conform to the working surface of the die. The Company utilizes several different types of stretch form machines, each type designed to stretch form extrusion, sheet metal or leading edge wing skins. Hot Joggle. The Company uses the hot joggle process to create a clearance step for intersecting parts. A work piece is placed between a mated die and punch and is heated to a precise temperature to make it malleable enough to set a form, but not hot enough to alter the temper of the metal. The joggle press then creates the joggle by stepping down a surface from the original plane of the work piece. Cutting and Punching. Various cutting and punching processes such as CNC turret punch, CNC laser cutting, CNC and conventional milling, are used for cutting out the shapes of flat pattern parts. Cutting, trimming and drilling functions such as CNC and conventional milling, five axis CNC routing and other machine and hand routing methods are used to complete formed components by trimming excess material, cutting and drilling holes. CNC processes utilize computer programs (generated by Company employees from CAD models provided by the customer) which direct the cutting, punching and/or drilling pattern of the machine. Other trimming processes use dies, templates or fixtures as the guide for trimming and/or drilling. Most parts require heat treating after forming which helps to strengthen and, then through controlled cooling, harden the material. This process along with older dies and tools, can cause slight distortion which is then modified with manual forming techniques also referred to as "line-up" or "check and straighten." The Company's highly skilled craftsmen provide the customer with great flexibility in utilizing customer's tools and small order quantities often associated with spares production. Value-Added Services The Company offers its customers both cost and time savings by having the process capabilities necessary for the production of most components from start to finish. 29 Tooling. While most of the dies, tools and fixtures needed in the manufacturing process are owned and supplied by customers, the Company offers its customers the ability to produce fiberglass route and drill tools, chemical milling templates, kirksite extrusion and sheet stretch blocks, and other original tooling. It also has extensive capabilities in the repair and rework of tools and dies originally supplied by its customers. The Company supports the tooling operations with its own foundry which pours lead and kirksite tops for drop hammer dies. Heat Treat and Age. Most components require heat treating and/or aging as part of the production process. The heat treat process is used to alter the temper of the material for increased formability and retention of the formed shape. The process involves heating work pieces to a prescribed temperature, usually in the range of 850 degrees to 950 degrees Fahrenheit, for a prescribed period of time. Multiple components can be heat treated at one time, so long as the prescribed process time and temperature are the same. After heating, the components are immediately submerged in a glycol solution or water to rapidly cool and suspend the hardening of the metal. The components are then refrigerated at sub-zero temperatures to retard work hardening until the forming process is completed. At ambient temperatures the metal slowly hardens. After all forming, trimming and drilling processes are complete, most components go through the age process, which involves slow heating at lower temperatures (up to 400 degrees Fahrenheit), to accelerate the hardening of the metal to its final temper. CMM Inspection and Engineering. The computer controlled coordinate measuring machine ("CMM") uses a computer operated touch probe to measure the accuracy of angles, contours and other features on a tool or component relative to customer defined models or coordinates permitting the Company to accurately inspect close tolerance components. The CMM also is used to engineer a CAD model from an existing part. Chemical Milling. Chemical milling is used to reduce the amount of material in specific places on a component in order to reduce weight within the aircraft and to facilitate the mating of components. The working piece is first coated (dipped or sprayed) with a maskant, which dries to a rubber-like finish sealing the component. The Company uses a water based maskant which is much safer for both employees and the environment than the traditional solvent based maskant. After masking, the portion of the part to be reduced is scribed out by tracing a template. These areas are then de-masked, and the part is dipped into the chemical milling tank, containing an alkaline solution, for a prescribed period of time. The solution then reduces the metal in the exposed areas. Metal Finishing, Polishing and Painting. Through its Tulsa facility the Company provides anodizing, painting, polishing and non-destructive testing. The chromic acid anodizing process is performed prior to paint or polish to help control rust, corrosion and part deterioration. Penetrant inspection is a non-destructive inspection method during which components are dipped into a dye solution which penetrates any small defects on the surface of the part and makes them visible under ultra violet light. Most components are painted or polished before final shipment. Paint is applied according to customer specification; some components receive a simple primary coat while others receive primary and finish coats. Skin quality components such as those in the leading edge wing program are polished with electric polishers and by hand to a mirror finish which is visible on the exterior of the aircraft after final assembly. Consistent with the Company's commitment to maintaining environmental and employee safety, the Tulsa facility has a state-of-the-art air circulation and filter system as well as its own waste water treatment equipment. Waste water from both the anodizing and chemical milling processes pass through the treatment equipment and all metals and toxic materials are removed, making the water safe for disposal through the normal sewer system. The metals are condensed into filter cakes which are then disposed of through certified hazardous waste disposal vendors. Assembly. The Company completes small and medium sized assemblies, incorporating its manufactured parts and those produced by other vendors. In the assembly process, the Company uses riveting, bolting, spot and fusion welding, and bonding. Customer supplied and Company manufactured jigs and fixtures are 30 used to ensure the proper alignment of edges and holes. The Company's new information system and the expansion of its purchasing department further increase its ability to acquire and track parts and hardware details from multiple vendors to integrate with its own components into assemblies. Backlog At December 31, 1997, the Company had outstanding purchase orders representing an aggregate invoice price of approximately $48.9 million, of which $40.5 million is scheduled for delivery during fiscal 1998. Historically, cancellations of such orders have been infrequent and immaterial, however OEMs 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 the timing of the Company's receipt of orders and the speed with which those orders are filled. Moreover, sales during any period may include sales which are not part of the backlog at the end of the prior period. Accordingly, prospective purchasers of Common Stock in this Offering should not place undue reliance on the Company's backlog as an indication of sales for any future period. The following table provides certain information with respect to the Company's total backlog as of December 31, 1995, 1996 and 1997 and the portion of backlog scheduled for delivery within 12 months of such dates: As of December 31, (in millions) --------------------------------- 1995 1996 1997 ---- ---- ---- Total $23.3 $43.1 $48.9 Portion deliverable within 12 months 12.4 34.1 40.5 Suppliers and Procurement Practices The Company's principal raw materials consist of aerospace-quality aluminum sheet metal and extrusion which it purchases, along with specialized services, from certain vendors. From time to time there have been shortages of aerospace quality aluminum sheet metal and extrusion, resulting in temporary increases in the cost of such raw materials and causing the Company to have delays in production schedules. In an attempt to assure itself of adequate supplies, the Company has entered into a multi-year aluminum sheet metal supply agreement with ALCOA, a dominant domestic supplier of aerospace quality aluminum, and is negotiating a similar agreement regarding extrusion with Tiernay Metals, Inc., a distributor, and Universal Alloy Corp., a producer. To mitigate the effect of fluctuations in the price of raw materials, the Company has negotiated agreements with some of its customers, including certain Boeing business units, permitting the Company to flow through a major portion of any price change to its customers. Furthermore, Boeing is engaged in negotiations with one or more aluminum suppliers which would entitle Boeing vendors, such as the Company, to purchase aluminum from Boeing's supplier on terms and conditions equal to those available to Boeing. The Company believes that its sources of supply of non-aluminum products and its relationships with its suppliers are satisfactory. While the loss of any one supplier could have a material adverse effect on the Company until alternative suppliers are located and have commenced providing products, alternative suppliers exist for substantially all of the products and services purchased by the Company. The Company has developed procurement practices to ensure that all supplies received conform to contract specifications. Through its computerized material resource planning system, the Company is able to track inventories and product ordering to optimize purchasing decisions. For cost, quality control and efficiency reasons, the Company generally purchases supplies only from vendors approved by the Company's customers and/or with whom the Company has on-going relationships. The Company chooses its vendors primarily based on the quality of the products and services supplied, record for on-time performance and the specification of such vendors by the Company's customers as the preferred source of supply. The Company regularly evaluates and audits its approved vendors based on their performance. 31 Quality Assurance and Control The Company continually seeks to maintain high quality standards in the processing of its products. Accordingly, the Company employs approximately 50 full time quality control and assurance personnel. Each work order introduced to the Company's manufacturing facilities contains an inspection plan specifying required inspection points. Quality inspectors are assigned to each work center and are trained in the testing required in connection with products passing through the assigned work center. Although a large percentage of the Company's products are 100% inspected immediately prior to shipment by a customer employee or a customer designated Company employee, Boeing has approved a sampling inspection program for certain components using statistical process control data maintained by the Company. In March 1998, the Company became certified as compliant with Boeing's new D1-9000 (Rev. A) quality assurance standard. During April 1998, the Company distributed all revised procedures and integrated such new procedures with its on-going employee training program and lean manufacturing techniques to assist employees in becoming familiar with the new procedures. The Company has expanded its existing internal audit program to ensure on-going compliance. In addition, the Company intends to supplement its quality assurance and control program in 1999 with ISO 9002 certification of all of its facilities. Sales and Marketing Sales and Marketing The Company's sales and marketing organization consists of six program managers and two independent sales representatives. The Company's sales personnel are devoted to maintaining and expanding customer relationships through continual education of existing and potential customers with respect to the Company's capabilities. Specifically, the Company is focused on expanding its presence in the fabrication of aftermarket spare parts and components for use in new corporate, regional and military aircraft. As a result, sales personnel have focused their efforts on diversifying the Company's product mix to include aerospace programs unrelated to new commercial aircraft production. A majority of the Company's sales to existing customers are awarded after receipt of a request for quotation ("RFQ"). On receipt, the RFQ is preliminarily reviewed by a team consisting of members of the Company's senior management, a program manager, an estimator and the plant manager. If the Company determines that the program is adequately compatible with the Company's capabilities and objectives, a formal response is prepared by a member of the Company's estimator group. Although a substantial percentage of programs are awarded on a competitive bid basis, the Company has recognized a trend favoring direct pricing. In direct pricing programs, the customer submits an indicated price offer for acceptance or rejection by the Company. The Company expects that as customers seek to limit the number of suppliers, direct pricing will become increasingly common. Competition Components for new aircraft and replacement components for existing aircraft are provided by a large fragmented group of companies, including certain business units affiliated with the Company's customers. However, the Company believes that the trends in the aerospace industry favor greater outsourcing of components and reducing the number of preferred suppliers. Under written multi-year contracts with its customers governing virtually all of the Company's sales, the Company is designated as the sole supplier of the aerospace components sold under such contracts. The Company is unaware of any competitor with which it competes in all of the Company's processes. The Company believes that participants in the aerospace components industry compete primarily with respect to reliability of delivery, price and quality. Certain of the Company's competitors, including business units affiliated with the Company's customers, have substantially greater financial, production and other resources than the Company. These competitors may have the ability to adapt more quickly to changes in customer requirements, may have stronger relationships with customers and suppliers and greater name recognition than the Company. Moreover, certain of the Company's customers may determine to directly manufacture a greater percentage of required components. 32 Regulatory Matters The aerospace industry is highly regulated in the U.S. by the Federal Aviation Administration and is regulated in other countries by similar agencies to ensure that aviation products and services meet stringent safety and performance standards. The FAA prescribes standards and licensing requirements for aircraft components, including those fabricated by the Company. Because the Company fabricates to meet specifications and designs created by its customers, it is not required to obtain any licenses or approvals from the FAA. The Company is subject, however, to inspection and audit by the FAA and to quality control and assurance programs instituted by many of its customers. The Company is also subject to various federal, state, local and foreign environmental requirements, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste, and the cleanup of properties affected by hazardous substances. In addition, certain environmental laws, such as CERCLA and similar state laws, impose strict, retroactive, and joint and several liability upon persons responsible for releases or potential releases of hazardous substances. The Company has not incurred, nor does it expect to incur, significant costs to address any releases or potential releases. It is possible, however, given the retroactive nature of CERCLA liability, that the Company will from time to time receive notices of potential liability relating to current or former activities. The Company has been and is in substantial compliance with environmental requirements and believes it has no liabilities under environmental requirements, except those which would not be expected to have a material adverse effect on the Company's business, results of operations, or financial condition. However, some risk of environmental liability is inherent in the nature of the Company's business and the Company might in the future incur material costs to meet current or more stringent compliance, cleanup or other obligations pursuant to environmental requirements. See "RISK FACTORS--- Governmental Regulations; Environmental Compliance." Employees As of December 31, 1997, the Company had 716 employees, of whom seven were engaged in executive positions, 138 were engaged in administrative positions and 571 were in manufacturing operations. None of the Company's employees is subject to a collective bargaining agreement, and the Company has not experienced any material business interruption as a result of labor disputes since it was formed. The Company believes that it has an excellent relationship with its employees. The Company strives to continuously train and educate its employees thereby enhancing the skill and flexibility of its work force. Through the use of internally developed programs, which include formal classroom and on-the-job, hands-on training, and independently developed programs, the Company seeks to attract, develop and retain the personnel necessary to achieve the Company's growth and profitability objectives. 33 Facilities The following table provides certain information with respect to the Company's headquarters and distribution centers:
Square Location Principal Use(s) Footage Interest -------- ---------------- ------- -------- 3600 Mueller Road Executive and Administrative 56,943 Owned St. Charles, MO Offices and Manufacturing Center 3030-3050 N. Hwy 94 Manufacturing Center and Storage 92,736 Owned St. Charles, MO 3000-3010 N. Hwy 94 Assembly and Storage 24,400 Leased(1) St. Charles, MO 204 H Street NW Manufacturing Center 45,328 Leased(2) Auburn, WA 101 Western Ave. So. Manufacturing Center 79,120 Leased(3) Auburn, WA 2629-2635 Esthner Ct. Manufacturing Center 34,377 Owned Wichita, KS 2621 W. Esthner Ct. Administrative Offices and 19,545 Leased(4) Wichita, KS Storage 2104 N. 170th St. E. Ave. Finishing Facility 75,000 Owned Tulsa, OK (1) Subject to a yearly rental amount of $52,186 expiring on February 28, 2004. (2) Subject to a yearly rental amount of $162,200 expiring on December 31, 1999. (3) Subject to a graduated yearly rental amount from $264,100 in 1998 to $418,800 in 2005. Such lease expires as of June 30, 2005, but the Company retains the option to extend the lease until June 30, 2008 at the monthly rate of $39,090. (4) Subject to a yearly rental amount of $55,200 expiring on June 30, 2000. The Company retains two options to extend the lease term for an additional 36 months each with a yearly rental amount of $60,000 and $63,600, respectively.
The Company believes that its present facilities are in good condition, are adequately insured and together with those under construction, are suitable and adequate for the conduct of its current operations. Legal Proceedings The Company is not a party to any legal proceedings, other than routine claims and lawsuits arising in the ordinary course of its business. The Company does not believe that such claims and lawsuits, individually or in the aggregate, will have a material adverse effect on the Company's business. 34 MANAGEMENT Directors and Executive Officers The following table sets forth certain information with respect to each director and executive officer of the Company: Name Age Position ---- --- -------- Joseph Burstein 70 Chairman of the Board and Director Ronald S. Saks 54 Chief Executive Officer, President and Director Lawrence J. LeGrand 47 Chief Operating Officer and Director Lawrence E. Dickinson 38 Chief Financial Officer and Secretary Duane E. Hahn 45 Vice President, Regional Manager and Director Robert T. Grah 44 General Manager (LMI Finishing, Inc.) Phillip A. Lajeunesse 45 General Manager (Wichita, KS) Bradley L. Nelson 39 General Manager (Auburn, WA) Ernest R. Bailey 62 General Manager (St. Charles, MO) Sanford S. Neuman 62 Assistant Secretary and Director Set forth below are biographies of each director and each executive officer of the Company. Joseph Burstein has been a director, the Chairman of the Board and Secretary of the Company since 1984. Prior to his association with the Company, Mr. Burstein was President of Associated Transports, Inc. Mr. Burstein is an entrepreneur and has had an interest in several businesses, including two travel agencies and a 100% interest in Chestnut Mountain Ski Resort, Galena, Illinois. Mr. Burstein graduated from the University of Nebraska. Ronald S. Saks has served as President and as a director of the Company 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 Peat Marwick LLP, for the eight years prior thereto. Mr. Saks obtained his Bachelor's degree in Business Administration from Washington University in 1966. He also studied engineering at the Massachusetts Institute of Technology, and completed an Executive Education program at Stanford University. Mr. Saks is a Certified Public Accountant. Lawrence J. LeGrand became Chief Operating Officer and a director of the Company in April 1998. His previous 24 years were spent with KPMG Peat Marwick, LLP, where he became a partner in 1980. Mr. LeGrand is a Certified Public Accountant and has extensive experience in mergers and acquisitions where he has represented both publicly held and privately owned buyers and sellers. Mr. LeGrand graduated with a Bachelor's degree in Commerce and Finance from St. Louis University in 1973 and presently serves as the Vice Chairman of the Board of Trustees of St. Louis University. Lawrence E. Dickinson has been the Chief Financial Officer of the Company 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 1981-1984. Mr. Dickinson received his Bachelor's degree in Accounting from the University of Alabama and received his Master's degree in Business Administration from Washington University in 1994. Duane E. Hahn joined the Company in 1984 and served as the Assistant General Manager until 1988, at which time he moved to Auburn, Washington to set up and manage the Auburn facility as Vice President and General Manager. In 1996, Mr. Hahn became the Vice President of Manufacturing and Regional Manager of the Company. Prior to joining the Company, Mr. Hahn served as a supervisor for Associated Transport, Inc. Mr. Hahn received his Associate's Degree from Nebraska Technical College in 1971. Mr. Hahn has extensive continuing education experience in lean manufacturing, just-in-time, and other world class manufacturing techniques. Mr. Hahn became a director of the Company in October 1990. 35 Robert T. Grah joined the Company in 1984 as Production Control Manager. Mr. Grah has held various management positions with the Company including Purchasing and Contracts Manager, Maintenance Manager, Facilities Manager, and was promoted to his current position as General Manager of LMI Finishing, Inc. in 1996. Prior to joining the Company, Mr. Grah was a supervisor for Associated Transport, Inc., and a manager for Beneficial Finance. Mr. Grah's education has included Florissant Valley Community College, and numerous continuing education courses in management, Total Preventative Maintenance, and various environmental and technical subjects. Phillip A. Lajeunesse joined the Company in 1988 as the Corporate Quality Assurance Manager. In 1990, he became the Plant Manager of the Company's St. Charles facility, and in 1996, he became the General Manager of the Wichita facility. Prior to joining the Company, Mr. Lajeunesse was a supervisor for Kaman Aerospace for nine years, and for six years was a supervisor for United Nuclear Corporation. Mr. Lajeunesse obtained an Associate's degree in Chemical Engineering from Thames Valley State Technical College in 1973, an Associate's degree in Business Administration from Bryant College in 1984, and a Master's of Business Administration from Washington University in 1994. Bradley L. Nelson joined the Company as a Production Supervisor in the Auburn facility in 1990. In 1994, he was promoted to Manufacturing Manager, and in 1996 he assumed his current position as General Manager of the Auburn facility. Previously, Mr. Nelson was Production Manager for Fabrication Technologies from 1989 to 1990, the owner of Totem Lake Service Center from 1984 to 1989, and Plant Manager for Tonoro Growers from 1981 to 1984. Mr. Nelson's continuing education courses include general management and manufacturing management and methods. Ernest R. Bailey joined the Company in 1997 as the General Manager of the St. Charles facility. From 1996 to 1997, Mr. Bailey was the General Manager for North American Machining Products, Inc. From 1994 to 1996, he was the Plant Manager for Precision Machine Works, and from 1987 to 1993, he was the General Manager for Rohr, Inc., in Auburn, Washington. His background also includes administration and management experience at Kenworth Truck Company, KME Manufacturing, and Heath Tecna, Inc. Mr. Bailey obtained his Associate's degree in Business Administration from Green River Community College in 1976, and his Bachelor's degree in Business Administration from Pacific Western University in 1995. Sanford S. Neuman is an Assistant Secretary and has been a director of the Company since 1984. Mr. Neuman is a founding member of the St. Louis, Missouri law firm of Gallop, Johnson & Neuman, L.C. and has been engaged in the private practice of law for more than 30 years. Mr. Neuman graduated from Washington University in 1956 with a Bachelor's degree in Business Administration. Mr. Neuman received his law degree from Washington University in St. Louis in 1959 and his L.L.M. in taxation from New York University in 1961. The Bylaws provide for a Board consisting of five members, each of whom serves in such capacity for a three-year term or until his successor has been elected and qualified, subject to earlier resignation, removal or death. The number of directors comprising the Board may be increased or decreased by resolution adopted by the affirmative vote of a majority of the Board; however, the Bylaws provide that the number of directors cannot be less than three or more than nine. The Articles and Bylaws provide for three classes of directorships serving staggered three-year terms such that approximately one-third of the directors are elected at each annual meeting of shareholders. The term of office of Mr. Neuman will continue until the 1999 annual meeting of shareholders, the term of office of Mr. LeGrand and Mr. Hahn will continue until the 2000 annual meeting of shareholders and the term of office of Mr. Saks and Mr. Burstein will continue until the 2001 annual meeting of shareholders. Director's Compensation The Company intends to pay each director who is not an employee of the Company $1,500 for each Board meeting or committee meeting attended, and will reimburse all directors for out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings. No director who is an employee of the Company will receive compensation for services rendered as a director. 36 Audit Committee The Board intends to establish an audit committee to be comprised of three directors, at least two of whom shall be independent directors. The audit committee will have the responsibility of recommending the accounting firm that will serve as the Company's independent auditors, reviewing the scope and results of the audit and services provided by the Company's independent accountants, and meeting with the financial staff of the Company to review accounting procedures and policies and records. Compensation Committee; Interlocks and Insider Participation The Company intends to establish a compensation committee to be comprised of three directors, at least two of whom shall be independent directors. This committee will be given the responsibility of reviewing the Company's financial records to determine overall compensation benefits for executive officers of the Company and to establish and administer the policies which govern employees' salaries and benefit plans. In addition, the committee has been charged with reviewing the professional development of the Company's executive officers and developing and executing a plan for management succession and transition. Executive Compensation Summary Compensation Table. The following table sets forth certain information with respect to the annual and long-term compensation for the year ended December 31, 1997 paid to, earned by or awarded to the Company's Chief Executive Officer and each of the four other most highly compensated executive officers (collectively, the "Named Officers") whose compensation exceeded $100,000 for services rendered in all capacities to the Company in 1997. Summary Compensation Table
Annual Compensation Name and Principal Position ------------------------------------------ - --------------------------- Other Year Salary Bonus Compensation(1) ---- ------ ----- --------------- Ronald S. Saks...................... 1997 $150,000 $246,266 $1,795 President and CEO Duane E. Hahn....................... 1997 105,000 209,748 1,795 Vice President Phillip A. Lajeunesse............... 1997 92,500 102,300 1,795 General Manager (Wichita, KS) Robert T. Grah...................... 1997 69,999 81,736 1,732 General Manager (Tulsa, OK) Bradley L. Nelson................... 1997 69,999 76,636 1,716 General Manager (Auburn, WA)
37 Option Grants. The following table sets forth certain information with respect to grants of stock options pursuant to the Company's 1989 Employee Incentive Stock Option Plan (the "Option Plan") to each of the Named Officers during the year ended December 31, 1997. No stock appreciation rights were granted to the Named Officers during such year. Options/SAR Grants in Last Fiscal Year Individual Grants -----------------
Percent Of Total Total Potential Realizable Number Of Options/ Value At Assumed Rates Securities SARs Of Stock Price Underlying Granted To Appreciation For Options/ Employees Exercise Option Term (1) SARs In Fiscal Or Base Expiration --------------- Name Granted Year Price ($/Sh) Date 5% 10% - ---- ------- ---- ------------ ---- -------- ---- Bradley L. Nelson.......... 4,935 8.30% $3.67 12/31/99 $2,327 $4,938 - --------------------------- (1) The per-share market price at the time of grant used for this purpose is deemed to be equal to the fair market value of the Company's Common Stock as determined by the Board on the date of grant, which amount was equal to the exercise price as adjusted for the 2.29 to 1 stock dividend. The potential realizable value assumes a rate of annual compound stock price appreciation of 5% and 10% from the date the option was granted over the full option term. Such rates are required by the Securities and Exchange Commission and do not represent the Company's estimate or projection of future prices of the Common Stock.
Option Exercises and Fiscal Year End Values. The following table sets forth certain information concerning option exercises and option holdings for the year ended December 31, 1997 with respect to each of the Named Officers. No options were exercised by the Named Officers during such year. No stock appreciation rights were exercised by the Named Officers during such year nor did any Named Officer hold any stock appreciation rights at the end of that year. Aggregated Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End Options/SAR Values Number Of Securities Underlying Unexercised Value Of Unexercised Options/SARs In-The-Money Options/SARs At Fiscal Year End At Fiscal Year End(1) ---------------------- ------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- Duane E. Hahn 57,575 0 $157,180 0 Bradley L. Nelson 24,675 0 59,055 0 Robert T. Grah 16,450 0 44,908 0 Phillip A. Lajeunesse 16,450 0 44,908 0 (1) The fair market value at year end used for this purpose is deemed to be $4.63, based on an independent valuation obtained by the Company as of November 30, 1997 adjusted for the 2.29 to 1 stock dividend. 38 Employment Arrangements with Named Officers On January 1, 1997, the Company entered into an employment agreement with Ronald Saks providing for his employment as President and Chief Executive Officer. The agreement is for a six year period that automatically extends for successive one year periods. Mr. Saks' employment agreement provides for an annual base salary in 1997 of $150,000 and of $240,000 for the remaining years of his contract payable in equal monthly installments. Mr. Saks is also entitled to a bonus based on the performance of the Company (the "Performance Bonus") if its annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $120,000. As of May 1, 1998, the Company entered into an employment agreement with Mr. LeGrand providing for his employment as the Chief Operating Officer of the Company. The agreement will terminate on December 31, 2002 and is automatically extended for successive one-year periods. Mr. LeGrand's employment agreement provides for an annual base salary of $225,000 payable in equally monthly installments during the period May 1, 1998 through December 31, 2000. The agreement provides for a Performance Bonus if the Company's annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $150,000. On January 1, 1998, the Company entered into an employment agreement with Duane E. Hahn providing for his employment as the Vice President and Regional Manager for the Company's facilities located in Auburn, Washington, Wichita, Kansas, and at the location of the LMI Finishing, Inc. plant in Tulsa, Oklahoma. The agreement is for a two year period that automatically extends for successive one year periods. Mr. Hahn's employment agreement provides for a base salary of $150,000 payable in equal monthly installments. Mr. Hahn is also entitled to a Performance Bonus if the Company's annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $75,000. On January 1, 1998, the Company entered into an employment agreement with Robert T. Grah providing for his employment as the General Manager for LMI Finishing Inc.'s facility in Tulsa, Oklahoma. The agreement is for a two year period that automatically extends for successive one year periods. Mr. Grah's employment agreement provides for a base salary of $105,000 for the calendar year 1998 and $115,000 for the calendar year 1999, with each amount payable in equal monthly installments. Mr. Grah is also entitled to a Performance Bonus if the Company's annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $70,000. On January 1, 1998, the Company entered into an employment agreement with Phillip A. Lajeunesse providing for his employment as the General Manager for the Company's facility in Wichita, Kansas. The agreement is for a two year period that automatically extends for successive one year periods. Mr. Lajeunesse's employment agreement provides for a base salary of $125,000 in 1998 and $135,000 in 1999 payable in equal monthly installments. Mr. Lajeunesse is also entitled to a Performance Bonus if the Company's annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $50,000. On January 1, 1998, the Company entered into an employment agreement with Bradley L. Nelson providing for his employment as the General Manager for the Company's facility in Auburn, Washington. The agreement is for a two year period that automatically extends for successive one year periods. Mr. Nelson's employment agreement provides for a base salary of $105,000 for the calendar year 1998 and $115,000 for the calendar year 1999, with each amount payable in equal monthly installments. Mr. Nelson is also entitled to a Performance Bonus if the Company's annual net income as of the last day of each fiscal year is more than $5 million. Such bonus is capped at $70,000. All such employment agreements provide that in addition to the base salary and formula based Performance Bonus, the employees may receive such additional bonus as the Board may authorize, and shall also participate in any health, accident and life insurance programs and other benefits available to the employees of the Company. The employment agreements also provide that the employees are entitled to an annual paid vacation as well as the use of an automobile. Each employment agreement described above may be terminated upon: (i) the termination of the Corporation, (ii) the death or severe disability of the employee, or (iii) 10 days written notice by the Company to the employee upon breach or default by the employee of any term of the agreement. 39 Benefit Plans Profit Sharing and Savings Plan. The Leonard's Metal, Inc. Profit Sharing and Savings Plan and Trust (the "Profit Sharing Plan") is a qualified defined contribution plan which contains both a profit sharing feature and a "cash or deferred arrangement" that allows active participants to take advantage of Section 401(k) of the Internal Revenue Code ("Section 401(k)"). All employees of the Company who have completed 1,000 hours of service become Profit Sharing Plan participants. Pursuant to the profit sharing provisions of the Profit Sharing Plan, the Company makes annual discretionary contributions to the Profit Sharing Plan in amounts determined by the Board. Pursuant to the methods described in such plan, the Company's annual discretionary contribution is allocated equally among all active participants. The cash or deferred arrangement of the Profit Sharing Plan is designed to qualify under Section 401(k). It permits participants to defer payment of between 1% and 15% of such participant's compensation in a tax-advantaged manner. To encourage systematic savings by Profit Sharing Plan participants, the Company may make matching contributions to active participants. Currently, the Company makes matching contributions equal to 50% of an active participant's compensation deferred up to a maximum matching contribution of $225 per eligible participant. Participants are at all times fully vested in amounts in their cash or deferred accounts (i.e., 401(k) contributions), matching amounts made by the Company, amounts rolled over from other eligible retirement plans for the benefit of the participant and certain amounts previously withdrawn by a participant which are later restored to the Profit Sharing Plan. For discretionary contributions made to the Profit Sharing Plan by the Company, participants vest in their account balances in 10% increments upon completion of their first year with the Company and continue in such increments up to the completion of the fourth year of service and vest in 20% percent increments upon completion of the fifth, sixth and seventh years of service, with full vesting upon completion of seven years of service. 1989 Employee Incentive Stock Option Plan. In December 1989, the Company adopted the Incentive Stock Option Plan (the "Option Plan") for key employees and officers of the Company or any wholly-owned subsidiary. The purpose of the Option Plan is to encourage the ownership of the stock of the Company and to provide additional incentive for participants to promote the success of the Company and to encourage them to remain in its employ. The Option Plan is administered by the Board which has broad authority in such administration. Awards to employees are in the form of options to purchase Common Stock. Each option is evidence by a stock option agreement stating the number of shares of common stock to which it pertains, price as fixed by the Board, and the terms and conditions under which the option may be exercised, as determined by the Board. The Option Plan provides that such options may be issued on the condition that any purchases of stock thereunder shall be for investment purposes and not with a view to resale or distribution. The Option Plan further provides that upon the occurrence of certain events, the Option Plan will automatically terminate and all outstanding options granted under the Option Plan shall terminate, provided that the Board will have the right to accelerate the time in which options may be exercised prior to such termination. The Company reserves an aggregate of 1,271,585 shares of common stock for issuance under the Option Plan. The Company granted options to the following executive officers under the Option Plan: Name Number of Shares Subject to Options ---- ----------------------------------- Duane E. Hahn 57,575 Lawrence J. LeGrand 32,900 Bradley L. Nelson 24,675 Robert T. Grah 16,450 Phillip A. Lajeunesse 16,450 Lawrence E. Dickinson 9,810 Ernest R. Bailey 4,935 40 CERTAIN TRANSACTIONS From time to time the Company has engaged in various transactions with certain of its directors, executive officers and other affiliated parties. The following paragraphs summarize certain information concerning certain transactions and relationships which have occurred during the past three fiscal years or are currently proposed. The Joseph Burstein Revocable Trust U/T/A August 20, 1983, for which Joseph Burstein, the Chairman of the Board, is the trustee, loaned $250,000 to the Company as evidenced by a promissory note dated August 10, 1995. Such indebtedness bore interest at a rate of 10.5% per annum and was payable on demand. Such indebtedness and accrued interest thereon was paid in full on March 31, 1998. In May 1996, NSS Leasing, Inc. ("NSS"), controlled by Mr. Burstein, entered into a lease agreement with the Company by which NSS leased certain equipment to the Company. Such lease agreement contained terms and conditions no less favorable to the Company than could have been obtained from an unaffiliated third party. During 1996 and 1997, the Company paid NSS $30,336 and $74,413, respectively, pursuant to the terms of such lease. Of the amount paid in 1997, $59,250 constituted the purchase price of the buy-out for such equipment. In August 1996, a trust of which no affiliate of the Company was a beneficiary, loaned $300,000 to the Company as evidenced by a subordinated promissory note dated August 15, 1996 (the "Trust"). Lawrence J. LeGrand is the trustee of such Trust. Such indebtedness bore interest at a rate of 11% per annum and was payable on March 15, 1999. The indebtedness and accrued interest thereon was paid in full on March 31, 1998. Mr. LeGrand became a director of the Company on April 17, 1998, and Chief Operating Officer of the Company on May 1, 1998. The terms of each of the foregoing transactions were negotiated on an arm's-length basis. All future transactions between the Company and its officers, directors, principal shareholders and affiliates will be approved by a majority of the independent and disinterested outside directors. PRINCIPAL SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of Common Stock by (i) each shareholder who is known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock, (ii) each director, (iii) each executive officer named in the Summary Compensation Table, and (iv) all directors and executive officers as a group. Unless otherwise specified, the address of all shareholders is the principal address of the Company set forth in the Prospectus. 41
Number of Number of Beneficially Owned Beneficially Owned Name of Shares Prior to Shares After Beneficial Owner the Offering Percent the Offering Percent ---------------- ------------------ ------- ----------------- ------- Ronald S. Saks(1) 4,731,651 78.3% 2,840,559 34.1% The Guaranty Trust Company of Missouri, as trustee for the 931,359 15.4 931,359 11.2 Profit Sharing Plan(2) Sanford S. Neuman(4) 660,000 10.9 282,940 3.4 Joseph and Geraldine Burstein(3) 599,296 9.9 599,296 7.2 Gary R. Saks(5) 367,519 6.1 367,519 4.4 Duane E. Hahn(6) 354,543 5.9 354,543 4.3 Lawrence J. LeGrand 263,200 4.4 263,200 3.2 Robert T. Grah(8) 78,150 1.3 78,150 * Phillip A. Lajeunesse(9) 54,367 * 54,367 * Bradley L. Nelson(10) 29,511 * 29,511 * All directors & executive officers as a group (10 in group) 5,415,922 87.3 4,559,696 53.6 * Less than 1%. (1) All of such shares of Common Stock are held of record by the Leonard's Metal Inc. Voting Trust dated November 11, 1996 ("Voting Trust No. 1") for which Mr. Saks is the Trustee. Pursuant to the terms of Voting Trust No. 1, Mr. Saks has the unqualified exclusive right and power to exercise all voting rights with respect to the stated shares except for (a) the right to sell or otherwise dispose of the shares or take any action in conflict with any shareholder agreement and (b) the right to take any corporate action which, under the provisions of Chapter 351 of the Missouri Revised Statutes, requires approval or consent by the holders of at least two-thirds (2/3) of the outstanding voting shares without first obtaining the consent of the holders representing the beneficial interest in Voting Trust No. 1. The shares subject to Voting Trust No. 1 include shares beneficially owned by: (i) Ronald S. Saks Revocable Trust U/T/A dated June 21, 1991 (2,840,559); (ii) Joseph Burstein Revocable Trust U/T/A dated August 20, 1983 (599,296); (iii) Sanford S. Neuman (282,940); (iv) Lawrence J. LeGrand (230,300); (v) Duane E. Hahn (238,525); (vi) Saks Family 1993 Trust (21,385); and (vii) Robert T. Grah (31,255). Mr. Saks has resigned as voting trustee of Voting Trust No. 1 effective on the date on which the Registration Statement, of which this Prospectus is a part, is declared effective. As a result, Voting Trust No. 1 will terminate on such date in accordance with its terms. (2) All such shares of Common Stock are held for the benefit of the Profit Sharing Plan. The shares subject to the Profit Sharing Plan include shares beneficially owned by: (i) Duane E. Hahn (58,443); (ii) Robert T. Grah (30,445); (iii) Phillip A. Lajeunesse (13,242); and (iv) Bradley L. Nelson (4,836). The address of the Guaranty Trust Company of Missouri is 7707 Forsyth Boulevard, St. Louis, Missouri 63105. 42 (3) All such shares of Common Stock are held of record by Voting Trust No. 1 for the benefit of Joseph Burstein Revocable Trust U/T/A dated August 20, 1983 for which Mr. Burstein and Mrs. Burstein are Co-Trustees. The Bursteins' address is 536 Fairways, St. Louis, Missouri 63141. (4) Includes 282,940 shares of Common Stock held of record by Voting Trust No. 1 for the benefit of Mr. Neuman. Also includes 377,060 shares of Common Stock held of record by the Leonard's Metal Inc. Voting Trust dated December 31, 1996 ("Voting Trust No. 2") for which Mr. Neuman is the Trustee. Pursuant to the terms of Voting Trust No. 2, Mr. Neuman has the unqualified exclusive right and power to exercise all voting rights with respect to the stated shares except for (a) the right to sell or otherwise dispose of the shares or take any action in conflict with any Shareholder Agreement and (b) the right to take any corporate action which requires approval or consent by the holders of at least two-thirds (2/3) of the outstanding voting shares under the provisions of Chapter 351 of the Missouri Revised Statutes without first obtaining the consent of the holders representing the beneficial ownership of not less than two-thirds (2/3) of the shares of Common Stock which are subject to the terms of Voting Trust No. 2. Mr. Neuman has resigned as voting trustee of Voting Trust No. 2 effective on the date on which the Registration Statement, of which this Prospectus is a part, is declared effective. As a result, Voting Trust No. 2 will terminate on such date in accordance with its terms. Mr. Neuman's address is 101 South Hanley, St. Louis, MO 63105. (5) Includes 21,385 shares of Common Stock held of record by Voting Trust No. 1 for the benefit of The Saks Family 1993 Trust for which Gary Saks is the Trustee. Also includes 328,039 shares of Common Stock held of record by Voting Trust No. 2 for the benefit of The Saks Family 1993 Trust and trusts established for the benefit of the children of Ronald Saks, all for which Gary Saks is Trustee, and 18,095 shares held of record by Voting Trust No. 2 for the children of Ronald Saks under the Missouri Transfers to Minors law for which Gary Saks is the Custodian. (6) Includes 238,525 shares of Common Stock held of record by Voting Trust No. 1 for the benefit of Mr. Hahn. Also includes 58,443 shares of Common Stock held of record by The Guaranty Trust Company of Missouri for the benefit of Mr. Hahn. Also includes 57,575 shares of Common Stock issuable upon the exercise of an immediately exercisable option to purchase such shares. Mr. Hahn's address is 204 H Street, N.W., Auburn, Washington 98001. (7) Includes 230,300 shares of Common Stock held of record by Voting Trust No. 1 for the benefit of Mr. LeGrand. Also includes 32,900 shares of Common Stock issuable upon the exercise of immediately exercisable options to purchase such shares. (8) Includes 31,255 shares of Common Stock held of record by Voting Trust No. 1 for the benefit of Mr. Grah. Also includes 30,445 shares of Common Stock held of record by The Guaranty Trust Company of Missouri for the benefit of Mr. Grah. Also includes 16,450 shares of Common Stock issuable upon the exercise of immediately exercisable options to purchase such share. Mr. Grah's address is 2104 N. 170th Street E. Avenue, Tulsa, Oklahoma 74116. (9) Includes 24,675 shares of Common stock held of record by Voting Trust No. 1 for the benefit of Mr. Lajeunesse. Also inclues 13,242 shares of Common Stock held of record by The Guaranty Trust Company of Missouri for the benefit of Mr. Lajeunesse. Also includes 16,450 shares of Common Stock issuable upon the exercise of immediately exercisable options to purchase such shares. Mr. Lejeunesse's address is 2629 Esthner Court, Wichita, KS 67213. (10) Includes 4,836 shares of Common Stock held of record by The Guaranty Trust Company of Missouri for the benefit of Mr. Nelson. Also includes 24,675 shares of Common Stock issuable upon the exercise of immediately exercisable options to purchase such shares. Mr. Nelson's address is 204 H Street, N.W., Auburn, Washington 98001.
43 AUTHORIZED AND OUTSTANDING CAPITAL STOCK Upon completion of the Offering the Articles will provide for an authorized capital of 30,000,000 shares, consisting of 2,000,000 shares of preferred stock, $0.02 par value per share (the "Preferred Stock"), and 28,000,000 shares of Common Stock. Based on shares outstanding as of March 31, 1998, upon the consummation of the Offering, 8,208,471 shares of Common Stock and no shares of Preferred Stock will be outstanding. The following summary description of the capital stock of the Company is qualified in its entirety by reference to the Articles. Common Stock The holders of Common Stock are entitled to cast one vote for each share held of record on all matters to be voted on by the Shareholders, including the election of directors. There is no cumulative voting with respect to the election of directors. As a result, the holders of Common Stock entitled to exercise more than 50% of the voting rights in an election of directors can elect all of the directors then standing for election if they choose to do so. The holders of Common Stock are entitled to receive dividends when and if declared by the Board out of legally available funds. In the event of the liquidation, dissolution or winding up of the affairs of the Company, the holders of Common Stock are entitled to share ratably in all remaining assets which are available for distribution to them after payment of liabilities and after provision has been made for each class of stock, if any, having preference over the Common Stock. No holder of any share of Common Stock or any other security of the Company, either now or hereafter authorized or issued, shall have any preferential or preemptive right to acquire additional shares of Common Stock or any other security of the Company other than such, if any, as the Board may in its discretion from time to time determine. All of the outstanding shares of Common Stock are, and the shares of Common Stock offered hereby will be when issued for the consideration set forth in this Prospectus, fully paid and non-assessable. Preferred Stock The Articles authorize the Board to establish one or more series of Preferred Stock and to determine, with respect to any series of Preferred Stock, the terms, rights and preferences of such series, including voting, dividend, liquidation, conversion, redemption and any other relative rights, preferences and limitations. The authorized shares of Preferred Stock will be available for issuance without further action by the Company's shareholders, unless such action is required by applicable law or other rules of any stock exchange or automated quotation system on which the Company's securities may be listed or traded. Although the Company has no present intention of doing so, it could issue a series of Preferred Stock that could discourage, impede, delay or prevent a transaction which would result in a change in control of the Company, regardless of whether some of the Company's stockholders might believe such a transaction to be in their best interest. Certain Effects of Authorized but Unissued Stock Upon the completion of the Offering, there will be 18,174,944 shares of Common Stock, which excludes the 1,271,585 shares of Common Stock reserved for issuance upon exercise of options granted under the Option Plan, 345,000 shares of Common Stock reserved for issuance upon exercise of the Underwriters' over-allotment option and 2,000,000 shares of Preferred Stock available for future issuance without stockholder approval. These additional shares may be issued for a variety of proper corporate purposes, including raising additional capital, corporate acquisitions and implementing employee benefit plans. Except as contemplated by the Option Plan and Profit Sharing Plan, the Company does not currently have any plans to issue additional shares of Common Stock or Preferred Stock. See "MANAGEMENT--Benefit Plans." 44 One of the effects of the existence of unissued and unreserved shares of Common Stock and Preferred Stock may be to enable the Board to issue shares to persons friendly to current management, which could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest, or otherwise, and thereby protect the continuity of the Company's management and possibly deprive the shareholders of opportunities to sell their shares of Common Stock at prices higher than the prevailing market prices. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of the Company. Special Provisions of the Articles, Bylaws and Missouri Law The Articles and Bylaws of the Company contain certain provisions regarding the rights and privileges of shareholders, some of which may have the effect of discouraging certain types of transactions that involve an actual or threatened change of control of the Company, diminishing the opportunities for a shareholder to participate in tender offers, including tender offers at a price above the then current market value of the Common Stock or over a shareholder's cost basis in the Common Stock, and inhibiting fluctuations in the market price of the Common Stock that could result from takeover attempts. These provisions of the Articles and Bylaws are summarized below. Size of Board, Election of Directors and Classified Board The Articles provide that the number of directors shall be fixed from time to time as provided in the Bylaws. The Bylaws provide for a minimum of three and a maximum of nine persons to serve on the Board. The number of directors may be increased or decreased by a resolution adopted by the affirmative vote of a majority of the Board. The Articles further provide that the Board may amend the Bylaws by action taken in accordance with such Bylaws, except to the extent that any matters under the Articles or applicable law are specifically reserved to the shareholders. The Bylaws provide that the Board will be divided into three classes of directors, with the classes to be as nearly equal in number as possible, and one of each such classes shall be elected each year to serve for a three-year term. Shareholder Nominations and Proposals The Company's Bylaws provide for advance notice requirements for shareholder nominations and proposals at annual meetings of the Company. Shareholders may nominate directors or submit other proposals only upon written notice to the Company not less than 120 days nor more than 150 days prior to the date of the notice to shareholders of the previous year's annual meeting. A shareholder's notice also must contain certain additional information, as specified in the Bylaws. The Board may reject any proposals that are not made in accordance with the procedures set forth in the Bylaws or that are not proper subjects of shareholder action in accordance with the provisions of applicable law. 45 Calling Shareholder Meetings; Action by Shareholders Without a Meeting Matters to be acted upon by the shareholders at special meetings are limited to those which are specified in the notice thereof. A special meeting of shareholders may be called by the Board or the President of the Company. As required by Missouri law, the Bylaws provide that any action by written consent of shareholders in lieu of a meeting must be signed by the holders of all outstanding shares of Common Stock. The foregoing provisions contained in the Articles and Bylaws are designed in part to make it more difficult and time consuming to obtain majority control of the Board or otherwise to bring a matter before shareholders without the Board's consent, and therefore to reduce the vulnerability of the Company to an unsolicited takeover proposal. These provisions are designed to enable the Company to develop its business in a manner which will foster its long-term growth without the threat of a takeover not deemed by the Board to be in the best interests of the Company and its shareholders, and to reduce, to the extent practicable, the potential disruption entailed by such a threat. However, these provisions may have an adverse effect on the ability of shareholders to influence the governance of the Company and the possibility of shareholders receiving a premium above the market price for their securities from a potential acquirer who is unfriendly to management. Indemnification of Directors and Officers Sections 351.355(1) and (2) of The General and Business Corporation Law of the State of Missouri provide that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful, except that, in the case of an action or suit by or in the right of the corporation, the corporation may not indemnify such persons against judgments and fines and no person shall be indemnified as to any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of the person's duty to the corporation, unless and only to the extent that the court in which the action or suit was brought determines upon application that such person is fairly and reasonably entitled to indemnity for proper expenses. Section 351.355(3) provides that, to the extent that a director, officer, employee or agent of the corporation has been successful in the defense of any such action, suit or proceeding or in defense of any claim, issue or matter therein, the person shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred by such person in connection with such action, suit or proceeding. Section 351.355(7) provides that a corporation may provide additional indemnification to any person indemnifiable under subsection (1) of (2), provided such additional indemnification is authorized by the corporation's articles of incorporation or an amendment thereto or by a shareholder-approved bylaw or agreement, and provided further that no person shall thereby be indemnified against conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct or which involves an accounting for profits pursuant to Section 16(b) of the Exchange Act. Article 9 of the Articles permits the Company to enter into agreements with its directors, officers, employees and agents to provide such indemnification as deemed appropriate. Article 9 also provides that the Company may extend to its directors and executive officers such indemnification and additional indemnification. 46 The Company may procure and maintain a policy of insurance under which the directors and officers of the Company will be insured, subject to the limits of the policy, against certain losses arising from claims made against such directors and officers by reason of any acts or omissions covered under such policy in their respective capacities as directors or officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Transfer Agent The transfer agent and registrar for the Common Stock will be American Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE Upon completion of the Offering, the Company will have outstanding 8,340,071 shares of Common Stock. Of these shares, only those offered for sale in the Offering and approximately 702,885 currently held by existing non-affiliate shareholders will be tradable without restriction under the Securities Act. The remaining 5,337,186 shares of Common Stock held by existing shareholders are "restricted" within the meaning of Rule 144 promulgated under the Securities Act. Subject to compliance with the provisions of Rule 144 and agreements with the Underwriters, all of such shares will be eligible for sale to the public, notwithstanding the fact that such shares have not been registered under the Securities Act. In general, under Rule 144 as currently in effect, an affiliate of the Company, or a person (or persons whose shares are aggregated) who has beneficially owned restricted securities for at least one year but less than two years, will be entitled to sell in any three month period a number of shares that does not exceed the greater of (i) 1% of the then outstanding shares of Common Stock or (ii) the average weekly trading volume during the four calendar weeks immediately preceding the date on which notice of the sale is filed with the Securities and Exchange Commission (the "Commission"). Sales under Rule 144 are subject to certain requirements relating to manner of sale, notice and availability of current information about the Company. A person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of the Company at any time during the 90 days immediately preceding the sale and who has beneficially owned his or her shares for at least two years is entitled to sell such shares under Rule 144(k) without regard to the limitations described above. All shares of Common Stock outstanding prior to this Offering are subject to an agreement which prohibits the sale of shares of Common Stock prior to December 31, 1998. The agreements will have no effect on the date on which shares become eligible for sale under Rule 144. The Company intends to file a registration statement on Form S-8 under the Securities Act covering approximately 1,271,585 shares of Common Stock reserved for issuance under the Option Plan. See "MANAGEMENT--Benefit Plans." Such registration statement is expected to be filed as soon as practicable after the date of this Prospectus and will automatically become effective upon filing. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to affiliates, be available for sale in the open market, except to the extent that such shares are subject to vesting restrictions. As of March 31, 1998, options to purchase 243,377 shares were granted and outstanding. 47 No predictions can be made of the effect, if any, that future market sales of shares of Common Stock or the availability of such shares for sale will have on the market price prevailing from time to time. Sales of substantial amounts of Common Stock, or the perception that such sales might occur, could adversely affect prevailing market prices. UNDERWRITING Subject to the terms and conditions contained in the Underwriting Agreement, the syndicate of underwriters named below (the "Underwriters"), for whom EVEREN Securities, Inc. and George K. Baum & Company are acting as Representatives (the "Representatives"), have severally agreed, to purchase from the Company, and the Company has agreed to sell, the respective number of shares of Common Stock set forth opposite the names of such Underwriters below: Number of Name Shares of Common Stock ---- ---------------------- EVEREN Securities, Inc. ......................... George K. Baum & Company ........................ --------- Total .................................. 2,300,000 ========= The Underwriting Agreement provides that the obligations of the several Underwriters to purchase and accept delivery of the shares of Common Stock offered hereby are subject to approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are obligated to purchase all of the shares of Common Stock offered hereby (other than the shares of Common Stock covered by the over-allotment option described below) if any are purchased. The Company has been advised by the Underwriters that they propose to offer the Common Stock to the public initially at the price set forth on the cover page of this Prospectus and to certain dealers (who may include the Underwriters) at such price, less a concession not in excess of $ per share of Common Stock. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share of Common Stock to certain other dealers. After the initial public offering, the price to the public, the concession and the discount to dealers may be changed. The Representatives have informed the Company that the Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority. The Offering of the Common Stock is made for delivery when, as and if accepted by the Underwriters and subject to prior sale and to withdrawal, cancellation or modification of the offer without notice. The Underwriters reserve the right to reject any order for the purchase of the Common Stock. The Company has granted to the Underwriters an option, exercisable for the 45 days from the date of this Prospectus, to purchase up to an aggregate of 345,000 additional shares of Common Stock at the initial price to public, less the underwriting discounts and commissions, solely to cover over-allotments, if any. To the extent that the Underwriters exercise such option, each Underwriter may be committed, subject to certain conditions, to purchase a number of additional shares of Common Stock proportionate to such Underwriter's initial commitment pursuant to the Underwriting Agreement. In the Underwriting Agreement, the Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the Underwriters may be required to make in respect thereof. Subject to certain exceptions, the Company, and all shares of Common Stock outstanding immediately prior to the completion of this Offering are subject to agreements which prohibit, without the prior written consent of EVEREN Securities, Inc., the offer, sale, contract to sell, grant of any option to purchase or other disposition of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for such Common Stock or the transfer in any other manner of all or a portion of the economic consequences associated with the ownership of any such Common Stock prior to December 31, 1998. 48 In connection with the Offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may overallot the Offering, creating a syndicate short position. Underwriters may bid for and purchase shares of Common Stock in the open market to cover syndicate short positions. In addition, the Underwriters may bid for and purchase shares of Common Stock in the open market to stabilize the price of the Common Stock. These activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities, and may end these activities at any time. LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Gallop, Johnson & Neuman, L.C., St. Louis, Missouri. Upon completion of the Offering, Mr. Sanford S. Neuman, a member of the firm of Gallop, Johnson & Neuman, L.C., will be the beneficial owner of 282,940 shares of Common Stock and serves as a director of the Company. Certain legal matters will be passed upon for the Underwriters by Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., Chicago, Illinois. EXPERTS The consolidated financial statements of LMI Aerospace, Inc. at December 31, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS The Company, with the approval of its Board, engaged Ernst & Young LLP as its independent auditor in March 1998 to replace KPMG Peat Marwick LLP ("KPMG"). KPMG resigned as the Company's independent auditor and withdrew its 1995 and 1996 opinions because KPMG determined that it lacked independence as a result of a $300,000 loan made by one of its partners, Lawrence J. LeGrand, acting as trustee on behalf of a non-family trust. See "CERTAIN TRANSACTIONS". During the period between the date KPMG was engaged and the date on which it resigned, there were no (i) disagreements between the Company and KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure or (ii) adverse opinions or a disclaimer of opinion, or qualification or modifications as to uncertainty, audit scope or accounting principles in connection with its report on the Company's financial statements. ADDITIONAL INFORMATION The Company has filed with the Commission a registration statement on Form S-1 under the Securities Act with respect to the Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules filed therewith. For further information with respect to the Company and such Common Stock, reference is hereby made to the Registration Statement and to the Consolidated Financial Statements, exhibits and schedules filed therewith. Statements contained in this Prospectus regarding the contents of any contract or document referred to therein are not necessarily complete and, in each instance, reference is made to the copy of such contract or the document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including the exhibits thereto, may be inspected without charge at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices at Seven World Trade Center, New York, New York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its public reference facilities in New York, New York and Chicago, Illinois, upon the payment of the prescribed fees or retrieved electronically via the Internet at the Commission's Internet web site. (http://www.sec.gov). 49 LMI AEROSPACE, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page ---- Report of Independent Auditors............................................ F-2 Consolidated Balance Sheets as of December 31, 1996 and 1997.............................................. F-3 Consolidated Statements of Operations for the years ended December 31, 1995, 1996 and 1997............................ F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1996 and 1997.................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997.................................. F-6 Notes to Consolidated Financial Statements ............................... F-7 F-1 Report of Independent Auditors The Board of Directors and Stockholders LMI Aerospace, Inc. We have audited the accompanying consolidated balance sheets of LMI Aerospace, Inc. (the Company) as of December 31, 1996 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of LMI Aerospace, Inc. at December 31, 1996 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Ernst & Young LLP St. Louis, MO April 20, 1998, except Note 12, as to which the date is ________, 1998 The foregoing report is the form that will be signed upon the completion of the restatement of capital accounts described in Note 12 to the financial statements. /S/ Ernst & Young LLP St. Louis, MO April 20, 1998 F-2 LMI Aerospace, Inc. Consolidated Balance Sheets (Amounts in thousands, except share and per share data) December 31 1996 1997 ---------------------------------- Assets Current assets: Cash and cash equivalents $ 205 $ 244 Trade accounts receivable 6,586 8,058 Inventories 7,195 8,701 Prepaid expenses 159 147 Deferred income taxes 407 502 Other current assets 234 109 ---------------------------------- Total current assets 14,786 17,761 Property, plant, and equipment, net 13,997 15,652 Deferred financing costs, net 196 130 Other assets 67 86 ================================== $29,046 $33,629 ================================== Liabilities and stockholders' equity Current liabilities: Accounts payable $ 2,599 $ 3,318 Accrued expenses 1,360 1,940 Income taxes payable 515 430 Demand note payable to stockholder 250 250 Current installments of long-term debt 1,436 567 ---------------------------------- Total current liabilities 6,160 6,505 Long-term debt, less current installments 10,735 9,274 Deferred income taxes 990 1,099 ---------------------------------- Total noncurrent liabilities 11,725 10,373 Stockholders' equity: Common stock of $.02 par value; authorized 15,000,000 shares; issued 5,824,205 and 5,908,471 shares in 1996 and 1997, respectively 116 118 Additional paid-in capital 1,241 1,543 Retained earnings 9,807 15,090 ---------------------------------- 11,164 16,751 Less treasury stock, at cost, 1,365 shares in 1996 3 - ---------------------------------- Total stockholders' equity 11,161 16,751 ---------------------------------- $29,046 $33,629 ================================== See accompanying notes. F-3 LMI Aerospace, Inc. Consolidated Statements of Operations (Amounts in thousands, except per share data)
Year ended December 31 1995 1996 1997 ------------------------------------------------------------- Net sales $25,424 $35,016 $55,080 Cost of sales 20,366 26,725 38,932 ------------------------------------------------------------- Gross profit 5,058 8,291 16,148 Selling, general, and administrative expenses 3,883 5,256 6,549 ------------------------------------------------------------- Income from operations 1,175 3,035 9,599 Other income (expense): Interest expense (1,038) (1,123) (1,020) Other, net (48) 15 10 ------------------------------------------------------------- (1,086) (1,108) (1,010) ------------------------------------------------------------- Income before income taxes 89 1,927 8,589 Provision for income taxes 52 740 3,306 ============================================================= Net income $ 37 $ 1,187 $ 5,283 ============================================================= Net income per common share $0.01 $0.21 $0.91 ============================================================= Net income per common share - assuming dilution $0.01 $0.20 $0.89 =============================================================
See accompanying notes. F-4 LMI Aerospace, Inc. Consolidated Statements of Stockholders' Equity (Amounts in thousands, except share and per share data)
Additional Total Common Stock Paid-In Retained Treasury Stockholders' Capital Earnings Stock Equity ------------------------------------------------------------------------ Balance at December 31, 1994 $109 $ 582 $ 8,583 $(127) $ 9,147 Sale of 77,644 shares of treasury stock - 16 - 127 143 Purchase of 19,740 shares of outstanding stock for treasury - - - (38) (38) Issuance of 354,580 shares of stock 7 670 - - 677 Net income - - 37 - 37 ------------------------------------------------------------------------ Balance at December 31, 1995 116 1,268 8,620 (38) 9,966 Sale of 7,896 shares of treasury stock - - - 15 15 Purchase of 30,646 shares of outstanding stock for treasury - - - (58) (58) Exercise of options to purchase 41,125 shares of stock - (27) - 78 51 Net income - - 1,187 - 1,187 ------------------------------------------------------------------------ Balance at December 31, 1996 116 1,241 9,807 (3) 11,161 Sale of 1,365 shares of treasury - 2 - 3 5 stock Issuance of 80,977 shares of stock 2 295 - - 297 Exercise of options to purchase 3,290 shares of stock - 5 - - 5 Net income - - 5,283 - 5,283 ======================================================================== Balance at December 31, 1997 $118 $1,543 $15,090 $ - $16,751 ========================================================================
See accompanying notes. F-5 LMI Aerospace, Inc. Consolidated Statements of Cash Flows (Amounts in thousands)
Year ended December 31 1995 1996 1997 ---------------------------------------- Operating activities Net income $ 37 $ 1,187 $ 5,283 Adjustments to reconcile net income to netnet cash provided by operating activities: net cash provided by (used in) operating activities: Depreciation and amortization 1,964 2,012 2,179 Deferred income taxes 50 214 14 Changes in operating assets and liabilities: Trade accounts receivable (911) (595) (1,472) Inventories (1,083) (1,544) (1,506) Prepaid expenses and other assets (145) (232) 63 Income taxes 2 513 (85) Accounts payable and accrued expenses 71 1,129 1,299 ------------------------------------------------------- Net cash provided by (used in) operating activities (15) 2,684 5,775 Investing activities Additions to property, plant, and equipment (1,736) (1,316) (3,856) Proceeds from sale of property, plant, and equipment 9 12 143 equipment Proceeds from sale of investments 183 - - ------------------------------------------------------- Net cash used in investing activities (1,544) (1,304) (3,713) Financing activities Proceeds from issuance of long-term debt 1,075 3,550 3,782 Principal payments on long-term debt (268) (4,914) (6,112) Purchase of outstanding stock for treasury (38) (58) - Proceeds from sale of treasury stock 143 15 5 Proceeds from exercise of stock options - 51 5 Proceeds from issuance of common stock 677 - 297 ------------------------------------------------------- Net cash (used in) provided by financing activities 1,589 (1,356) (2,023) activities ------------------------------------------------------- Net increase in cash and cash equivalents 30 24 39 Cash and cash equivalents, beginning of year 151 181 205 ======================================================= Cash and cash equivalents, end of year $ 181 $ 205 $ 244 ======================================================= Supplemental disclosures of cash flow information: cash paid during the year for: Interest paid $ 1,061 $ 1,191 $ 996 Income taxes paid $ - $ 14 $ 3,378 =======================================================
See accompanying notes. F-6 ================================================================================ LMI Aerospace, Inc. ================================================================================ LMI Aerospace, Inc. Notes to Consolidated Financial Statements (Dollar amounts in thousands, except share and per share data) December 31, 1997 1. Accounting Policies Description of Business LMI Aerospace, Inc. (the Company) (formerly Leonard's Metal, Inc.) is a fabricator, finisher, and integrator of formed, close tolerance aluminum and specialty alloy components for use by the aerospace industry. The Company is a Missouri corporation with headquarters in St. Charles, Missouri. The Company maintains facilities in St. Charles, Missouri; Seattle, Washington; Tulsa, Oklahoma; and Wichita, Kansas. The accompanying financial statements include the consolidated financial position, results of operations, and cash flows of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Customer and Supplier Concentration Sales to the Company's three largest customers accounted for 74 percent, 73 percent, and 81 percent of the Company's revenues in 1995, 1996, and 1997. Accounts receivable balances related to these three customers were 77 percent and 83 percent in 1996 and 1997, respectively. Direct sales to the Company's largest customer accounted for 45 percent, 46 percent, and 59 percent of the Company's revenues in 1995, 1996, and 1997. Accounts receivable balances related to direct sales to this customer were 52 percent and 62 percent in 1996 and 1997, respectively. In addition, indirect sales to the Company's largest customer accounted for 19 percent, 20 percent, and 17 percent of the Company's sales in 1995, 1996, and 1997, respectively. In 1997, the Company purchased approximately 50 percent of the materials used in production from three suppliers. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 those estimates. F-7 1. Accounting Policies (continued) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, amounts due from banks, and all highly liquid investment instruments with an initial maturity of three months or less. Inventories Inventories are stated at the lower of cost or market using actual cost for raw materials and work-in-process and average cost for finished goods. Inventories include certain deferred production costs related to long-term production contracts. These costs are included in cost of sales over the life of the contract based on a units-of-delivery method. Revenue Recognition Revenues are recorded when services are performed or when products are shipped, except for long-term construction contracts which are recorded on the percentage-of-completion method based on a units-of-delivery method. Sales from long-term construction contracts were less than 10 percent of total sales for each year in the three-year period ended in 1997. The billings in excess of costs, under long-term construction contracts, are $321 as of December 31, 1997 and are included in accrued expenses. Billings in excess of costs were immaterial as of December 31, 1996. Property and Equipment Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of the minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life of the asset. Estimated useful lives for buildings and machinery and equipment are 20 years and 4 to 10 years, respectively. Income Taxes The Company utilizes the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement and income tax basis of the Company's assets and liabilities. F-8 1. Accounting Policies (continued) Stock-Based Compensation Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company has elected to continue to measure its cost of stock-based compensation under the provisions of Accounting Principles Board (APB) Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Financial Instruments Fair values of the Company's fixed rate long-term obligations approximate their carrying value, as the rates approximate those which could be obtained by the Company for similar issues with similar maturities. The Company's other financial instruments have fair values which approximate their respective carrying values, due to their short maturities or variable rate characteristics. Earnings per Common Share In 1997, the Company adopted SFAS No. 128, Earnings per Share, which replaced the calculation of primary and fully diluted earnings per share with basic and fully diluted earnings per share. All earnings per share amounts for all periods have been presented or, where appropriate, restated to conform to SFAS No. 128. Earnings per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding during the applicable periods. The weighted average number of common shares outstanding was 5,529,483, 5,779,833, and 5,836,700 in 1995, 1996, and 1997, respectively. In order to compute diluted earnings per common share, the Company included weighted average dilutive stock options outstanding which totaled 15,552, 11,150, and 76,104 in 1995, 1996, and 1997, respectively. F-9 2. Inventories Inventories consist of the following: 1996 1997 ------------------------------------------ Raw materials $2,142 $2,990 Work in process 4,065 3,875 Finished goods 988 1,836 ========================================== $7,195 $8,701 ========================================== 3. Property, Plant, and Equipment Property, plant, and equipment at December 31 consist of the following: 1996 1997 ------------------------------------------ Land $ 638 $ 638 Buildings 7,010 7,405 Machinery and equipment 16,127 18,899 Leasehold improvements 307 426 Construction in progress 224 298 ------------------------------------------ 24,306 27,666 Less accumulated depreciation (10,309) (12,014) ========================================== $ 13,997 $ 15,652 ========================================== Depreciation expense (including amortization expense on capital leases) recorded by the Company totaled $1,812, $1,907, and $2,058, for 1995, 1996, and 1997, respectively. 4. Demand Note Payable to Stockholder The Company is obligated to a stockholder for a $250 demand note payable. The note accrues interest quarterly at 10.5 percent per annum. In March 1998, the note was paid. See Note 5. F-10 5. Long-Term Debt Long-term debt consists of the following:
1996 1997 --------------------------------------- Revolving line of credit, interest payable quarterly, at a variable rate $ 3,459 $1,281 Industrial Development Revenue Bond, interest payable monthly, at a variable rate 5,000 2,500 Term loan note payable, interest payable monthly, at a fixed rate of 9.75% 2,250 - Term loan note payable, principal and interest payable monthly, at a fixed rate of 9.0% - 3,482 Real estate note payable, principal and interest payable monthly, at a variable rate 450 428 Notes payable, principal and interest payable monthly, at fixed rates, ranging from 8.25% to 9.56% 118 1,233 Subordinated debentures, interest payable monthly, at a fixed rate of 11% 800 800 Capital lease obligations 94 117 --------------------------------------- 12,171 9,841 Less current installments 1,436 567 ======================================= $10,735 $9,274 =======================================
The Company has a Credit and Security Agreement with Norwest Business Credit, Inc. for a revolving credit facility up to $6,500 subject to a borrowing base calculation and secured by the working capital of the Company. Interest is payable monthly on the facility at the prime rate plus .5 percent, 9 percent at December 31, 1997. The facility matures on February 13, 1999 and requires compliance with certain nonfinancial and financial covenants, including debt service coverage, minimum book net worth, leverage ratio, and current ratio. The Industrial Revenue Bond (IRB) bears interest at a variable rate, which is based on the existing market rates for comparable outstanding tax-exempt bonds (4.3 percent and 4.1 percent at December 31, 1996 and 1997, respectively), not to exceed 12 percent. The IRB is secured by a letter of credit, and Magna Bank, which holds 100 percent participation in the letter of credit, has a security interest in certain equipment. The balance at December 31, 1997 matures in November 2000. F-11 5. Long-Term Debt (continued) On August 15, 1996, the Company executed a 9.75 percent term note payable for $2,600 with Magna Bank N.A. (Magna Bank) secured by certain Company-owned real estate. The term note payable was amended on January 17, 1997 requiring the Company to make principal payments of $1,300 in 1997. Interest is payable monthly on the term note payable at 9.75 percent per annum. During 1997, the Company refinanced $2,500 of the IRB and the remaining $1,000 of the 9.75 percent term note payable and executed a new 9.0 percent term note payable for $3,500 with Magna Bank secured by certain Company-owned real estate. Accordingly, the $2,500 which was scheduled to mature on November 1, 1997 has been classified as long-term debt at December 31, 1996. The term note payable requires monthly principal and interest payments of $45, and any remaining principal balance is due upon maturity in November 2000. The term note payable contains certain nonfinancial and financial covenants, including leverage ratio, current ratio, and minimum tangible net worth. The real estate note payable with the Oklahoma Industrial Finance Authority requires monthly principal and interest payments through May 2009 and bears interest at the lender's prime rate adjusted quarterly based on the last day of the previous quarter (8.25 percent at December 31, 1996 and 8.5 percent at December 31, 1997). The real estate note payable is secured by a mortgage on the property. The Company entered into various notes payable for the purchase of certain equipment. The notes are payable in monthly installments including interest ranging from 8.25 percent to 9.56 percent through November 2002. The notes payable are secured by equipment. The Company issued subordinated debentures during 1996 which bear interest at 11 percent, payable monthly. The debentures are unsecured and mature on March 15, 1999. All of the Company's property, plant and equipment is pledged under the above agreements. F-12 5. Long-Term Debt (continued) The aggregate maturities of long-term debt as of December 31, 1997 are as follows: Year ending December 31: 1998 $ 567 1999 2,655 2000 5,805 2001 307 2002 220 Thereafter 287 ================== $ 9,841 ================== On March 31, 1998, the Company secured a $15,000 unsecured line of credit with Magna Bank to fund short-term working capital needs. The Company drew upon the line in March 1998 to retire certain outstanding debt balances, including the Norwest revolving line of credit ($1,281 at December 31, 1997), demand notes to former shareholders ($250 at December 31, 1997), and the subordinated debentures ($800 at December 31, 1997). The credit facility prohibits the payment of cash dividends on the common stock without the lender's prior written consent. 6. Leases The Company leases certain facilities and equipment under various noncancelable operating lease agreements which expire at various dates throughout 2005. At December 31, 1997, the future minimum lease payments under operating leases with initial noncancelable terms in excess of one year are as follows: Year ending December 31: 1998 $ 610 1999 673 2000 495 2001 464 2002 479 Thereafter 1,143 ================== $3,864 ================== Rent expense totaled $206, $364, and $539 in 1995, 1996, and 1997, respectively. F-13 7. Defined Contribution Plans The Company has a noncontributory profit sharing plan and a contributory 401(k) plan which covers substantially all full-time employees. Employees are eligible to participate in both plans after reaching 1,000 hours of accredited service. Contributions to the profit sharing plan are at the discretion of management and become fully vested to the employees after seven years. Contributions by the Company to the profit sharing plan totaled $0, $41, and $150 for 1995, 1996, and 1997, respectively. Contributions by the Company to the 401(k) plan are based upon a percentage of employee contributions, up to a maximum of $225 per employee. The Company's contributions to the 401(k) plan totaled $50, $36, and $78 for 1995, 1996, and 1997, respectively. 8. Stock Options The Company has an Employee Incentive Stock Option Plan (the Plan), which provides options for up to 1,398,250 shares to be granted to key employees at exercise prices greater than or equal to the fair market value per share on the date the option is granted. All options vest immediately upon grant. Stock option activity under the Plan is as follows:
1995 1996 1997 ---------------------------- ---------------------------- ----------------------------- Number of Option Number of Option Number of Option Shares Prices Shares Prices Shares Prices ------------ --------------- ------------- -------------- ------------- --------------- Options outstanding at beginning of year 90,475 $1.24 to $1.77 174,370 $1.24 to $1.90 241,815 $1.77 to $1.90 Granted 83,895 $1.77 to $1.90 116,795 $1.90 59,467 $2.60 to $3.67 Exercised - - (41,125) $1.24 (3,290) $1.77 Canceled - - (8,225) $1.64 (65,800) $1.90 ------------ ------------- ------------- Options outstanding at end of year 174,370 $1.24 to $1.90 241,815 $1.77 to $1.90 232,192 $1.77 to $3.67 ============ =============== ============= ============== ============= =============== Options available for grant at end of year 1,141,630 - 1,033,060 - 1,039,393 - ============ =============== ============= ============== ============= ===============
Under the Plan, 1,271,585 common shares are reserved for issuance as of December 31, 1997. The weighted average fair value per stock option granted during 1995, 1996, and 1997 was $.50, $.41, and $.67, respectively, measured on the date of grant using the Black-Scholes Option Pricing model with the following assumptions: volatility of 25.7 percent; 0 percent dividend yield; an expected life of 3.5 years, 2.5 years, and 1.5 to 2.25 years for 1995, 1996, and 1997, respectively; and a risk-free rate of 4.94 percent, 5.20 percent, and 5.26 percent for 1995, 1996, and 1997. The Company applied APB Opinion F-14 8. Stock Options (continued) No. 25 in accounting for its stock option plans, and accordingly, no compensation cost has been recognized for stock options granted. Had the Company determined compensation cost based on the fair value at the grant date under SFAS No. 123, the effect on earnings would be immaterial. 9. Income Taxes The temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to the deferred tax assets and deferred tax liabilities are as follows: 1996 1997 --------------------------------------- Deferred tax asset: Accrued vacation $ 122 $ 158 Inventory 142 186 Accrued environmental expenses 58 13 Alternative minimum tax credit 60 - Other accrued expenses 15 135 Other 10 10 --------------------------------------- Total deferred tax assets 407 502 Deferred tax liabilities: Depreciation (934) (1,074) Other (56) (25) --------------------------------------- Total deferred tax liabilities (990) (1,099) --------------------------------------- Net deferred tax liability $(583) $ (597) ======================================= The Company's income tax provision consisted of the following for the year ended December 31: 1995 1996 1997 -------------------------------------------------------- Federal: Current $ 2 $471 $2,937 Deferred 43 182 (17) -------------------------------------------------------- 45 653 2,920 State: Current - 55 355 Deferred 7 32 31 -------------------------------------------------------- $52 $740 $3,306 ======================================================== F-15 9. Income Taxes (continued) The federal corporate statutory rate is reconciled to the Company's effective income tax rate as follows:
1995 1996 1997 ----------------------------------------------------------- Federal taxes $ 30 $653 $2,920 State and local taxes, net of federal benefit benefit 9 57 258 Other 13 30 128 =========================================================== Provision for income taxes $52 $740 $3,306 ===========================================================
At December 31, 1995, the Company had a net operating loss carryforward of $789 which was fully utilized in 1996. At December 31, 1996, the Company had an alternative minimum tax credit carryforward of $60 which was fully utilized in 1997. 10. Commitments and Contingencies The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position. During January 1992, the Company entered into an agreement for the purchase of certain real estate. The agreement contained a representation and warranty of the seller that the property did not suffer from environmental contamination. Environmental contamination was subsequently identified on the property, and during 1996, the Company accrued $250 for remediation and related legal costs. During 1997, the remediation was substantially completed. The Company incurred total costs of $140 related to this matter, and $75 of the reserve was reversed in 1997. As of December 31, 1997, the Company has certain monitoring requirements related to the property, for which an accrued expense of $35 is included in accrued expenses. In 1996 and 1997, the related income effects were classified as selling, general, and administrative expense in the consolidated statements of operations. F-16 11. Quarterly Financial Data (Unaudited)
First Second Third Fourth ------------------ ----------------- ------------------ ----------------- 1996 Net sales $ 7,718 $ 7,766 $ 8,913 $10,619 Cost of sales 6,067 5,760 6,628 8,270 Net income 196 371 392 228 (1) Net income per common share .03 .06 .07 .04 Net income per common share - assuming dilution .03 .06 .07 .04 1997 Net sales $12,690 $14,383 $13,975 $14,032 Cost of sales 9,393 10,266 9,598 9,675 Net income 939 1,350 1,577 1,417 Net income per common share .16 .23 .27 .24 Net income per common share - assuming dilution .16 .23 .27 .24 (1) Includes a charge of $250 for environmental remediation - see Note 10.
12. Subsequent Event - Initial Public Offering On , 1998, the Company's Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission relating to an initial public offering of 2,300,000 shares of the Company's unissued common stock (345,000 additional shares if the underwriters' over-allotment option is exercised). In connection with the initial public offering, the Company effected a 2.29-for-one stock dividend of the Company's common stock. All references in the accompanying financial statements to the number of shares of common stock and per common share amounts have been retroactively adjusted to reflect the stock dividend. In addition, the Company's capital structure was changed to reflect 28,000,000 shares of common stock and 2,000,000 shares of preferred stock authorized. F-17 No dealer, salesperson or any other person has been authorized to give any information or to make any representation other than those contained in this Prospectus in connection with the offer contained herein, and if given or made, such information or representation must not be relied upon as having been authorized by the Company, the Selling Shareholder or any Underwriter. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, shares of Common Stock in any jurisdiction to any person to whom it is not lawful to make any such offer or solicitation in such jurisdiction or in which the person making such offer or solicitation is not qualified to do so. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the Company since the date hereof. TABLE OF CONTENTS Page ---- Prospectus Summary ........................................ Summary Consolidated Financial Information................. Risk Factors............................................... Use of Proceeds............................................ Dividend Policy............................................ Dilution................................................... Capitalization............................................. Selected Consolidated Financial Information................ Management's Discussion and Analysis of Financial Condition and Results of Operations............................................... Business................................................... Management................................................. Certain Transactions....................................... Principal Shareholders..................................... Authorized and Outstanding Capital Stock................... Shares Eligible for Future Sale............................ Underwriting............................................... Legal Matters.............................................. Experts.................................................... Relationship with Independent Accountants.................. Additional Information..................................... Index to Financial Statements.............................. F-1 Until ______________, 1998 (25 days after the date of this Prospectus), all dealers effecting transactions in the registered securities, whether or not participating in this distribution, may be required to deliver a Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. LMI AEROSPACE, INC. [LMI LOGO] 2,300,000 Shares Common Stock PROSPECTUS _______________, 1998 EVEREN Securities, Inc. George K. Baum & Company PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following table sets forth the estimated expenses in connection with the issuance and distribution of the shares offered hereby, all of which will be paid by the Registrant: SEC registration fee ................................ $ 10,924 NASD review fee...................................... 4,203 Nasdaq National Market listing fee .................. 75,000 Transfer Agent fees and expenses..................... 5,000 Legal fees and expenses.............................. 175,000 Accounting fees and expenses......................... 150,000 Printing and engraving expenses...................... 100,000 Miscellaneous........................................ 29,873 ------- Total .......................................... $550,000 ======= Item 14. Indemnification of Directors and Officers Sections 351.355(1) and (2) of The General and Business Corporation Law of the State of Missouri provide that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful, except that, inVtheNcaseuoftansaction or suit by or in the right of the corporation, the corporation may not indemnify such persons against judgments and fines and no person shall be indemnified as to any claim, issue or matter as to which such person shall have beeneadjudgedBtombe liable for negligence or misconduct in the performance of the person's duty to the corporation, unlessCandaonly to the extent that the court in which the action or suit was brought determines upon application that such person is fairly and reasonably entitled to indemnity for proper expenses. Section 351.355(3) provides that, to the extent that a director, officer, employee or agent of the corporation has been successful in the defense of any such action, suit or proceeding or in defense of any claim, issue or matter therein, the person shall be indemnified against expenses, including attorney's fees, actually and reasonably incurred by such person in connection with such action, suit or proceeding. Subsection (7) of Section 351.355 provides that a corporation may provide additional indemnification to any person indemnifiable under subsection (1) or (2) of such Section, provided such additional indemnification is (i) authorized by the corporation's articles of incorporation or an amendment thereto or (ii) by a shareholder-approved bylaw or agreement, and provided further that no person shall thereby be indemnified against conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct or which involves an accounting for profits pursuant to Section 16(b) of the Exchange Act. Article 9 of the Articles of Incorporation of the Company permits the Company to enter into agreements with its directors, officers, employees and agents to provide such indemnification as deemed appropriate. Article 9 also provides that the Company may extend to its directors and executive officers such indemnification and additional indemnification. The Company has procured and intends to maintain a policy of insurance under which the directors and officers of the Company will be insured, subject to the limits of the policy, against certain losses arising from claims made against such directors and officers by reason of any acts or omissions covered under such policy in their respective capacities as directors or officers. II-1 Item 15. Recent Sales of Unregistered Securities Explanatory Note: The following per share data does not reflect the proposed 2.29 to 1 stock dividend. On August 10, 1995, the Company issued 8,000 shares to the Ronald S. Saks Revocable Trust U/T/A dated June 21, 1991 for $50,240, 16,000 to Sanford Neuman for $100,480 and 26,400 to the Joseph Burstein Revocable Trust U/T/A dated August 20, 1983 for $165,792, all of which issuances were effected under Section 4(2) of the Securities Act. On November 13, 1995, the Company issued in the aggregate 57,375 shares to the Guaranty Trust Company of Missouri as trustee for the Profit Sharing Plan for $360,315 under Rule 701 of the Securities Act. On October 2, 1997, the Company issued 25,028 shares to the Guaranty Trust Company of Missouri as trustee for the Profit Sharing Plan for $302,088 under Rule 701 of the Securities Act. On December 31, 1997, as a result of an exercise of part of an option granted to a shareholder, the Company issued 1,000 shares to Ronald S. Saks as Voting Trustee under Voting Trust No. 1 for an aggregate exercise price of $5,810 under Section 4(2) of the Securities Act. Item 16. Exhibits and Financial Statement Schedules Exhibits See Exhibit Index on page E-1 Financial Statement Schedules See Index to Financial Statements on Page F-1 Item 17. Undertakings (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the undersigned Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-2 (b) The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreements, certificates in such denominations and registered in such names as required by the Representatives to permit prompt delivery to each purchaser. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the Offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of St. Louis and State of Missouri on the 29th day of April, 1998. LMI AEROSPACE, INC. (Registrant) By Ronald S. Saks President and Chief Executive Officer Each of the undersigned hereby appoints Ronald S. Saks and Lawrence E. Dickinson, and each of them (with full power to act alone), as attorneys and agents for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to sign and file with the Securities and Exchange Commission under the Securities Act of 1933 any and all amendments and exhibits to this Registration Statement and any and all applications, instruments and other documents to be filed with the Securities and Exchange Commission pertaining to the registration of the securities covered hereby, with full power and authority to do and perform any and all acts and things whatsoever requisite or desirable. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Ronald S. Saks Chief Executive Officer, April 29, 1998 - -------------------------- President, and Director Ronald S. Saks /s/ Joseph Burstein Chairman of the Board, April 29, 1998 - -------------------------- Secretary and Director Joseph Burstein /s/ Lawrence J. LeGrand Chief Operating Officer April 29, 1998 - -------------------------- and Director Lawrence J. LeGrand /s/ Lawrence E. Dickinson Chief Financial Officer April 29, 1998 - -------------------------- Lawrence E. Dickinson /s/ Duane Hahn Vice President, Regional April 29, 1998 - -------------------------- Manager and Director Duane Hahn /s/ Sanford S. Neuman Assistant Secretary and April 29, 1998 - -------------------------- Director Sanford S. Neuman EXHIBIT INDEX Exhibit Number Description Page 1.1 Form of Underwriting Agreement ........................ 3.1 Restated Articles of the Registrant ................... 3.2 Amended and Restated By-Laws of the Registrant ........ 4.1 Form of the Registrant's Common Stock Certificate ..... 5.1 Opinion of Gallop, Johnson & Neuman, L.C. ..... 9.1* Voting Trust Agreement dated November 11, 1996 ........ 9.2* Voting Trust Agreement No. 2 dated December 31, 1996 .. 10.1 1989 Stock Option Plan, including all amendments ...... 10.2 Employment Agreement, dated January 1, 1997, between the Registrant and Ronald S. Saks ................... 10.3 Employment Agreement, effective as of May 1, 1998, between the Registrant and Lawrence J. LeGrand ...... 10.4* Employment Agreement, dated January 1, 1998, between the Registrant and Duane E. Hahn .................... 10.5 Employment Agreement, dated January 1, 1998, between the Registrant and Phillip A. Lajeunesse ............ 10.6 Employment Agreement, dated January 1, 1998, between the Registrant and Robert T. Grah ................... 10.7 Employment Agreement, dated January 1, 1998, between the Registrant and Bradley L. Nelson ................ 10.8* Lease Agreement, dated November 25, 1991, between the Registrant and Roy R. Thoele and Madonna J. Thoele, including all amendments (Leased premises at 3000 Highway 94 North).................................... 10.9* Lease Agreement, dated June 28, 1988, between the Registrant and J & R Sales, including all amendments (Leased premises at 204 H Street)......... 10.10* Lease Agreement, dated May 6, 1997, between the Registrant and Victor Enterprises, LLC, including all amendments Leased premises at 101 Western Avenue S)............................................ 10.11* Lease Agreement, dated February 1, 1995, between the Registrant and RFS Investments (Leased premises at 2621 West Esthner Court)............................. 10.12 Profit Sharing and Savings Plan and Trust, including all amendments ...................................... 10.13 Loan Agreement between the Registrant and Magna Bank, N.A., dated August 15, 1996, including all amendments .......................................... E-1 10.14* Indenture of Trust and Loan Agreement, both with the Industrial Development Authority of St. Charles County, Missouri and dated as of September 1, 1990.... 10.15* General Terms Agreement, Special Terms Agreement and Warranty Agreements, dated ____________________, between the Registrant and Boeing Seattle............. 10.16* Master Purchase Order and General Conditions, dated ________________, between the Registrant and Boeing North American........................................ 10.17* Master Purchase Order and General Conditions, dated ________________, between the Registrant and Boeing Wichita............................................... 10.18* Master Purchase Order and General Conditions, dated ________________, between the Registrant and Northrop Grumman............................................... 16.1 Letter from KPMG Peat Marwick, LLP as to statements regarding change in certified accountants............. 21.1 List of Subsidiaries of the Registrant ................. 23.1 Consent of Gallop, Johnson & Neuman, L.C. (contained in Exhibit 5.1 hereto)..................... 23.2 Consent of Ernst & Young LLP, independent auditors .... 24 Power of Attorney (on signature page of initial filing of Form S-1)................................... 27.1 Financial Data Schedule ................................ - -------------------- * To be filed by amendment. E-2 EX-1 2 EXHIBIT 1.1 - UNDERWRITING AGREEMENT 2,300,000 Shares LMI AEROSPACE, INC. Common Stock June ____, 1998 UNDERWRITING AGREEMENT EVEREN Securities, Inc. George K. Baum & Company 2,300,000 Shares LMI AEROSPACE, INC. Common Stock ($0.02 par value) UNDERWRITING AGREEMENT June ___, 1998 EVEREN Securities, Inc. George K. Baum & Company As Representatives of the Several Underwriters c/o EVEREN Securities, Inc. 77 West Wacker Drive Chicago, Illinois 60601-1994 Ladies and Gentlemen: LMI Aerospace, Inc., an Illinois corporation (the "Company"), confirms its agreement with the several underwriters listed in Schedule I hereto (the "Underwriters"), for whom EVEREN Securities, Inc., and George K. Baum & Company (collectively, the "Representatives") have been duly authorized to act as representatives, as follows: 1. The Shares. Subject to the terms and conditions set forth in this agreement (this "Agreement"), the Company proposes to issue and sell 2,300,000 shares of the Company's Common Stock, $0.02 par value (the "Common Stock"), to the several Underwriters. Such 2,300,000 shares of Common Stock proposed to be sold by the Company are hereinafter referred to as the "Firm Shares." The Company also proposes to issue and sell to the several Underwriters up to 345,000 additional shares of Common Stock (the "Additional Shares") if requested by the Underwriters as provided in Section 3 hereof. The Firm Shares and the Additional Shares are herein collectively called the "Shares." The Shares are more fully described in the Registration Statement and Prospectus referred to below. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Registration Statement and Prospectus. 2. Registration Statement and Prospectus. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-1 (File No. 333-______), including a prospectus, relating to the Shares. The registration statement, as amended at the time when it became or becomes effective, including all financial schedules and exhibits thereto and all of the information (if any) deemed to be part of the registration statement at the time of its effectiveness pursuant to Rule 430A under the Act ("Rule 430A"), is hereinafter referred to as the "Registration Statement"; the prospectus in the form first provided to the Underwriters by the Company in connection with the offering and sale of the Shares (whether or not required to be filed pursuant to Rule 424(b) under the Act ("Rule 424(b)")) is hereinafter referred to as the "Prospectus," except that if any revised prospectus shall be provided to the Underwriters by the Company for use in connection with the offering of the Shares that differs from the Prospectus (whether or not any such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) under the Act), the term "Prospectus" shall refer to the revised prospectus from and after the time it is first provided to the Underwriters for such use; and each preliminary prospectus included in the Registration Statement prior to the time it became or becomes effective is herein referred to as a "Preliminary Prospectus." 3. Agreements to Sell and Purchase. On the basis of the representations and warranties contained in this Agreement, and subject to the terms and conditions hereof, (i) the Company agrees to issue and sell to the Underwriters 2,300,000 Firm Shares at a price of $_____ per Share (the "Purchase Price"); and (ii) each Underwriter agrees, severally and not jointly, to purchase from the Company, at the Purchase Price, the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto. On the basis of the representations and warranties contained in this Agreement, and subject to the terms and conditions hereof, (i) the Company agrees to issue and sell to the Underwriters, at the Purchase Price, up to 345,000 Additional Shares; and (ii) the Underwriters shall have the right to purchase, severally and not jointly, from time to time, up to an aggregate of 345,000 Additional Shares at the Purchase Price. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter, severally and not jointly, agrees to purchase from the Company the number of Additional Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased from the Company as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I bears to the total number of Firm Shares. The Company is advised by you that the Underwriters propose to make a public offering of their prospective portions of the Shares as soon after the Registration Statement and this Agreement become effective as in your judgment is advisable. The Company is further advised that the Underwriters propose to offer the Shares to the public initially upon the terms set forth in the Prospectus. The Company is further advised that after the initial public offering, the price to the public, the concession and the discount to dealers may be changed. For a period of 180 days from the date this Agreement becomes effective, the Company will not, without the prior written consent of EVEREN Securities, Inc. on behalf of the Underwriters (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (other than [1,389,750] shares of Common Stock and/or related options issued or issuable pursuant to the 1989 Employee Incentive Stock Option Plan described in the Prospectus, or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The Company will cause each shareholder of the Company (each a "Shareholder") to deliver to the Representatives an agreement pursuant to which such Shareholder agrees that it will not, without the prior written consent of EVEREN Securities, Inc. on behalf of the Underwriters, for a period of 180 days from the date this Agreement becomes effective, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly .or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, or (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. 4. Agreements of the Company as to Delivery and Payment. The Company agrees with each Underwriter that: (a) Delivery to the Underwriters of and payment for the Firm Shares shall be made at 10:00 A.M., New York City time, on the third full business day (such time and date being referred to as the "Closing Date") following the date of the initial public offering of the Firm Shares, at such place as you shall designate. 2 (b) Delivery to the Underwriters of and payment for any Additional Shares to be purchased by the Underwriters shall be made at such place as the Representatives shall designate, at 10:00 A.M., New York City time, on such date or dates (individually, an "Option Closing Date" and collectively, the "Option Closing Dates"), which may be the same as the Closing Date but shall in no event be earlier than the Closing Date, as shall be specified in a written notice from the Representatives to the Company of the Underwriters' determination to purchase a number, specified in said notice, of Additional Shares. Any such notice may be given at any time within 45 days after the date of this Agreement. (c) Certificates for the Shares shall be registered in such names and issued in such denominations as you shall request in writing not later than two business days prior to the Closing Date or the applicable Option Closing Date, as the case may be, and shall be made available for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date or the applicable Option Closing Date, as the case may be. Certificates in definitive form evidencing the Shares shall be delivered to you on the Closing Date or the applicable Option Closing Date, as the case may be, with any transfer taxes thereon payable upon initial issuance or the transfer thereof duly paid by the Company for the respective accounts of the Underwriters against payment of the Purchase Price therefor to the order of the Company by a federal funds check of same day funds or by wire transfer of same day funds. 5. Further Agreements of the Company. The Company covenants and agrees with each Underwriter that: (a) it will, if the Registration Statement has not heretofore become effective under the Act, file an amendment to the Registration Statement or, if necessary pursuant to Rule 430A under the Act, a post-effective amendment to the Registration Statement, as soon as practicable after the execution and delivery of this Agreement, and will use its best efforts to cause the Registration Statement or such post-effective amendment to become effective at the earliest possible time; and the Company will comply fully and in a timely manner with the applicable provisions of Rule 424(b) and Rule 430A under the Act and will provide evidence satisfactory to you of such compliance; (b) it will advise you promptly and, if requested by you, confirm such advice in writing, (i) when the Registration Statement has become effective, if and when the Prospectus is sent for filing pursuant to Rule 424 under the Act and when any post-effective amendment to the Registration Statement becomes effective, (ii) of the receipt of any comments from the Commission or any state securities commission or other regulatory authority that relate to the Registration Statement or requests by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, or of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation or, to the best knowledge of the Company, threat of any proceedings for such purpose by the Commission or any state securities commission or other regulatory authority, and (iv) of the happening of any event or information becoming known during the period referred to in paragraph (e) below that makes any statement of a material fact made in the Registration Statement untrue or that requires the making of any 3 additions to or changes in the Registration Statement (as amended or supplemented from time to time) in order to make the statements therein not misleading or that makes any statement of a material fact made in the Prospectus (as amended or supplemented from time to time) untrue or that requires the making of any additions to or changes in the Prospectus (as amended or supplemented from time to time) in order to make the statements therein, not misleading; if at any time the Commission shall issue or institute proceedings (or threaten to institute any such proceedings) to issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue or institute proceedings (or threaten to institute proceedings) to issue an order suspending the qualification or exemption of the Shares under any state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (c) it will furnish to you without charge four signed copies of the Registration Statement as first filed with the Commission and of each amendment to it, including all exhibits filed therewith, and will furnish to you and each Underwriter designated by you such number of conformed copies of the Registration Statement as so filed and of each amendment to it, without exhibits, as you may reasonably request; (d) it will not file any amendment or supplement to the Registration Statement, whether before or after the time when it becomes effective, or make any amendment or supplement to the Prospectus of which you shall not previously have been advised and provided a copy a reasonable period of time prior to the filing thereof or to which you or your counsel shall reasonably object; and to prepare and file with the Commission, promptly upon your reasonable request, any amendment to the Registration Statement or supplement to the Prospectus which may be necessary or advisable in connection with the distribution of the Shares by you, and to use its best efforts to cause the same to become promptly effective; (e) promptly after the Registration Statement becomes effective, and from time to time thereafter for such period as a prospectus is required by the Act to be delivered in connection with the sales by an underwriter or a dealer (in the opinion of your counsel), it will furnish to each Underwriter and dealer without charge as many copies of the Prospectus (and any amendment or supplement of the Prospectus) as such Underwriter or dealer may reasonably request for the purposes contemplated by the Act; the Company consents to the use of the Prospectus and any amendment or supplement thereto by any Underwriter or any dealer, both in connection with the offering or sale of the Shares and for such period of time thereafter as the Prospectus is required by the Act to be delivered in connection therewith; (f) if during the period specified in paragraph (e) above any event shall occur or information become known as a result of which in the opinion of your counsel it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in light of the circumstances existing as of the date the Prospectus is delivered to a purchaser, not misleading, or it is necessary to amend or supplement the Prospectus to comply with any law, it will forthwith prepare and, subject to paragraph 5(d) above, file with the Commission at the sole expense of the Company an appropriate amendment or supplement to the Prospectus so that the statements of any material facts in the Prospectus, as so amended and supplemented, will not in light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the Act and all other applicable law and it will furnish to the Underwriters and to such dealers as the Underwriters shall specify, at the sole expense of the Company, such number of copies thereof as such Underwriters or dealers may reasonably request; 4 (g) prior to any public offering of the Shares, it will cooperate with you and counsel for the Underwriters in connection with the registration, qualification or filing of notices of the offer and sale of the Shares by the several Underwriters and by dealers under the state securities or Blue Sky laws of such jurisdictions as you may request and to continue such qualification in effect as long as required for distribution of the Shares and to file such consents to service of process or other documents as may be necessary in order to effect such registration or qualification; (h) it will not acquire any capital stock of the Company prior to the exercise in full or termination or expiration of the option to purchase the Additional Shares nor will the Company declare or pay any dividend or make any other distribution upon the Common Stock payable to shareholders of record on a date prior to the exercise in full or termination or expiration of the option to purchase the Additional Shares, except in either case as contemplated by the Prospectus; (i) it will make generally available to its security holders and furnish to the Underwriters as soon as reasonably practicable a consolidated earnings statement covering a period of at least 12 months beginning after the "effective date" (as defined in Rule 158 under the Act) of the Registration Statement (but in no event commencing later than 90 days after such date) that will satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder; (j) during the period of five years after the date of this Agreement, it will furnish to you a copy (i) as soon as practicable after the filing thereof, of each report filed by the Company with the Commission, any securities exchange or the National Association of Securities Dealers, Inc. ("NASD"); (ii) as soon as practicable after the release thereof, of each material press release in respect of the Company; (iii) as soon as available, of each report of the Company mailed to shareholders; and (iv) as soon as available, such other publicly available information concerning the Company as you may reasonably request; (k) it will use the net proceeds received by it from the sale of the Shares being sold by it in the manner specified in the Prospectus; (l) it will cause the Shares to be listed, subject to notice of issuance or sale, on The Nasdaq National Market (the "NASDAQ"); it will comply with all registration, filing and reporting requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and the NASDAQ for so long as delivery of a Prospectus is required in connection with the offering or sale of the Shares; (m) Prior to the Closing Date and any Closing Date, as the case may be, not to issue any press release or other communication relating to the offering of the Shares, or hold any press conference with respect to the Company, any subsidiary, the financial conditions, results of operations, business, properties, assets, or liabilities of any of them, or this offering, without prior written consent of EVEREN Securities, Inc. which shall not be unreasonably withheld; and (n) it will use its best efforts to do and perform all things required to be done and performed under this Agreement by it prior to or after the Closing Date or any Option Closing Date, as the case may be, and to satisfy all conditions precedent to the delivery of the Shares. 5 6. Representations and Warranties. (a) The Company represents and warrants to each Underwriter as of the date hereof, the Closing Date and each Option Closing Date that: (i) the Company has filed with the Commission the Registration Statement, including the Prospectus, related to the Shares; the Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus Registration Statement or Prospectus relating to the proposed offering of the Shares nor instituted or threatened any proceedings for that purpose or for purpose of issuing a stop order suspending effectiveness of the Registration Statement. The Registration Statement, on the date it became or becomes effective, each Preliminary Prospectus, on the date of the filing thereof with the Commission, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission (or if not filed, on the date provided by the Company to the Underwriters in connection with the offering and sale of the Shares) and at the Closing Date and each Option Closing Date conformed or will conform with the requirements of the Act and the rules and regulations promulgated thereunder ("Rules and Regulations"); the Registration Statement, on the date it became or becomes effective, did not or will not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; each Preliminary Prospectus, on the date of the filing thereof with the Commission, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission (or if not filed, on the date provided by the Company to the Underwriters in connection with the offering and sale of the Shares) and at the Closing Date and each Option Closing Date did not and will not include an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; the foregoing shall not apply to statements in or omissions from the Preliminary Prospectus, Registration Statement and the Prospectus made or omitted in reliance upon, and in conformity with, information relating to the Underwriters furnished in writing to the Company by or on behalf of the Underwriters with your consent expressly for use therein; the Company hereby acknowledges for all purposes under this Agreement that (A) the statements set forth under the caption "Underwriting" in the Prospectus, (B) the stabilization legend on the gate-fold of the Prospectus and (C) footnotes [1 and 3] and the last paragraph of text on the cover page of the Prospectus constitute the only written information furnished to the Company by or on behalf of the Underwriters for use in the preparation of the Registration Statement or the Prospectus or any amendment or supplement thereto; (ii) the Company's subsidiaries are Leonard's Metal, Inc., a Missouri corporation ("Leonard's") and LMI Finishing, Inc., a Missouri corporation ("Finishing"), (such subsidiaries being collectively referred to herein as the "Subsidiaries"); and individually a "Subsidiary" each of the Company and its Subsidiaries has been duly incorporated and is a validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, with full corporate power and authority to own or lease its respective properties and assets and to conduct its respective business as described in the Registration Statement and the Prospectus and is duly qualified to do business in each jurisdiction in which it owns or leases real property or in which the conduct of its respective business or the ownership or leasing of property requires such qualification, except where the failure to be 6 so qualified, either individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), business, assets, prospects, net worth or results of operations of the Company and its Subsidiaries taken as a whole (a "Material Adverse Effect") and no preceding has been instituted in any such jurisdiction revoking, limiting, curtailing or seeking to revoke, limit or curtail such power and authority or qualification; (iii) the capitalization of the Company is, and upon consummation of the transactions contemplated hereby and by the Prospectus will be (as modified by the assumptions and footnotes included in the "Capitalization" section of the Prospectus), as set forth in the Registration Statement and the Prospectus under the caption "Capitalization;" all of the issued and outstanding shares of capital stock of the Company have been duly authorized and are validly issued, are fully paid and non-assessable and conform to the description thereof in the Registration Statement and the Prospectus and were not issued in violation of any preemptive rights or other rights to subscribe for or purchase securities; except as set forth in the Registration Statement and the Prospectus with respect to the Company's 1989 Employee Incentive Stock Option Plan, no options, warrants or other rights to purchase from the Company, agreements or other obligations of the Company to issue or other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Company are outstanding; the description of the Company's 1989 Employee Incentive Stock Option Plan and the other options or rights granted and exercised thereunder, as set forth in the Registration Statement and the Prospectus, accurately presents the information required to be shown under the Act with respect to such options and rights; and all of the issued and outstanding shares of capital stock of each Subsidiary have been duly and validly authorized and issued and are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, security interests, equities or claims; (iv) subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, and except as described therein, (A) neither the Company nor any Subsidiary has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions which are not in the ordinary course of business or which could result in a material reduction in the future earnings of the Company and the Subsidiaries, (B) the Company has not purchased any of its outstanding capital stock or declared, paid or otherwise made any dividend or distribution of any kind on its capital stock or otherwise and the Company and the Subsidiaries are not in default in the payment of principal or interest on any outstanding debt obligations, (C) there has not been any material adverse change in the Company's or any Subsidiary's condition (financial or otherwise), business, affairs, prospects or results of operations and (D) there has not been any material change in the capital stock or the material indebtedness of the Company or any Subsidiary; (v) the Shares to be sold by the Company pursuant to this Agreement have been duly and validly authorized and, when issued, delivered and paid for pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and will conform to the description thereof contained in the Prospectus and the issuance of the Shares will not be subject to any preemptive or similar rights; 7 (vi) the Company has the requisite corporate power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder; this Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the Company enforceable in accordance with its terms, except (i) as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general equity principles and (ii) that rights to indemnity or contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; (vii) neither the Company nor any Subsidiary (i) is in violation of its charter or by-laws (except for such violation as would not have a Material Adverse Effect), (ii) is in default in (nor has any event occurred that with notice or lapse of time, or both, would be a breach of or a default in) the performance of any obligation, agreement or condition contained in any agreement, lease, contract, permit, license, franchise agreement, mortgage, loan agreement, debenture, note, deed of trust, bond, indenture or other evidence of indebtedness or any other instrument or obligation (collectively, "Obligations and Instruments") to which it or any of its respective properties or assets is bound or affected (except for such contravention or default as would not have a Material Adverse Effect), (iii) is in violation of any statute, judgment, decree, order, rule or regulation (collectively, "Laws") applicable to it or any of its respective properties or assets that, alone, or together with other violations of Laws would result in a Material Adverse Effect, and (iv) is charged with or, to the Company's knowledge, under investigation with respect to, any material violation of any such Laws (except for such violation as would not have a Material Adverse Effect); (viii) the execution, delivery and performance of this Agreement and delivery of the Shares by the Company and compliance by the Company with all the provisions hereof and the consummation of the transactions contemplated hereby and as described in the Prospectus under the caption "Use of Proceeds" will not, alone or upon notice or the passage of time or both (A) require any consent, approval, authorization, license, certificate, permit or other order of any court, regulatory body, administrative agency or other governmental body or third party, including any party to any material Obligation or Instrument, except such as may be required under the Act and the securities or Blue Sky laws of the various states or by the NASD, (B) result in the creation or imposition of any lien, charge or encumbrance upon any of the properties or assets of the Company or any Subsidiary pursuant to the terms and provisions of any Obligation or Instrument (except for such creation or imposition as would not have a Material Adverse Effect), (C) conflict with or constitute a breach or default under any Obligation or Instrument to which the Company or any Subsidiary is a party or by which any of their properties or assets is bound, (except for such conflict, breach or default as would not have a Material Adverse Effect) and would impair materially the ability of the Company to perform its obligation hereunder or thereunder, or (D) assuming compliance with the Act and all applicable state securities or Blue Sky laws, violate or conflict with any Laws applicable to the Company or any of its properties or assets (except for such violation or conflict as would not have a Material Adverse Effect); 8 (ix) except as set forth in the Prospectus, there is no action, suit, proceeding, inquiry or investigation, governmental or otherwise before any court, arbitrator or governmental agency or body (collectively, "Proceedings") pending to which the Company or any Subsidiary is a party or to which any of its respective properties or assets are subject, that, if determined adversely, could reasonably be expected to result in a Material Adverse Effect, or that could reasonably be expected to materially and adversely affect the properties or assets of the Company and its Subsidiaries, taken as a whole, or that seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of any of the Shares to be sold hereunder or the consummation of the transactions described in the Prospectus under the caption "Use of Proceeds", and, to the best knowledge of the Company, no such Proceedings are threatened or contemplated; no action has been taken with respect to the Company, and, to the best knowledge of the Company, no statute, rule or regulation or order has been enacted, adopted or issued by any governmental agency that suspends the effectiveness of the Registration Statement, prevents or suspends the use of any Preliminary Prospectus or the Prospectus or suspends the sale of the Shares in any jurisdiction; no injunction, restraining order or order of any nature by a federal or state court of competent jurisdiction has been issued with respect to the Company that could reasonably be expected to prevent the issuance of the Shares, in any manner invalidate this Agreement, suspend the effectiveness of the Registration Statement, prevent or suspend the use of any Preliminary Prospectus or the Prospectus or suspend the sale of the Shares in any jurisdiction; and every request of the Commission, or any securities authority or agency of any jurisdiction, for additional information (to be included in the Registration Statement or the Prospectus or otherwise) has been complied with in all material respects; (x) neither the Company nor any Subsidiary has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Law") the violation of which in such case or in the aggregate would have a Material Adverse Effect; no property owned or leased by the Company or any Subsidiary is contaminated with any waste or hazardous substances the presence of which would result in a Material Adverse Effect, nor would the Company or any Subsidiary be deemed an "owner or operator" of a "facility" or "vessel" that owns, possesses, transports, generates, discharges or disposes of a "hazardous substance" as those terms are defined in ss.9601 of the Comprehensive Response Compensation and Liability Act of 1980, U.S.C. ss.9601 et seq. (except that the Company and its Subsidiaries dispose in the ordinary course of its business certain materials that may be classified as or contain "hazardous substances"; the disposal of such products (A) is in material compliance with all applicable laws as of the date hereof and (B) has not and will not result in a Material Adverse Effect); (xi) neither the Company nor any Subsidiary is in violation of any foreign, Federal, state or local law relating to discrimination in the hiring, promotion or pay of employees nor any applicable foreign, Federal or state wages and hours 9 laws, nor any provisions of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder ("ERISA") or similar foreign laws, the violation of which in each case or in the aggregate would result in a Material Adverse Effect; no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) which in each case or in the aggregate-would result in a Material Adverse Effect; neither the Company nor any Subsidiary has incurred any material liability under (i) Title IV of ERISA with respect to the termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended; (xii) each of the Company and its Subsidiaries has such permits, licenses, consents, certificates, orders, franchises and authorizations of governmental or regulatory authorities or third parties ("Permits"), including, without limitation, under any applicable Environmental Laws, as are necessary to own, lease and operate its respective properties and assets and to conduct its respective businesses, except where the failure to have any such Permit would not have a Material Adverse Effect; each of the Company and its Subsidiaries has fulfilled and performed all of its respective material obligations with respect to such Permits and, to the best knowledge of the Company, no event has occurred that allows, or after notice or lapse of time, or both would allow, revocation or termination thereof or result in any other material impairment of the rights of the holder of any such Permit; (xiii) neither the Company nor any Subsidiary is, nor intends to conduct its business in a manner in which it would become, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"); (xiv) except as otherwise set forth in the Prospectus, each of the Company and its Subsidiaries has good and marketable title, free and clear of all liens, claims, encumbrances and restrictions (except liens for taxes not yet due and payable and except for such liens, claims, encumbrances and restrictions as do not materially affect the value of such property and do not materially interfere with the use made of such property) to all property and assets described in the Registration Statement as being owned by it; all leases to which each of the Company and its Subsidiaries is a party are subsisting, valid and binding and no default of the Company or any Subsidiary has occurred or is continuing thereunder that might result in a Material Adverse Effect; and each of the Company and its Subsidiaries has peaceful and undisturbed possession under all such leases to which it is a party as lessee with such exceptions as do not materially interfere with the use made thereof by the Company or such Subsidiary; (xv) each of the Company and its Subsidiaries maintains insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries; (xvi) KPMG Peat Marwick LLP, for the years 1993 and 1994, and Ernst & Young LLP for the years 1995 and subsequent, are each an independent public accounting firm with respect to the Company and its Subsidiaries as required by the Act; 10 (xvii) the consolidated financial statements of the Company, together with related notes and schedules of the Company, included in the Registration Statement and the Prospectus (and any amendment or supplement thereto), are accurate and present fairly the consolidated financial position, results of operations and cash flows of the Company and its Subsidiaries at the indicated dates and for the indicated periods; such financial statements, schedules and related notes have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied throughout the periods involved (except as disclosed in the Prospectus) as certified by the independent accountants named in clause (xvi) above, and all adjustments necessary for a fair presentation of results for such periods have been made and any unaudited financial statements have been prepared on the basis described in the Prospectus; and the summary and selected financial and operating data included in the Registration Statement and the Prospectus presents fairly the information shown therein and have been compiled on the basis described in the Prospectus; and the other financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto) is, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company; (xviii) no holder of any security of the Company has any right to require inclusion of any such security in the Registration Statement; there are no preemptive rights with respect to the Offering being made by the Prospectus; (xix) except as disclosed in the Registration Statement and the Prospectus, no labor dispute with the employees of the Company or any Subsidiary exists, or to the best knowledge of the Company, is imminent, that could result in a Material Adverse Effect; and neither the Company nor any Subsidiary has received notice of any existing or imminent labor disturbance by the employees of any of its principle suppliers, customers, manufacturers or contractors that could result in any Material Adverse Effect; (xx) the Company has filed or caused to be filed, or has properly filed extensions for, all foreign, federal, state and local income, value added and franchise tax returns and has paid all taxes and assessments shown thereon as due, except for such taxes and assessments as are disclosed or adequately reserved against and that are being contested in good faith by appropriate proceedings, promptly instituted and diligently conducted; all material tax liabilities are adequately provided for on the books of the Company and its Subsidiaries, and there is no material tax deficiency that has been asserted against the Company or any Subsidiary that is not so provided for; (xxi) the Company and its Subsidiaries own or possess, or can readily acquire on reasonable terms, the patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names (collectively, "Patents and Proprietary Rights") currently employed by them in connection with the businesses they now 11 operate except where the failure to so own, possess or acquire such Patents and Proprietary Rights would not have a Material Adverse Effect; and neither the Company nor any Subsidiary has received any notice and is not otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Patent or Proprietary Rights that, if the subject of any unfavorable decision, ruling or finding, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; and neither the Company nor any Subsidiary is obligated or under any liability whatsoever to pay any royalty fee or other similar payment in respect of any Patents and Proprietary Rights; (xxii) neither the Company nor any of the Company's executive officers, directors or affiliates (as defined under the Act) has taken or will take, directly or indirectly, any action designed to or which has constituted or that might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (xxiii) each of the Company and its Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's authorization, and (iv) the recorded accountability for inventory is compared with the existing inventory at reasonable intervals and appropriate action is taken with respect to any differences; (xxiv) there is no (i) material contract, document, agreement or transaction to which the Company or any Subsidiary is a party, or that involved or involves the Company or any Subsidiary or any of its respective properties or assets or (ii) local or governmental proceeding pending or, to the best knowledge of the Company, threatened, to which the Company or any Subsidiary is a party or to which any of their respective property is subject that is required to be described in or filed as an exhibit to the Registration Statement or the Prospectus by the Act or the Rules and Regulations that have not been so described or filed; (xxv) other than as contemplated in this Agreement, the Company has not incurred any liability for any finder's or broker's fee or agent's commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby; (xxvi) except as disclosed in the Prospectus, to the best of its knowledge, the Company owns and has the unrestricted right to use all trade secrets, including know-how, customer lists, inventions, designs, processes, computer programs and technical data necessary to manufacture, operate and sell all products and services sold or developed and proposed to be sold by it as described in the Prospectus, free and clear of any rights, liens and claims of others. To the best of its knowledge, the Company is not using any material confidential information or trade secrets of any former employer of any of its past or present employees; 12 (xxvii) the Company has not, since the end of its last fiscal year for which certified financial statements of the Company were included in the Prospectus: (a) failed to pay any dividend or sinking fund installment on preferred stock; or (b) defaulted (i) on any installment or installments of indebtedness for borrowed money, or (ii) on any rental on one or more long term leases which defaults in the aggregate are material to the financial position of the Company; and (xxviii) the Company's Common Stock, including the Shares, is eligible for trading on the NASDAQ National Market System. (b) Any certificate signed by any officer of the Company and delivered to you or to counsel for the Underwriters shall be deemed a representation and warranty made by the Company to each Underwriter as to the matters covered thereby and shall be deemed incorporated herein in its entirety and shall be effective as if such representation and warranty were made herein. 7. Indemnification. (a) The Company agrees to indemnify and hold harmless each of the Underwriters and each person, if any, who controls each of the Underwriters within the meaning of Section 15 of the Act or Section 20 of the Exchange Act (the "indemnified parties") from and against any and all losses, claims, damages, liabilities and judgments caused by, arising out of, related to or based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A, if applicable, or the Prospectus or any Preliminary Prospectus or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or judgment arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through EVEREN Securities, Inc. expressly for use therein. The Company acknowledges that the only written information furnished to the Company by or on behalf of any Underwriter for use in such documents is set forth in Sections 6(a)(i) above. (b) In case any action shall be brought against any of the indemnified parties, based upon any Preliminary Prospectus, the Registration Statement or the Prospectus or any amendment or supplement thereto and with respect to which indemnity may be sought against the Company, such indemnified party shall promptly notify the Company in writing (but the failure so to notify shall not relieve the Company of any liability that they may otherwise have to such indemnified parties under this Section 7 (although the Company's liability to an indemnified party may be reduced on a monetary basis to the extent, but only to the extent, they have been prejudiced by such failure on the part of such indemnified party)) and the Company shall promptly assume the defense thereof, including the employment of counsel satisfactory to such indemnified party and payment of all fees and expenses. The indemnified parties shall each have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment of such counsel shall have been specifically authorized by the Company, (ii) the Company shall have failed to assume promptly the defense or to employ counsel reasonably satisfactory to such indemnified party or (iii) the named 13 parties to any such action (including any impleaded parties) include both the indemnified party and the Company and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to one or more of the indemnified parties that are different from or additional to those available to the Company (in which case the Company shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the Company shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for the indemnified parties, which firm shall be designated in writing by EVEREN Securities, Inc., and that all such fees and expenses shall be reimbursed promptly as they are incurred). The Company shall not be liable for any settlement of any such action effected without its written consent, which consent shall not be unreasonably withheld, but if settled with the written consent of the Company, the Company agrees to indemnify and hold harmless the indemnified parties from and against any and all loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 10 business days after delivery by registered or certified mail to the proper address for notice to such indemnifying party of the aforesaid request (whether or not such delivery is accepted) and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional and complete release in writing of such indemnified party from any and all liability on claims that are the subject matter of such proceeding, which such settlement shall be in form and substance satisfactory to the indemnified party. The indemnification provided in this Section 7 will be in addition to any liability which the Company may otherwise have. (c) The Underwriters agree, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Underwriters but only with reference to information stated in or omitted from the Registration Statement, the Prospectus or any Preliminary Prospectus in reliance upon, and in conformity with, information relating to the Underwriters furnished in writing to the Company by or on behalf of the Underwriters with your consent expressly for use therein. In case any action shall be brought against the Company, any of the Company's directors, any such officers or any person controlling the Company based on the Registration Statement, the Prospectus or any Preliminary Prospectus and in respect of which indemnity may be sought against the Underwriters, the Underwriters shall have the rights and duties given to the Company by Section 7(b) hereof (except that if the Company shall have assumed the defense thereof, such Underwriter shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such Underwriter), and the Company, its directors, any such officers and any person controlling the Company shall have the rights and duties given to the "indemnified parties" by Section 7(b) hereof. (d) To provide for just and equitable contribution, if an indemnified party makes a claim for indemnification pursuant to Section 7 (subject to the limitations hereof) but it is found in a final judicial determination, not subject to further appeal, that such 14 indemnification may not be enforced in such case, even though this Agreement expressly provides for indemnification in such case, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares or (ii) if the allocation provided in clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering and sale of the Shares (before deducting expenses) received by the Company on the one hand, and the total underwriting discounts and commissions received by the Underwriters on the other, bears to the total price to the public of the Shares, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or the alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise paid or been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligation in this Section 7(d) to contribute are several in proportion to the respective amount of Shares purchased hereunder by each Underwriter and not joint. 8. Conditions to the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Shares on the Closing Date and the Additional Shares on any Option Closing Date are subject to the fulfillment of each of the following conditions on or prior to the Closing Date and each Option Closing Date: (a) All the representations and warranties of the Company contained in this Agreement and in any certificate delivered hereunder shall be true and correct on the Closing Date and each Option Closing Date with the same force and effect as if made on and as of the Closing Date or Option Closing Date, as applicable. The Company shall not have failed at or prior to the Closing Date or Option Closing Date, as applicable, to perform or comply in all respects with any of the agreements herein contained and required to be performed or complied with by the Company at or prior to the Closing Date. 15 (b) If the Registration Statement is not effective at the time of the execution and delivery of this Agreement, the Registration Statement shall have become effective (or, if a post-effective amendment is required to be filed pursuant to Rule 430A under the Act, such post-effective amendment shall have become effective) not later than 9:30 A.M., New York City time, on the date of this Agreement or such later time as you may approve in writing or, if the Registration Statement has been declared effective prior to the execution and delivery hereof in reliance on Rule 430A, the Prospectus shall have been filed as required hereby, if necessary; and at the Closing Date and each applicable Option Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been commenced or shall be pending before or, to the best knowledge of the Underwriters or the Company, threatened by the Commission; every request for additional information on the part of the Commission shall have been complied with to the Underwriters' satisfaction. (c) The legality and sufficiency of the authorization, issuance and sale or transfer and sale of the Shares hereunder, the validity and form of the certificates representing the Shares, the execution and delivery of this Agreement and all corporate proceedings and other legal matters incident thereto, and the form of the Registration Statement and the Prospectus (except financial statements) shall have been approved by counsel for the Underwriters exercising reasonable judgment, and no Underwriter shall have advised the Company, based on information received after the date hereof, that the Registration Statement or the Prospectus, or any amendment or supplement thereto, contains an untrue statement of material fact, or omits to state a fact that in your opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading. (d) Subsequent to the execution and delivery of this Agreement, there shall not have occurred any material change, or any material development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, business, prospects or properties of the Company and its Subsidiaries that, in the judgment of the Representatives, makes it impractical or inadvisable to proceed with the public offering or purchase of the Shares as contemplated hereby. (e) You shall have received an agreement from all of the executive officers and directors of the Company and all of the other Shareholders, who in the aggregate hold 100% of the shares of Common Stock of the Company outstanding immediately prior to the completion of the Offering of the Shares, whereby each such Person agrees to be bound by an agreement to the same effect as the covenants set forth in the last paragraph of Section 3 of this Agreement (the "Lock-Up Agreements"). (g) You shall have received an opinion (satisfactory to you and your counsel) dated the Closing Date or the Option Closing Date, as the case may be, of Gallop, Johnson & Neuman, L.C., counsel for the Company, to the effect that: (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Missouri with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and the Company has been duly qualified to do business as a foreign corporation under the corporation law of, and is in good standing as such in, every jurisdiction where the ownership or leasing of property, or the conduct of its business requires such qualification except where the failure so to qualify would not have a Material Adverse Effect and, to the best of such counsel's knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting, curtailing or seeking to revoke, limit or curtail, such power and authority or qualification; 16 (ii) each Subsidiary has been duly incorporated and is validly existing as a corporation in good standing under laws of the jurisdiction of its incorporation with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and each Subsidiary has been duly qualified to do business as a foreign corporation under the corporation law of, and is in good standing as such in, every jurisdiction where the ownership or leasing of property, or the conduct of its business requires such qualification except where the failure so to qualify would not have a Material Adverse Effect and, to the best of such counsel's knowledge, no proceeding has been instituted in any such jurisdiction revoking, limiting, curtailing or seeking to revoke, limit or curtail, such power and authority or qualification; (iii) the Company has all necessary corporate power and authority to enter into and perform this Agreement, and the performance of the Company's obligations hereunder has been duly authorized by all necessary corporate action; this Agreement has been duly executed and delivered by and on behalf of the Company, and, assuming due authorization, execution and delivery of this Agreement by the Underwriters, constitutes a legal, valid and binding agreement of the Company enforceable in accordance with its terms, except (i) as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general equity principles and (ii) that rights to indemnity or contribution hereunder may be limited by Federal or state securities laws or the public policy underlying such laws; no approval, consent, order, authorization, designation, license, certificate, permit, declaration or filing by or with any regulatory, administrative or other governmental body or, to the best of such counsel's knowledge, third party (including any party to any material Obligation or Instrument), is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated herein (other than as may be required by the NASD or as required by state securities or Blue Sky laws, as to which such counsel need express no opinion) except such as have been obtained or made, with counsel specifying the same; (iv) all of the issued and outstanding capital stock of each Subsidiary has been duly authorized, validly issued and is fully paid and nonassessable, and the Company owns directly or indirectly all of the outstanding capital stock of each Subsidiary; all of the issued shares of each Subsidiary have been duly and validly authorized and issued, and except as set forth in the Registration Statement, such shares are owned free and clear of any claims, liens, encumbrances, equities or security interests; (v) the Company has the capitalization set forth in the Prospectus (except for subsequent issuances, if any, pursuant to stock options or other rights referred to in the Prospectus), and all of the issued shares of capital stock of the Company conform as to legal matters to the description thereof in the Registration Statement and Prospectus; to the best of such counsel's knowledge, except as set forth in the Registration Statement, no options, warrants, preemptive rights or other rights to convert any obligation into, or exchange any securities for or to subscribe for or to purchase shares of capital stock or ownership interests in the Company are outstanding; 17 (vi) the issued and outstanding capital stock of the Company has been duly authorized and validly issued and is fully paid and nonassessable and was not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities; (vii) to the best of such counsel's knowledge, neither the filing of the Registration Statement or any amendment thereto nor the offer and sale of the Shares to the Underwriters as contemplated by this Agreement gives rise to any rights, nor do any rights exist, for or relating to the registration under the Act of any securities of the Company, except as otherwise disclosed in this Agreement or the Prospectus; (viii) the Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registration Statement has been issued and, to the best of such counsel's knowledge, no proceedings for that purpose are pending or have been initiated or threatened by the Commission; and the Registration Statement (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A, if applicable), the Prospectus and each amendment or supplement thereto, as of their effective or issue dates, (except for the financial statements and other statistical or financial data included therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Act and the Rules and Regulations; (ix) the statements made in the Registration Statement under the captions "Capitalization," "Description of Capital Stock,", "Business-Customers," "Management-Employment Agreements with Executive Officers," "Management-Stock Option Plans," "Management-Limitations on Directors' and Officers' Liability," "Management-Anti-Takeover Provisions," "Certain Transactions," "Shares Eligible for Future Sale" and Items 15 and 17 of Part II of the Registration Statement insofar as they constitute summaries of documents referred to therein, proceedings or matters of law are accurate summaries thereof; (x) to the best of such counsel's knowledge, there are no Proceedings required to be described in the Prospectus that are not described, or of any contracts or documents of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that were not described and filed as required; (xi) the certificates for the Shares to be delivered hereunder are in due and proper form, and when duly countersigned by the Company's transfer agent and delivered to you or upon your order against payment of the agreed consideration therefor in accordance with the provisions of this Agreement, the Shares sold by the Company hereunder and represented thereby will be duly authorized and validly issued, fully paid and non-assessable and free and clear of all liens and restrictions on transfer; the Shares and Common Stock conform in all material respects as to legal matters to the description thereof contained in the Prospectus; 18 (xii) except as disclosed in the Prospectus, the execution and performance of this Agreement will not result in the creation of any lien, charge or encumbrance upon any of the properties or assets of the Company or any Subsidiary pursuant to the terms and provisions of, or conflict with, or contravene any of the provisions of, or result in a default under, any agreement, franchise, license, indenture, mortgage, deed of trust, or other instrument described in the Registration Statement or filed as an exhibit thereto, of the Company or any of its Subsidiaries or by which the property of any of them is bound and which contravention or default would have a Material Adverse Effect; or violate any of the provisions of the charter or bylaws of the Company or any of its Subsidiaries or, to the best of such counsel's knowledge, violate any statute, order, rule or regulation of any regulatory or governmental body having jurisdiction over the Company and its Subsidiaries and which violation would have a Material Adverse Effect; (xiii) to the best of such counsel's knowledge, all offers and sales of the Company's capital stock since June ___, 1995 were at all relevant times exempt from the registration requirements of the Act and were duly registered or the subject of an available exemption from the registration requirements of the applicable state securities or blue sky laws; and (xiv) neither the Company, nor any Subsidiary is an "investment company" subject to registration or regulation under the Investment Company Act or a company controlled by an "investment company" subject to such registration or regulation. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company and representatives of the Underwriters and their counsel, at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or unfairness of the statements contained in the Registration Statement or the Prospectus and has not made any independent verification thereof, on the basis of the foregoing (relying as to factual matters and materiality upon the statements of officers and other representatives of the Company), (i) no facts have come to such counsel's attention that lead such counsel to believe that either the Registration Statement or any amendment (including any post-effective amendment) thereto at the time such Registration Statement or amendment became effective, contained an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus or any amendment or supplement thereto as of their respective dates and as of the Closing Date and any applicable Option Closing Date contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading and (ii) the Registration Statement and Prospectus (and any supplement or amendment thereto) comply as to form in all material respects with the 19 Act and the Exchange Act, except that such counsel need express no opinion with respect to the financial statements, schedules and other financial data included in the Registration Statement or the Prospectus. The opinion of Gallop, Johnson and Neuman, L.C. described above shall be rendered to you at the request of the Company and shall so state therein. (h) You shall have received an opinion of Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., counsel for the Underwriters, dated the Closing Date or the Option Closing Date, as the case may be, in form and substance reasonably satisfactory to you. (i) You shall have received, in connection with the execution of this Agreement and on the Closing Date and each Option Closing Date, a "cold comfort" letter from Ernst and Young LLP, dated as of each such date in form and substance satisfactory to you with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus. (j) You shall have received a consent from KPMG Peat Marwick LLP in form and substance satisfactory to you. (k) You shall have received from the Company a certificate, signed by Ronald S. Saks and Lawrence E. Dickenson in their capacities as Chief Executive Officer and Chief Financial Officer of the Company, respectively, addressed to the Underwriters and dated the Closing Date or Option Closing Date, as applicable, to the effect that: (i) such officer has carefully examined the Registration Statement and the Prospectus and all amendments or supplements thereto and, in such officer's opinion, such Registration Statement or such amendment as of its effective date and as of the Closing Date, and the Prospectus or such supplement as of its date and as of the Closing Date, did not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading and, in such officer's opinion, since the effective date of the Registration Statement, no event has occurred or information become known that should have been set forth in an amendment to the Registration Statement or a supplement to the Prospectus which has not been so set forth in such amendment or supplement; (ii) the representations and warranties of the Company set forth in Section 6(a) of this Agreement are true and correct as of the date of this Agreement and as of the Closing Date or the Option Closing Date, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date; and (iii) the Commission has not issued an order preventing or suspending the use of the Prospectus or any preliminary prospectus filed as a part of the Registration Statement or any amendment thereto; no stop order suspending the effectiveness of the Registration Statement has been issued; and, to the best knowledge of the respective signers, no proceedings for that purpose have been instituted or are pending or contemplated under the Act. 20 The delivery of the certificate provided for in this subparagraph shall be and constitute a representation and warranty of the Company as to the facts required in the immediately foregoing clauses (ii) and (iii) of this subparagraph to be set forth in said certificate. (l) You and Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C., counsel for the Underwriters, shall have received on or before the Closing Date or the Option Closing Date, as the case may be, such further documents, opinions, certificates and schedules or instruments relating to the business, corporate, legal and financial affairs of the Company as you and they shall have reasonably requested from the Company. 9. Effective Date of Agreement, Termination and Defaults. This Agreement shall become effective upon, and shall not be deemed delivered until, the later of (i) execution of this Agreement and (ii) when notification of the effectiveness of the Registration Statement has been released by the Commission. This Agreement may be terminated at any time prior to the Closing Date and any exercise of the option to purchase Additional Shares may be canceled at any time prior to any Option Closing Date by the Underwriters by written notice to the Company if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any adverse change or development involving a prospective adverse change in the condition, financial or otherwise, of the Company or any Subsidiary or the condition (financial or otherwise), earnings, affairs, management, business or prospects of the Company or any Subsidiary, whether or not arising in the ordinary course of business, that would, in the Representatives' sole judgment, make it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus, (ii) any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic conditions or in the financial markets of the United States that, in the Representatives' judgment, is material and adverse and would, in the Representatives' judgment, make it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus, (iii) the suspension or material limitation of trading in securities on the New York Stock Exchange, the American Stock Exchange or the NASDAQ or limitation on prices for securities on any such exchange or the NASDAQ, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of any court or other governmental authority that in the Representatives' opinion materially and adversely affects, or will materially and adversely affect, the business or operations of the Company or any Subsidiary, (v) the declaration of a banking moratorium by either federal or New York, Missouri or Illinois state authorities, (vi) the taking of any action by any Federal, state or local government or agency in respect of its monetary or fiscal affairs that in the Representatives' opinion has a material adverse effect on the financial markets in the United States or (vii) there shall be any change in financial markets or in political, economic or financial conditions which, in the opinion of the Representatives, either renders it impracticable or inadvisable to proceed with the offering and sale of the Shares on the terms set forth in the Prospectus or materially adversely affects the market for the Shares. If on the Closing Date or on any Option Closing Date, as the case may be, any of the Underwriters shall fail or refuse to purchase the Firm Shares or Additional Shares, as the case may be, which it has agreed to purchase hereunder on such date, and the aggregate number of Firm Shares or Additional Shares, as the case may be, that such defaulting Underwriter or Underwriters agreed but failed or refused to purchase does not exceed, in the aggregate, 10% of the total number of Shares that all Underwriters are obligated to purchase on such date, each non-defaulting Underwriter shall be obligated, in the proportion which the number of Firm Shares set forth opposite its name in Schedule I hereto bears to the total number of Firm Shares or Additional Shares, as the case may be, that all the non-defaulting Underwriters have agreed to purchase, or in such other proportion as you may specify, to purchase the Firm Shares or Additional Shares, as the case may be, that such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date. If, on the Closing Date or on the Option Closing Date, as the case may be, any of the Underwriters shall fail or refuse to purchase the Firm Shares or Additional Shares, as the case may be, in an amount that exceeds, in the aggregate, 10% of the total number of the Shares, and arrangements satisfactory to you and the Company for the purchase of such Shares are not made within 48 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Underwriters 21 and the Company, except as otherwise provided in this Section 9. In any such case that does not result in termination of this Agreement, either you or the Company may postpone the Closing Date or the Option Closing Date, as the case may be, for not longer than seven (7) days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve a defaulting Underwriter from liability in respect of any default of any such Underwriter under this Agreement. 10. Costs and Expenses. Whether or not the transactions contemplated hereby are consummated or this Agreement becomes effective or is terminated, the Company shall pay all costs, fees, expenses and taxes incident to the performance by the Company of its obligations hereunder, including (i) the preparation, printing, filing and distribution under the Act of the Registration Statement (including financial statements and exhibits), each preliminary Prospectus and all amendments and supplements to any of them prior to or during the period specified in paragraph (e) above of Section 5, (ii) the word processing, reproduction and distribution of this Agreement, the Master Agreement among Underwriters and the Selected Dealer Agreement and any supplements or amendments thereto in connection with the offering of the Shares (including in each case any disbursements of counsel for the Underwriters relating to the preparation and delivery of such documents but not including any legal fees of counsel to the Underwriters), (iii) the filing of notices for the offer and sale of the Shares under the securities or Blue Sky laws of the several states, including in each case the disbursements of counsel for the Underwriters but not including legal fees of counsel to the Underwriters, relating to filings, (iv) filings and clearance with the NASD in connection with the offering and sale of the Shares, (v) the listing of the Shares on the NASDAQ National Market ("NASDAQ"), (vi) furnishing such copies of the Registration Statement, each Preliminary Prospectus, the Prospectus and all amendments and supplements thereto as may be requested for use in connection with the offering or sale of the Shares by the Underwriters or by dealers to whom the Shares may be sold, (vii) obtaining the opinion to be provided pursuant to Sections 8(g) of this Agreement and (viii) the performance by the Company of all of its other obligations under this Agreement. If the sale of the Shares provided for herein is not consummated because the Underwriters exercise their right to terminate this Agreement pursuant to Section 9 hereof and any of the following have occurred during the term of this Agreement: (a) there has been any adverse change in the condition (financial or otherwise), earnings, affairs, management, business or prospects of the Company or any Subsidiary, or (b) the Company shall refuse or be unable to comply with any provision hereof (except as the result of a breach of this Agreement by the Underwriters), the Company will promptly reimburse the Underwriters upon demand for all reasonable out-of-pocket expenses (including the fees and disbursements of counsel for the Underwriters) that shall have been incurred by the Underwriters in connection with the proposed purchase and sale of Shares. 11. Effectiveness of Registration Statement. You and the Company will use your and its best efforts to cause the Registration Statement to become effective, if it has not yet become effective, and to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement and, if such stop order be issued, to obtain as soon as possible the lifting thereof. 12. Miscellaneous. All communications hereunder will be in writing and, if sent to the Underwriters will be mailed, delivered or telegraphed and confirmed to you c/o EVEREN Securities, Inc., 77 West Wacker Drive, Chicago, Illinois 60601-1994, Attention: Syndicate Department, with a copy to Much Shelist Freed Denenberg Ament Bell & Rubenstein P.C., 200 North LaSalle Street, Suite 2100, Chicago, Illinois 60601, Attention: Steven Schwartz; and if sent to the Company will be mailed, delivered or telegraphed and confirmed to the Company at its corporate headquarters with a copy to Gallop, Johnson & Neuman, L.C., 101 South Hanley Road, 16th Floor, St. Louis, Missouri 63105, Attention: Douglas J. Bates, or in any case to such other address as the person to be notified may have requested in writing. The indemnity and contribution provisions and other agreements, representations and warranties of the Company, and the Company's shareholders, officers and directors set forth in or made pursuant to this Agreement shall remain operative and in full force and effect, and will survive delivery of and payment for the Shares, regardless of (i) any investigation, or statement as to the results thereof, made by or on behalf of any of the Underwriters or by or on 22 behalf of the Company or the shareholders, officers or directors of the Company or any controlling person of the Company, (ii) acceptance of the Shares and payment therefor hereunder or (iii) termination of this Agreement. Except as otherwise provided, this Agreement has been and is made solely for the benefit of, and shall be binding upon, the Company, the Underwriters, any indemnified person referred to herein and their respective successors and assigns, all as and to the extent provided in this Agreement, and no other person shall acquire or have any right under or by virtue of this Agreement. The terms "successors and assigns" shall not include a purchaser of any of the Shares from any of the several Underwriters merely because of such purchase. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. This Agreement may be signed in various counterparts which together shall constitute one and the same instrument. Please confirm that the foregoing correctly sets forth the agreement among the Company and the several Underwriters, including you. Very truly yours, LMI AEROSPACE, INC. a Missouri corporation By:_____________________________ The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. EVEREN SECURITIES, INC. GEORGE K. BAUM & COMPANY Acting as Representatives of the several Underwriters named in Schedule I hereto By: EVEREN Securities, Inc. By:________________________________ Name:______________________________ Title:_____________________________ 23 SCHEDULE I Underwriters Number of Firm Shares Name to be Purchased ---- --------------- EVEREN Securities, Inc. George K. Baum & Company ----------- Total =========== EX-3.(I) 3 EXHIBIT 3-1 ARTICLES OF INCORPORATION RESTATED ARTICLES OF INCORPORATION OF LMI AEROSPACE, INC. The undersigned, the duly authorized President and Assistant Secretary of LMI Aerospace, Inc. (f/k/a Leonard's Metal, Inc.) (the "Corporation"), do hereby restate the following Articles of Incorporation of the Corporation, which restated Articles of Incorporation correctly set forth without change the corresponding provisions of the Articles of Incorporation of the Corporation as heretofore amended, which restated Articles of Incorporation were duly adopted and approved by the Shareholders and Directors of the Corporation on April 22, 1998, and which restated Articles of Incorporation supersede the original Articles of Incorporation of the Corporation and all amendments thereto: ARTICLE ONE The name of the Corporation shall hereinafter be: LMI AEROSPACE, INC. ARTICLE TWO The address of its registered office in the State of Missouri is 101 South Hanley Road, Suite 1600, St. Louis, Missouri 63105. The name of its registered agent at such address is Sanford S. Neuman. ARTICLE THREE (a) The aggregate number of shares of capital stock which the Corporation shall have authority to issue is Thirty Million (30,000,000), each having a par value of Two Cents ($0.02) per share. Of such authorized shares, Twenty-Eight Million (28,000,000) shares are hereby classified and designated as Common Stock and Two Million (2,000,000) shares are hereby classified and designated as Preferred Stock. (b) The voting power of the Corporation shall be vested in the holders of the Common Stock, who shall be entitled to one vote per share of Common Stock on all matters to be voted on by the stockholders (including the election of directors), except to the extent voting rights are established for holders of Preferred Stock by the Board of Directors in accordance with part (c) of this Article Three. (c) The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article Three, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Missouri, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. (d) The authority of the Board of Directors with respect to the establishment of each series of Preferred Stock shall include, but not be limited to, determination of the following: (i) the number of shares constituting that series and the distinctive designation of that series; (ii) the dividend rate on the shares of that series, whether dividends shall be cumulative and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) whether that series shall have voting rights, in addition to the voting rights provided by law, and if so, the terms of such voting rights; (iv) whether that series shall have conversion privileges and, if so, the terms and conditions of such conversion privileges, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (v) whether or not the shares of that series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) whether that series shall have a sinking fund for the redemption or purchase of shares of that series and, if so, the terms and amount of such sinking fund; (vii) the rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (viii) any other relative rights, preferences and limitations of that series. (e) There shall be no right to cumulative voting in the election of directors. (f) Except as otherwise required by the General and Business Corporation Law of the State of Missouri, whenever the holders of shares of stock of the Corporation shall be entitled to vote as a class at a meeting at which a quorum of the class is present with respect to any matter, the affirmative vote of a majority of the shares of such class voted in person or by proxy at the meeting shall be required to constitute the act of such class. 2 2 ARTICLE FOUR No holder of any share of stock or other security of the Corporation, either now or hereafter authorized or issued, shall have any preferential or preemptive right to acquire additional shares of stock or any other security of the Corporation other than such, if any, as the Board of Directors may in its discretion from time to time determine pursuant to the authority conferred by these Articles of Incorporation of the Corporation. ARTICLE FIVE The name and place of residence of the each incorporator is as follows: Sanford S. Neuman 848 South Meramec St. Louis, Missouri 63105 ARTICLE SIX (a) The number of directors constituting the entire Board shall be not less than three (3) nor more than nine (9) persons, as fixed from time to time by vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director then in office and, provided further, that the number of directors constituting the entire Board shall be five (5) until otherwise fixed by a majority of the entire Board. (b) In furtherance and not in limitation of the powers granted by statute, the board of directors is authorized to adopt, alter or repeal the bylaws of the Corporation. ARTICLE SEVEN The duration of the Corporation is perpetual. ARTICLE EIGHT The Corporation is formed for the following purposes and shall have the following powers: To have and exercise all the powers now or hereafter conferred by the laws of the State of Missouri upon corporations organized under the laws of said State, and any and all acts amendatory thereof and supplemental thereto; 3 and to do any and all things necessary and proper in carrying out or accomplishing any and all of the above-mentioned purposes or any part thereof, not inconsistent with the Constitution and laws of the State of Missouri or these Articles of Incorporation. ARTICLE NINE The Corporation shall have the power, without further action by the shareholders of the Corporation, to give any further indemnity in addition to the indemnity authorized or contemplated under the bylaws of this Corporation to any person who is or was a director, officer, employee or agent, or to any person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or to enter into agreements with any of such persons providing such rights of indemnification as the Corporation may deem appropriate; provided that no such indemnity shall indemnify any person from or on account of such person's conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. Any agreement entered into by the Corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the basis that different or similar agreements may have been or may thereafter be entered into with other directors. Nothing in this Article Nine shall be deemed to limit the power of the Corporation under Section Five of Article VIII of the bylaws of this Corporation to enact bylaws or enter into agreements without shareholder adoption of the same. 4 IN WITNESS WHEREOF, I have hereunto set my hand as of this _____ day of April, 1998. LMI AEROSPACE, INC. /s/ Ronald S. Saks By: Ronald S. Saks, President ATTEST: /s/ Sanford S. Neuman By: Sanford S. Neuman, Assistant Secretary STATE OF MISSOURI ) ) ss. COUNTY OF ST. LOUIS ) I, ________________________, a notary public do hereby certify that on this _____ day of April, 1998, personally appeared before me Ronald S. Saks, who, being by me first sworn, declared that he is the President of LMI AEROSPACE, INC., that he signed the foregoing Amended and Restated Articles of Incorporation as President of the Corporation, and that the statements therein contained are true and correct to the best of his personal knowledge, information and belief. __________________________________ Notary Public My commission expires:________________ EX-3.(II) 4 EXHIBIT 3.2 BYLAWS AMENDED AND RESTATED BY-LAWS OF LMI AEROSPACE, INC. * * * * * ARTICLE I OFFICES Section 1. The registered office of the corporation shall be in the City of St. Louis, State of Missouri. Section 2. The corporation may also have offices at such other places, both within and without the State of Missouri, as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. All meetings of the shareholders for the election of directors shall be held at such place, either within or without the State of Missouri, as may be designated from time to time by the Board of Directors and stated in the notice of the meeting. Meetings of shareholders for any other purpose may be held at such time and place, within or without the State of Missouri, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of shareholders, commencing with the year 1998, shall be held on the second Tuesday day of if not a legal holiday, and if a legal holiday, then on the next business day following, at 9:00 a.m., or at such other date and time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which the shareholders shall elect one or more directors and transact such other business as may properly be brought before the meeting. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the secretary of the corporation. To be timely, a shareholder's notice must be received at the principal executive offices of the corporation not less than 120 days nor more than 150 days prior to the date of the notice to shareholders of the previous year's annual meeting. A shareholder's notice to the secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting: (a) a brief description of the proposal or business desired to be brought before the annual meeting and the reasons for presenting the proposal or conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation's books, of the shareholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the shareholder, and (d) any material interest of the shareholder in such proposal or business. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2. The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2, and if he should so determine and declare to the meeting, any such business not properly brought before the meeting shall not be transacted. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each shareholder entitled to vote at such meeting not less than ten (10) nor more than seventy (70) days before the date of the meeting. Section 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at the registered office of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. Section 5. Special meetings of the shareholders entitled to vote, for any purpose or purposes, may be called only by the president or the Board of Directors. Section 6. Written notice of a special meeting of the shareholders entitled to vote, stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than seventy (70) days before the date of the meeting to each shareholder entitled to vote at the meeting. Section 7. Business transacted at a special meeting of the shareholders entitled to vote shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the issued and outstanding stock which is entitled to vote, whether present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business. If, however, such a quorum shall not be present or represented at a meeting, except as otherwise provided in Article VI, Section 5, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting in accordance with the original notice thereof. If the adjournment is for more than ninety (90) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting in accordance with Section 3 and/or Section 6 of this Article II. - 2 - Section 9. When a quorum is present at any meeting, the affirmative vote of a majority of the votes cast shall decide any question brought before the meeting, unless the question is one upon which, by the express provision of statute, the Articles of Incorporation of the corporation or these By-Laws, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. When determining the presence of a quorum at any meeting, all shares held by (a) any shareholder, or represented by a holder of a proxy therefor, who is present but voluntarily decides not to vote, or (b) a broker or nominee who lacks authority to vote such shares, shall be deemed present. However, such shares shall not be deemed cast on any matter unless properly voted and, therefore, shall have no effect on the outcome of the matter in question. Section 11. Unless otherwise provided in the Articles of Incorporation of the corporation, each shareholder shall at every meeting of the shareholders be entitled to cast one vote in person or by proxy for each share of the capital stock having voting power held by such shareholder, but no proxy shall be voted on after eleven (11) months from its date, unless the proxy provides for a longer period. Section 12. Any action required or permitted to be taken at any annual or special meeting of shareholders of the corporation, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Such consents shall have the same force and effect as a unanimous vote of the shareholders at a meeting duly held. The Secretary of the Corporation shall file such consents with the minutes of the meetings of the shareholders. ARTICLE III DIRECTORS Section 1. (a) The number of directors constituting the entire Board shall be not less than three (3) nor more than nine (9) as fixed from time to time by vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director then in office, and provided further, that the number of directors constituting the entire Board shall be five (5) until otherwise fixed by a majority of the entire Board. - 3 - (b) The Board of Directors shall be divided into three classes. Directors shall be elected and/or appointed to one of the following classes: CLASS EXPIRATION OF TERM I Annual meeting date of the shareholders in 1998 and every 3 years thereafter II Annual meeting date of the shareholders in 1999 and every 3 years thereafter III Annual meeting date of the shareholders in 2000 and every 3 years thereafter Directors shall be elected and/or appointed to classes so that the total number of directors shall be divided as equally as possible between the three classes of directors. Any vacancies in the Board of Directors for any reason, and any created directorships resulting from any increase in the directors, may be filled by the Board of Directors, acting by a majority of the directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of the class for which such directors shall have been chosen and until their successors shall be elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the terms of the director or directors elected by such holders shall expire at the next succeeding annual meeting of shareholders. Subject to the foregoing, at each annual meeting of shareholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting. (c) Notwithstanding any other provisions of the Articles of Incorporation of the Corporation or these By-Laws (and notwithstanding the fact that some lesser percentage may be specified or permitted by law, the Articles of Incorporation or the By-Laws of the Corporation), any director or the entire Board of Directors of the Corporation may be removed at any time, but only for cause and only by the affirmative vote of the holders of eighty percent (80%) or more of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors cast at a meeting of the shareholders called for that purpose. Notwithstanding the foregoing, and except as otherwise required by law, whenever the holders of any one or more series of Preferred Stock shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of this subsection (c) shall not apply with respect to the director or directors elected by such holders of Preferred Stock. - 4 - Section 2. The business of the corporation shall be managed by or under the direction of its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation of the Corporation or by these By-Laws directed or required to be exercised or done by the shareholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Missouri. Section 5. The annual meeting of the Board of Directors shall be held immediately following the annual meeting of shareholders at the place at which the meeting of the shareholders is held, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum of the Board of Directors is present. Section 6. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors. Section 7. Special meetings of the Board of Directors may be called by the president on three (3) days' notice to each director, either personally or by mail or by facsimile; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two or more directors unless the Board of Directors consists of only one director. Section 8. At all meetings of the Board of Directors, a majority of directors shall constitute a quorum for the transaction of business and the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. Section 9. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, without prior notice and without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 10. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting. - 5 - COMMITTEES OF DIRECTORS Section 11. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in resolutions of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority to amend the Articles of Incorporation of the Corporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, as provided in Section 351.180 of the General Corporation and Business Law of Missouri, fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation, or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation), to adopt an agreement of merger or consolidation, to recommend to the shareholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, to recommend to the shareholders a dissolution of the corporation or a revocation of a dissolution, or to amend the By-Laws of the corporation; and, unless the resolution of the Board of Directors or the Articles of Incorporation of the Corporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors. COMPENSATION OF DIRECTORS Section 13. The Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors or committee thereof and may be paid, either in cash or in securities of the corporation, a fixed sum for attendance at each meeting of the Board of Directors or committee thereof or a stated salary as director or committee member. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. - 6 - ARTICLE IV NOTICES Section 1. Whenever notice is required or permitted to be given to any director or shareholder, it shall not be construed to require personal notice, but such notice may be given in writing, by mail, addressed to such director or shareholder, at his or her address as it appears on the records of the corporation, with first class postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given personally, by facsimile or by next business day courier delivery and shall be deemed to be given when personally given or so sent. Section 2. Whenever any notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the Board of Directors at its first meeting after each annual meeting of shareholders and shall be a president, one or more vice-presidents (who may have further descriptive designations thereof, such as executive vice-president, senior vice-president, vice-president, finance, etc.), a secretary and a treasurer. The Board of Directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of offices may be held by the same person, unless the Articles of Incorporation or these By-Laws otherwise provide. Section 2. The Board of Directors may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 3. The salaries of all executive officers of the corporation shall be fixed by the Board of Directors. Section 4. The officers of the corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the corporation may be filled by the Board of Directors. - 7 - THE PRESIDENT Section 5. The president shall be the chief executive officer of the corporation and shall have general supervision over the policies, affairs and finances of the corporation. He shall keep the Board of Directors fully informed and shall freely consult with the Board of Directors concerning the business of the corporation and shall perform such other duties as are incident to his office and are properly required of him by the Board of Directors. The president shall preside at all meetings of the shareholders and the Board of Directors. Except where by law the signature of the president is required and except as otherwise provided by the Board of Directors, the president may sign all certificates, contracts, documents and other instruments on behalf of the corporation. Unless otherwise provided by resolution of the Board of Directors, the president also shall be entitled to vote all stock and other interests having voting rights which are owned by the corporation; in the absence of a contrary resolution adopted by the Board of Directors, the president shall vote such stock and other interests in a manner which he deems appropriate. THE VICE-PRESIDENTS Section 6. In the absence of the president or in the event of the president's inability or refusal to act, the vice-president (or in the event there is more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 7. The secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all the proceedings of such meetings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The secretary shall have custody of the corporate seal of the corporation and shall have authority to affix the same to any instrument requiring it and, when so affixed, it may be attested by the secretary's signature. The Board of Directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by the secretary's signature. Section 8. The assistant secretary, if any, or if there be more than one, the assistant secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. - 8 - THE TREASURER AND ASSISTANT TREASURERS Section 9. The treasurer shall be the chief financial officer of the corporation and shall have the custody of the corporate funds and securities and shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. Section 10. The treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and upon request shall render to the Board of Directors, an account of all transactions as treasurer and of the financial condition of the corporation. Section 11. If required by the Board of Directors, the treasurer shall give the corporation and maintain in effect a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. Section 12. The assistant treasurer, if any, or if there shall be more than one, the assistant treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of the inability or refusal to act of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES FOR SHARES Section 1. The shares of the corporation shall be represented by one or more certificates. Certificates shall be signed, in the name of the corporation, by the president or a vice-president and the treasurer or an assistant treasurer or the secretary or an assistant secretary of the corporation. Upon the face or back of each stock certificate issued to represent any partly paid shares shall be set forth the total amount of the consideration to be paid therefor and the amount paid thereon. - 9 - If the corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized or referenced on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, provided that, if summarized or referenced, there shall also be set forth on the face or back of the certificate which the corporation shall issue to represent such class or series of stock, a statement that the corporation will furnish without charge to each shareholder thereof who so requests a copy of the powers, designations, preferences and relative, participating, optional or other special rights of the class of stock or series and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on a certificate may be facsimile. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue. LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books, subject, however to restrictions imposed either by applicable federal or state securities laws or by agreements by or among the shareholders. FIXING RECORD DATE Section 5. In order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than seventy (70) nor less than ten (10) days before the date of such meeting, nor more than seventy (70) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. - 10 - REGISTERED SHAREHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, and to hold liable for calls and assessments, and shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person, whether or not the corporation shall have express or other notice thereof. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock of the corporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. CHECKS Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. - 11 - FISCAL YEAR Section 4. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. SEAL Section 5. The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Missouri". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS Section 1. (a) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred by such person in connection with such action, suit, or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such conduct was unlawful. (b) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation, as a director or officer of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. - 12 - (c) To the extent that a director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subparagraphs (a) and (b), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred in connection therewith. (d) Any indemnification under subparagraphs (a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in subparagraphs (a) and (b). Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit, or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized herein. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, other subsections of this section shall not be deemed exclusive of any other rights to which officers or directors seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. (g) The Corporation shall have the power to give any further indemnity, in addition to the indemnity authorized or contemplated under other sections of this Article VIII to any person who is or was a director, officer, employee or agent, or to any person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise; provided that no such indemnity shall indemnify any person from or on account of such person's conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest or willful misconduct. Nothing in this Section (g) shall be deemed to limit the power of the Corporation to enact bylaws or to enter into agreements without shareholder adoption of the same. - 13 - (h) The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this section. (i) For the purposes of this section, references to "the corporation" include all constituent corporations (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, employees or agents, as well as the resulting or surviving corporation, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. (j) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director or officer of the corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section. (k) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, including, but not limited to, a person who ceases to be a director, officer, employee or agent due to the resignation of such person prior to the initiation of any action, suit or proceeding referred to in subparagraphs (a) and (b), and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 2. The corporation shall, to the fullest extent permitted by Section 351.355 of the General and Business Corporation Law of the State of Missouri, as the same may be amended and supplemented from time to time, indemnify all officers and directors whom it shall have the power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, or any successor section thereto. - 14 - ARTICLE IX AMENDMENTS Section 1. These By-Laws may be altered, amended or repealed or new By-Laws may be adopted by the shareholders or by the Board of Directors (when such power is conferred upon the Board of Directors by the Articles of Incorporation), at any regular meeting of the shareholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the Articles of Incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal By-Laws. - 15 - EX-4 5 EXHIBIT 4.1 - FORM OF COMMON STOCK CERTIFICATE COMMON STOCK COMMON STOCK PAR VALUE $.02 PAR VALUE $.02 NUMBER SHARES C [LOGO] INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS OF THE STATE OF MISSOURI CUSIP THIS CERTIFIES THAT IS THE OWNER OF FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF LMI AEROSPACE, INC. transferable on the books of the Corporation by the holder hereof in person or by attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Certificate of Incorporation of the Corporation, as amended from time to time, to all of which each holder of this Certificate, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. /s/ Ronald S. Saks COUNTERSIGNED AND REGISTERED: PRESIDENT AND CHIEF AMERICAN STOCK TRANSFER AND EXECUTIVE OFFICER TRUST COMPANY [seal] TRANSFER AGENT AND REGISTRAR /s/ Lawrence E. Dickinson SECRETARY BY AUTHORIZED SIGNATURE The following abbreviations, when used in the inscription on the fact of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common TEN ENT - as tenants by the entireties JT TEN - as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT - _____________ Custodian __________________ (Cust.) (Minor) under Uniform Gifts to Minors Act __________________ (State) Additional abbreviations may also be used though not in the above list. For Value Received, _________________________ hereby sell, assign and transfer unto ______________________ Please insert Social Security or Other Identifying Number of Assignee - ------------------------------------------------------------------ (Please print or typewrite name and address, including zip code, of Assignee) - ------------------------------------------------------------------ ________________________________________________________ Shares of the Common Stock evidenced by this Certificate, and do hereby irrevocably constitute and appoint ______________________________________________________ Attorney to transfer said shares on the books of the within names Corporation with full power of substitution in the premises. Dated___________________________ X__________________________________ X__________________________________ NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. Signature(s) Guaranteed By______________________________ THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15. EX-5 6 EXHIBIT 5.1 - LEGAL OPINION April 29, 1998 Board of Directors LMI Aerospace, Inc. 3600 Mueller Road St. Charles, Missouri 63302 Re: Registration Statement on Form S-1 (File No. 333-__________) Ladies and Gentlemen: We have acted as counsel for LMI Aerospace, Inc., a Missouri corporation (the "Company"), in connection with the various legal matters relating to the filing of a Registration Statement on Form S-1, File No. 333-__________ (the "Registration Statement") under the Securities Act of 1933, as amended, relating to 2,645,000 shares of the common stock of the Company, $0.02 par value per share (the "Common Stock") to be sold by the Company to EVEREN Securities, Inc. and George K. Baum & Company, as representatives of the several underwriters, which shares include up to 345,000 shares of Common Stock to be upon exercise of an option granted to the representatives to cover over-allotments, if any. We have examined such corporate records of the Company, such laws and such other information as we have deemed relevant, including the Company's Restated Articles of Incorporation, Amende and Restated Bylaws, resolutions adopted by the Board of Directors of the Company relating to such offering and certificates received from state officials and from officers of the Company. In delivering this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as certified, photostatic or conformed copies, and the correctness of all statements submitted to us by officers of the Company. Based solely on the foregoing, the undersigned is of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Missouri; and, 2. The Common Stock being offered by the Company, if sold and issued in the manner described in the Registration Statement, will be validly issued and outstanding and will be fully paid and non-assessable. LMI Aerospace, Inc. April 29, 1998 Page 2 We consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Registration Statement. We also consent to your filing copies of this opinion as an exhibit to the Registration Statement with agencies of such states as you deem necessary in the course of complying with the laws of such states regarding the issuance of the Common Stock sold. Very truly yours, /S/ GALLOP, JOHNSON & NEUMAN, L.C. EX-10 7 EXHIBIT 10.1 - STOCK OPTION PLAN AND AMENDMENTS LEONARD'S METAL, INC. 1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN 1. Purpose. This 1989 Employee Incentive Stock Option Plan (the "Plan") is intended to encourage the ownership of stock of Leonard's Metal, Inc. (the "Company") by key employees of the Company, to provide additional incentive for them to promote the success of the business, and to encourage them to remain in its employ. It is further intended that options issued pursuant to this Plan (the "Options") shall constitute Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended, (the "Code") and the rules and regulations thereunder. 2. Administration of the Plan. The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall determine the key employees who are to be granted Options hereunder (the "Participants") and the amount of stock to be optioned to each. The interpretation and construction by the Board of any provisions of the Plan or any Option granted hereunder shall be final. No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Option granted under it. 3. Participants. The Board, in its sole discretion but subject to the requirements of Section 422A of the Code, shall select Participants from among the key employees of the Company, including officers (whether or not they are Directors). No Director shall participate in the granting of Options to himself under the Plan. 4. Grant of Options. Prior to the expiration of ten years from the day on which this Plan is adopted by the Board, the Board in its discretion may grant to the Participants the right to purchase Common Stock, as defined in Paragraph 5 hereof, pursuant to the terms and conditions set forth in Paragraph 7 hereof. 5. Stock Subject to the Plan. The stock subject to the Option shall be shares of the Company's authorized but unissued or reacquired $0.01 par value common stock (the "Common Stock"). The aggregate number of shares which may be issued under Options hereunder shall not exceed 5,000 shares of Common Stock. The limitations established in this Plan by the preceding sentences shall be subject to adjustment as provided in Paragraph 6 hereunder. In the event that any outstanding Option under the Plan for any reason expires, is cancelled or is terminated, the shares of Common Stock allocable to the unexercised portion of such Option may again be subjected to an Option under the Plan. -1- 6. Changes in Capital Structure. In the event that the shares of outstanding Common Stock are hereafter increased or decreased (other than such shares (i) issued to or acquired from a Participant hereunder or (ii) acquired by the Company from a stockholder of the Company) or changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares or dividend payable in corporate shares, an appropriate adjustment shall be made in the number and kind of shares as to which Options may be granted under the Plan, including the maximum number that may be granted to any one Participant. In addition, an appropriate adjustment shall be made in the number and kind of shares as to which outstanding Options, or portions thereof then unexercised, shall be exercisable to the end that each Participant's proportionate interest in the total shares subject to an Option shall be maintained as before the occurrence of such event; such adjustment in the shares subject to an Option shall be made without changing the total price applicable to the unexercised portion of any Option and with a corresponding adjustment in the Option price per share; provided, however, that each such adjustment in the number and kind of shares subject to outstanding Options, including any adjustment in the Option price, shall be made in such manner as not to constitute a "modification" as defined in Section 425 of the Code. Any adjustment made by the Board shall be conclusive. 7. Terms and Conditions of Options. Options shall be evidenced by Stock Option Agreements (the "Option Agreements") in such form not inconsistent with this Plan as the Board shall from time to time determine, provided that the substance of the following be included therein. (a) Number of Shares. Each Option Agreement shall state the number of shares of Common Stock to which it pertains. The aggregate fair market value of Common Stock (determined as of the date of grant in accordance with the provisions of subparagraph 7(b) hereof) with respect to which Options are first exercisable during any one calendar year shall not exceed $l00,000. (b) Option Price. Each Option Agreement shall state the Option price, which shall not be less than 100% of the fair market value of a share of Common Stock on the date of the granting of the Option. Such fair market value shall be the maximum price at which such shares may be sold under any stock restriction agreement ("Shareholders Agreement") to which such stock is subject as of the date of the grant of such Option. In the event no such Shareholders Agreement is then in effect, the Board shall determine the purchase price based on information available to it including any valuations or appraisals by independent experts. Subject to the foregoing, the Board shall have full authority and discretion in fixing the option price and be fully protected in doing so. -2- (c) Exercise of Options. Each Option Agreement shall set forth the terms and conditions under which the Option thereby granted may be exercised, as determined by the Board. During the lifetime of the Participant the Option shall be exercised only by him and shall not be assignable or transferable by him and no other person shall acquire any rights therein. To the extent that the right to purchase shares is accrued thereunder, Options may be exercised from time to time by the delivery by a Participant of written notice to the Company stating the number of shares of Common Stock with respect to which the Option is being exercised and the time and date of purchase thereof, which shall be during the normal business hours of the Company on a regular business day not less than fifteen (l5) days nor more than thirty (30) days after the giving of such notice unless another date shall have been mutually agreed upon. At the time specified in such notice, the Company shall, without transfer or issue tax, transfer and set aside for the benefit of the Participant a certificate or certificates for such shares out of its theretofor authorized but unissued or reacquired Common Stock, against payment in full by the Participant of the Option price. If the Participant fails to pay for any part of the number of shares specified in such notice in accordance with the terms of the Plan and such notice, the Participant's right to exercise the Option with respect to such shares may, by subsequent action of the Board, be terminated. (d) Option Term.Each Option Agreement shall specify the period for which the Option thereunder is granted. In no event shall an Option be exercisable after the expiration of six years from the date the Option is granted. At the end of such specified period the Option shall expire. (e) Effect of Termination of Employment. Upon termination of a Participant's employment with the Company and its subsidiaries for any reason, any outstanding Option or unexercised portion thereof granted to the Participant shall terminate. Any transfer of employment from the Company to any parent or subsidiary thereof, or vice versa, shall not be deemed a termination of employment. (f) Investment Purpose. Each Option issued under this Plan may be issued on the condition that any purchase of stock thereunder shall be for investment purposes and not with a view to resale or distribution (the "Restricted Stock"). If requested by the Company, each Participant must agree, at the time of the purchase of any Restricted Stock, to execute a Shareholders Agreement and/or an "investment letter" setting forth such investment intent in the form acceptable to the Company and subjecting the Restricted Stock to the terms of such Shareholders Agreement. Each Participant must consent to any stock certificate issued to him thereunder bearing a restrictive legend setting forth the restrictions applicable to the further resale, transfer or other conveyance thereof under the Shareholders Agreement and without registration under the Securities Act of 1933, as amended, and applicable securities or blue sky laws of any other jurisdiction (together, the "Securities Laws"), and to the placing of transfer restrictions on the records of the transfer agent for such stock. No Restricted Stock may thereafter be resold, transferred or otherwise conveyed unless such transaction is authorized pursuant to the Stock Restriction Agreement and: -3- (1) an opinion of the Participant's counsel is received, in form and substance satisfactory to counsel for the Company, that registration under the applicable Securities Laws is not required; or (2) such stock is registered under the applicable Securities Laws; or (3) "no action" letters are received from the staff of the Securities and Exchange Commission and from the administrative agencies administering all other applicable securities or blue sky laws, based on an opinion of counsel for Participant in form and substance reasonably satisfactory to counsel for the Company, advising that registrations under the Securities Laws are not required. (g) Rights as a Stockholder. Each Participant shall have all rights attributable to stockholders of the Company with respect to any shares issued to him or for his benefit pursuant to the terms of his Option but shall have no stockholder rights prior thereto. Except as provided in Paragraph 6 hereof, no adjustment shall be made for dividends or other rights appurtenant to the ownership of shares in the Company for which the record date is prior to the date of purchase of shares in accordance with subparagraph 7(c) hereof. (h) Stock Ownership. In the event an Option shall be granted to any person who, at the time such Option is granted, owns Common Stock in excess of the limitations imposed by Section 422A(b)(6) or other comparable restriction under the Code (i.e., owns more than l0% of the total combined voting power of all classes of stock of the Company or of the parent or any subsidiary corporation of the Company), the Option price (as defined in subparagraph 7(b) hereof) shall be increased to not less than ll0% of the fair market value of the Common Stock as of the date of grant and such Option must be exercisable within five years from the date the Option is granted. (i) Waiver of Restrictions. The Board, in its discretion or pursuant to contract, may waive the restrictions imposed by paragraph 7(c) hereof (relating to time of exercise) on any Participant with respect to Options granted under the Plan; provided, however, no restriction which is required by Section 422A of the Code may be waived. -4- 8. Effective Date; Amendment; and Termination of the Plan. The effective date of this Plan is _________________, 1989, i.e. the date of adoption by the Board ("Adoption Date"). Within twelve months after the Adoption Date, this Plan shall be submitted to the Shareholders of the Company for their approval in accordance with Section 422A(b)(1) of the Code. The Board may amend or terminate this Plan at any time. The amendment or termination of this Plan shall not affect rights and obligations theretofor granted and then in effect. 9. Use of Proceeds. The proceeds from the sale of Common Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. 10. Construction. When used herein the male, female and neuter gender shall include the other and the singular shall include the plural as the context or facts so require. Adopted by the Board of Directors as of the _____ day of ____________, 1989. LEONARD'S METAL, INC. By Ronald S. Saks, President -5- AMENDMENT NO. 1 LEONARD'S METAL, INC. 1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the "Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the "Plan") as of December 7, 1989; WHEREAS, the Board of Directors of the Corporation, through the duly authorized officers of the Corporation, desires to amend the Plan so as to increase the aggregate number of shares which may be issued under Options (as that term is defined in the Plan); and WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of the Corporation reserved the right to amend the Plan at any time. NOW, THEREFORE, in the exercise of the power provided for in Section 8 of the Plan, the Corporation, through its duly authorized officers and Board of Directors, hereby amends the Plan, effective December 31, 1991, in the following respects: 1. By deleting in its entirety the second sentence of Section 5 of the Plan (on page 2 of the Plan) and substituting in lieu thereof the following which shall henceforth be read as the second sentence of Section 5 of the Plan: "The aggregate number of shares which may be issued under Options hereunder shall not exceed 50,000 shares of Common Stock." 2. Except as expressly set forth in this Amendment No. 1 to the Plan, all other provisions of the Plan shall remain in full force and effect. Adopted by the Board of Directors as of the 31st day of December, 1991. LEONARD'S METAL, INC. By:_________________________________ Ronald S. Saks, President AMENDMENT NO. 2 LEONARD'S METAL, INC. 1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the "Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the "Plan") as of December 7, 1989; WHEREAS the Plan was previously amended as of December 31, 1991; WHEREAS, the Board of Directors of the Corporation, through the duly authorized officers of the Corporation, desires to again amend the Plan in order to allow the Corporation to grant incentive stock options to certain employees of any wholly-owned subsidiary of the Corporation; and WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of the Corporation reserved the right to amend the Plan at any time. NOW, THEREFORE, in the exercise of the power provided for in Section 8 of the Plan, the Corporation, through its duly authorized officers and Board of Directors, hereby amends the Plan, effective January 1, 1994, in the following respects: 1. By deleting in its entirety the first sentence of Section 1 of the Plan (on page 1 of the Plan) and substituting in lieu thereof the following which shall henceforth be read as the first sentence of Section 1 of the Plan: "This 1989 Employee Incentive Stock Option Plan (the "Plan") is intended to encourage the ownership of stock of Leonard's Metal, Inc. (the "Company") by key employees of the Company or any wholly-owned subsidiary of the Company, to provide additional incentive for them to promote the success of the business, and to encourage them to remain in the employ of the Company or its subsidiary, as the case may be." 2. By deleting in its entirety the first sentence of Section 3 of the Plan (on page 1 of the Plan) and substituting in lieu thereof the following which shall henceforth be read as the first sentence of Section 3 of the Plan: "The Board, in its sole discretion but subject to the requirements of Section 422A of the Code, shall select Participants from the key employees of the Company or any wholly-owned subsidiary of the Company, including officers (whether or not they are Directors)." 3. Except as expressly set forth in this Amendment No. 2 to the Plan, all other provisions of the Plan, as amended, shall remain in full force and effect. Adopted as of the 1st day of August, 1994. LEONARD'S METAL, INC. By: Ronald S. Saks, President Attest: By: Secretary AMENDMENT NO. 3 LEONARD'S METAL, INC. 1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the "Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the "Plan") as of December 7, 1989; WHEREAS the Plan was amended as of December 31, 1991 and again amended as of January 1, 1994; WHEREAS, the Board of Directors of the Corporation, through the duly authorized officers of the Corporation, desires to again amend the Plan in order to increase the aggregate number of shares of Common Stock that may be issued under Options granted to any one Participant (as those terms are defined in the Plan); and WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of the Corporation reserved the right to amend the Plan at any time. NOW, THEREFORE, in the exercise of the power provided for in Section 8 of the Plan, the Corporation, through its duly authorized officers and Board of Directors, hereby amends the Plan, effective October 1, 1995, in the following respects: 1. By deleting the number "5,000" in the fifth line of Section 5 of the Plan (on page 2 of the Plan) and substituting in lieu thereof the number "75,000". 2. By adding the following language to the Plan which shall henceforth be read as Section 6A of the Plan: "6A. Notwithstanding the provisions of Section 6 above, upon: (i) the dissolution or liquidation of the Company, (ii) a reorganization, merger or consolidation of the Company with one or more corporations in which the Company is not the surviving corporation, (iii) a sale of substantially all of the assets of the Company, or (iv) the transfer of more than 80% of the then outstanding Stock of the Company to another entity or person in a single transaction or series of transactions, the Plan shall terminate, and any outstanding Options granted under the Plan shall terminate on the day before the consummation of the transaction; provided that the Board shall9 have the right, but shall not be obligated, to accelerate the time in which any Options may be exercised prior to such a termination. However, the termination of such Options shall not occur if provision is made in writing in connection with the transaction, in a manner acceptable to the Board of Directors, for: (i) the continuance of the Plan and assumption of outstanding Options, or (ii) the substitution for such Options of new options to purchase the stock of a successor corporation (or parent or subsidiary thereof), with appropriate adjustments as to number and kind of shares and option price. The Board of Directors shall have the authority to amend this paragraph to provide for a requirement that a successor corporation assume any outstanding Options. Adjustments under this Section 6A shall be made by the Board of Directors whose determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan or in connection with any such adjustment." 3. Except as expressly set forth in this Amendment No. 3 to the Plan, all other provisions of the Plan, as amended, shall remain in full force and effect. Adopted as of the 1st day of October, 1995. LEONARD'S METAL, INC. By: Ronald S. Saks, President Attest: By: Secretary AMENDMENT NO. 4 LEONARD'S METAL, INC. 1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the "Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the "Plan") as of December 7, 1989; WHEREAS, the Plan was amended as of December 31, 1991, amended again as of January 1, 1994, and amended again as of October 1, 1995; WHEREAS, the Board of Directors of the Corporation, through the duly authorized officers of the Corporation, desires to again amend the Plan in order to increase the aggregate number of shares of Common Stock that may be issued under Options granted to Plan Participants (as those terms are defined in the Plan); and WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of the Corporation reserved the right to amend the Plan at any time. NOW, THEREFORE, in the exercise of the power provided for in Section 8 of the Plan, the Corporation, through its duly authorized officers and Board of Directors, hereby amends the Plan, effective December 18, 1996, in the following respects: 1. By deleting the number "75,000" in Section 5 of the Plan, as amended by Section 1 of Amendment No. 3 to the Plan and substituting in lieu thereof the number "85,000". 2. Except as expressly set forth in this Amendment No. 4 to the Plan, all other provisions of the Plan, as amended, shall remain in full force and effect. Adopted as of the 18th day of December, 1996. LEONARD'S METAL, INC. By: Ronald S. Saks, President Attest: By: Secretary EX-10 8 EXHIBIT 10.2 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and RONALD S. SAKS ("Employee") hereby agree as follows: 1. Employment. The Corporation hereby employs Employee, and Employee accepts employment from the Corporation, upon the terms and conditions hereinafter set forth. Any and all employment agreements heretofore entered into between the Corporation and Employee are hereby terminated and cancelled, and each of the parties hereto mutually releases and discharges the other from any and all obligations and liabilities heretofore or now existing under or by virtue of any such employment agreements, it being the intention of the parties hereto that this Agreement, effective immediately, shall supersede and be in lieu of any and all prior employment agreements between them. 2. Term of Employment. The initial term of Employee's employment under this Agreement shall commence as of January 1, 1997 and shall continue for a six (6) year period terminating December 31, 2002; provided, however, that this Agreement shall be automatically extended for additional terms of one year each unless not later than August 31 of any year beginning in 2002, either party has given written notice to the other party of its or his intention not to extend the term of this Agreement; and provided, further, that the term of employment may be terminated upon the earlier occurrence of any of the following events: (a) Upon the termination of the business or corporate existence of the Corporation; (b) Upon the death of the Employee; (c) At the Corporation's option if Employee shall suffer a permanent disability; (For purpose of this Agreement "permanent disability" shall be defined as Employee's inability, through physical or mental illness or other cause, to perform the essential functions of Employee's usual duties, with or without a reasonable accommodation that would not cause an undue hardship to the Corporation, for a period of 12 months or more. The Corporation's option in this regard shall be exercised in writing and mailed or delivered to Employee or Employee's personal representative, and shall be effective on the date of mailing or delivery of the option as exercised.) or (d) At the Corporation's option upon ten (10) days written notice to Employee in the event of any breach or default by Employee of any of the terms of this Agreement or of any of Employee's duties or obligations hereunder, or in the event the Corporation determines that Employee is not performing the duties required of him hereunder to the satisfaction of the Corporation. Upon termination of employment for any reason, Employee shall be entitled to receive only the Base Salary (as that term is hereinafter defined) accrued but unpaid as of the date of termination and shall not be entitled to additional compensation except as expressly provided in this Agreement. 3. Compensation. (A) During the term of this Agreement the Corporation shall compensate Employee for Employee's services rendered hereunder by paying to Employee an annual salary (the "Base Salary") as follows: (i) One Hundred Fifty Thousand Dollars ($150,000.00) payable in equal monthly installments during the calendar year 1997; and (ii) Two Hundred Forty Thousand Dollars ($240,000.00) payable in equal monthly installments during the calendar years 1998, 1999, 2000, 2001, and 2002. (B) With respect to each complete fiscal year of the Corporation during which (i) the Employee is employed under the terms of this Agreement as of the last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as that term is hereinafter defined) is more than Five Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in addition to the Base Salary, an annual "Performance Bonus". The amount of the annual Performance Bonus (if any) shall be equal to Three Percent (3%) of the Corporation's Annual Net Income that is between Five Million Dollars ($5,000,000.00) and Nine Million Dollars ($9,000,000.00), inclusive. In the event the Corporation's Annual Net Income for any given fiscal year during the term of this Agreement is Five Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a Performance Bonus with respect to such fiscal year. Notwithstanding anything contained herein to the contrary, in no event shall Employee's Performance Bonus for fiscal year 1997 exceed Two Hundred Forty-Five Thousand Dollars ($245,000.00). For purposes of the calculation of the Performance Bonus, the Corporation's "Annual Net Income" means the consolidated net profit of the Corporation and its subsidiaries, for a given fiscal year, as determined by the firm of independent certified public accountants providing auditing services to the Corporation, using generally accepted accounting principles consistently applied, and calculated without regard to (a) any bonuses paid to the Corporation's Chairman of the Board, President and any Vice-President; (b) federal and state income tax; and (c) any income or loss attributable to any other corporation or entity (including the assets of a corporation or entity that constitute an operating business) acquired by or merged into the Corporation subsequent to the effective date of this Agreement. If during the term of this Agreement outstanding debt of the Corporation is repaid through the proceeds of the sale of the Corporation's stock by the Corporation, the interest that otherwise would have been payable on such repaid debt shall be deemed to have been paid by the Corporation for purposes of calculating the Corporation's "Annual Net Income", as if such repayment of debt had not occurred. -2- The Corporation shall pay to Employee any Performance Bonus due the Employee hereunder not later than fifteen (15) days after the receipt by the Corporation of its annual audited financial statements, which the Corporation expects to receive within ninety (90) days after the end of each fiscal year of the Corporation. (C) In addition to the Base salary and Performance Bonus (if any) Employee shall be entitled to receive such bonus compensation as the Board of Directors of the Corporation may authorize from time to time. 4. Duties of Employee. (A) Employee shall be elected as President and Chief Executive Officer of the Corporation or to such other office (but not below the office of President) as may be determined by the Board of Directors of the Corporation and shall perform such duties (comparable to those normally performed by individuals who serve as officers of comparable companies) on behalf of the Corporation and its subsidiaries by such means and in such manner as may be specified from time to time by the officers or Board of Directors of the Corporation. (B) Employee agrees to abide by and conform to all rules established by the Corporation applicable to its employees. (C) Employee shall devote so much of Employee's entire time, attention and energies to the business of the Corporation as is necessary for the successful operation of the Corporation and shall endeavor at all times to improve the business of the Corporation. 5. Expenses. During the period of Employee's employment, except as otherwise specifically provided in this Agreement, the Corporation will pay directly, or reimburse Employee for, all items of reasonable and necessary business expenses approved in advance by the Corporation if such expenses are incurred by Employee in the interest of the business of the Corporation. The Corporation shall also reimburse Employee for automobile expenses incurred by Employee in the performance of Employee's duties hereunder. The amount of such reimbursement shall be in accordance with the automobile expense reimbursement policy adopted (and as it may be modified from time to time) by the Corporation's Board of Directors. All such expenses paid by Employee will be reimbursed by the Corporation upon presentation by Employee, from time to time (but not less than quarterly), of an itemized account of such expenditures in accordance with the Corporation's policy for verifying such expenditures. -3- 6. Fringe Benefits. (A) Employee shall be entitled to participate in any health, accident and life insurance program and other benefits which have been or may be established by the Corporation for other employees of the Corporation performing duties similar to those of Employee. (B) Employee shall be entitled to an annual vacation without loss of compensation for such period as may be determined by the Board of Directors of the Corporation. (C) The Corporation shall furnish to the Employee during the term of his employment an automobile comparable to the automobiles furnished by the Corporation to other executives performing duties similar to those performed by Employee, to aid the Employee in the performance of his duties. 7. Covenants of Employee. (A) During the term of Employee's employment with the Corporation and for all time thereafter Employee covenants and agrees that Employee will not in any manner directly or indirectly, except as required in Employee's duties to the Corporation, disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company, directly or indirectly, any knowledge, devices, information, techniques, customer lists, business plans or other data belonging to the Corporation or developed by Employee on behalf of the Corporation during his employment with the Corporation, without regard to whether all of the foregoing matters will be deemed confidential, material or important, the parties hereto stipulating, as between them, that the same are important, material, confidential and the property of the Corporation, that disclosure of the same to or use of the same by third parties would greatly affect the effective and successful conduct of the business of the Corporation and the goodwill of the Corporation, and that any breach of the terms of this subparagraph (A) shall be a material breach of this Agreement. (B) During the term of Employee's employment with the Corporation and for a period of two (2) years (the "Covenant Term") after cessation for whatever reason of such employment (except as hereinafter provided in subparagraph (C) of this paragraph 7), Employee covenants and agrees that Employee will not in any manner directly or indirectly: -4- (i) solicit, divert, take away or interfere with any of the customers (or their respective affiliates or successors) of the Corporation; (ii) engage directly or indirectly, either personally or as an employee, partner, associate partner, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business which is competitive with the business of the Corporation. For purposes of this covenant a business will be deemed competitive if it is conducted in whole or in part within any geographic area wherein the Corporation is engaged in marketing its products, and if it involves the manufacture of component parts for commercial aircraft or any other business which is in any manner competitive, as of the date of cessation of Employee's employment, with any business then being conducted by the Corporation or as to which the Corporation has then formulated definitive plans to enter; (iii) induce any salesman, distributor, supplier, manufacturer, representative, agent, jobber or other person transacting business with the Corporation to terminate their relationship with the Corporation, or to represent, distribute or sell products in competition with products of the Corporation; or (iv) induce or cause any employee of the Corporation to leave the employ of the Corporation. (C) The parties agree that the Covenant Term provided for in the preceding subparagraph (B) shall be: (i) reduced to six (6) months in the event all of the operating assets or all of the common stock of the Corporation is sold to any entity or individuals unaffiliated with the Corporation, its successors or assigns; or (ii) eliminated if the business currently operated by the Corporation is terminated and the assets of the Corporation are liquidated. (D) All the covenants of Employee contained in this paragraph 7 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of these covenants. -5- (E) It is the intention of the parties to restrict the activities of Employee under this paragraph 7 only to the extent necessary for the protection of legitimate business interests of the Corporation, and the parties specifically covenant and agree that should any of the provisions set forth therein, under any set of circumstances not now foreseen by the parties, be deemed too broad for such purpose, said provisions will nevertheless be valid and enforceable to the extent necessary for such protection. 8. Documents. Upon cessation of Employee's employment with the Corporation, for whatever reason, all documents, records (including without limitation, customer records), notebooks, invoices, statements or correspondence, including copies thereof, relating to the business of the Corporation then in Employee's possession, whether prepared by Employee or others, will be delivered to and left with the Corporation, and Employee agrees not to retain copies of the foregoing documents without the written consent of the Corporation. 9. Remedies. In the event of the breach by Employee of any of the terms of this Agreement, notwithstanding anything to the contrary contained in this Agreement, the Corporation may terminate the employment of Employee by written notice thereof to Employee and with payment of the Base Salary to Employee only to the date of such termination. It is further agreed that any breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to the Corporation and will authorize recourse to injunction and/or specific performance as well as to other legal or equitable remedies to which the Corporation may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies by the Corporation shall not constitute a waiver of the right to pursue other available remedies. In the event it becomes necessary for the Corporation to institute a suit at law or in equity for the purpose of enforcing any of the provisions of this Agreement, the Corporation shall be entitled to recover from Employee the Corporation's reasonable attorneys' fees plus court costs and expenses. 10. Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any court of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof, shall continue in full force and effect and shall be interpreted as if such invalid agreements or covenants were not contained herein. -6- 11. Waiver or Modification. No waiver or modification of this Agreement or of any covenant, condition or limitation herein shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Paragraph may not be waived except as herein set forth. Failure of the Corporation to exercise or otherwise act with respect to any of its rights hereunder in the event of a breach of any of the terms or conditions hereof by Employee shall not be construed as a waiver of such breach nor prevent the Corporation from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 12. Assignability. The services to be performed by Employee hereunder are personal in nature and, therefore, Employee shall not assign Employee's rights or delegate Employee's obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 13. Successors. Subject to the provisions of paragraph 12, this Agreement shall be binding upon and shall inure to the benefit of the Corporation and Employee and their respective heirs, executors, administrators, legal administrators, successors and assigns. 14. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered personally or mailed by certified or registered mail, return receipt requested, if to the Corporation, to: Ronald S. Saks, President Leonard's Metal, Inc. P.O. Box 678 St. Charles, MO 63302-0678 with a copy to: Gallop, Johnson & Neuman, L.C. 101 South Hanley Road Suite 1600 St. Louis, MO 63105 Attention: Sanford S. Neuman, Esq. and, if to Employee, to: Mr. Ronald S. Saks 96 Arundel Place St. Louis, MO 63105 -7- or to such other address as may be specified by either of the parties in the manner provided under this paragraph 14. 15. Construction. This Agreement shall be deemed for all purposes to have been made in the State of Missouri and shall be governed by and construed in accordance with the laws of the State of Missouri, notwithstanding either the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. 16. Venue. The parties hereto agree that any suit filed arising out of or in connection with this Agreement shall be brought only in the Federal Court for the Eastern District of Missouri, unless said Court shall lack jurisdiction, in which case such action shall be brought only in the circuit Court in the County of St. Louis, Missouri. The parties have executed this Agreement as of January 1, 1997. LEONARD'S METAL, INC. ("Corporation") By: __________________________ Title: ________________________ ------------------------------- Ronald S. Saks ("Employee") -8- EX-10 9 EXHIBIT 10.3 - EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and LAWRENCE J. LEGRAND ("Employee") hereby agree as follows: 1. Employment. The Corporation hereby employs Employee, and Employee accepts employment from the Corporation, upon the terms and conditions hereinafter set forth. Any and all employment agreements heretofore entered into between the Corporation and Employee are hereby terminated and cancelled, and each of the parties hereto mutually releases and discharges the other from any and all obligations and liabilities heretofore or now existing under or by virtue of any such employment agreements, it being the intention of the parties hereto that this Agreement, effective immediately, shall supersede and be in lieu of any and all prior employment agreements between them. 2. Term of Employment. The initial term of Employee's employment under this Agreement shall commence as of May 1, 1998 and shall continue through December 31, 2002; provided, however, that this Agreement shall be automatically extended for additional terms of one year each unless not later than August 31 of any year beginning in 2002, either party has given written notice to the other party of its or his intention not to extend the term of this Agreement; and provided, further, that the term of employment may be terminated upon the earlier occurrence of any of the following events: (a) Upon the termination of the business or corporate existence of the Corporation; (b) Upon the death of the Employee; (c) At the Corporation's option if Employee shall suffer a permanent disability; (For purpose of this Agreement "permanent disability" shall be defined as Employee's inability, through physical or mental illness or other cause, to perform the essential functions of Employee's usual duties, with or without a reasonable accommodation that would not cause an undue hardship to the Corporation, for a period of 12 months or more. The Corporation's option in this regard shall be exercised in writing and mailed or delivered to Employee or Employee's personal representative, and shall be effective on the date of mailing or delivery of the option as exercised.) or (d) At the Corporation's option upon ten (10) days written notice to Employee in the event of any breach or default by Employee of any of the terms of this Agreement or of any of Employee's duties or obligations hereunder, or in the event the Corporation determines that Employee is not performing the duties required of him hereunder to the satisfaction of the Corporation. Upon termination of employment for any reason Employee shall be entitled to receive only the Base Salary (as that term is hereinafter defined) accrued but unpaid as of the date of termination and shall not be entitled to additional compensation except as expressly provided in this Agreement. 3. Compensation. (A) During the term of this Agreement the Corporation shall compensate Employee for Employee's services rendered hereunder by paying to Employee a salary (the "Base Salary") at an annual rate of two Hundred Twenty-Five Thousand Dollars ($225,000.00) payable in equal monthly installments of Eighteen Thousand Seven Hundred Fifty dollars ($18,750.00) during the remainder of 1998 and during each of the calendar years 1999, 2000, 2001 and 2002. (B) With respect to each complete fiscal year of the Corporation during which (i) the Employee is employed under the terms of this Agreement as of the last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as that term is hereinafter defined) is more than Five Million Dollars ($5,000,000.00), the Corporation shall pay to the Employee, in addition to the Base Salary, an annual "Performance Bonus". The amount of the annual Performance Bonus (if any) shall be equal to the following: (i) Three Percent (3%) of the Corporation's Annual Net Income that is between Five Million Dollars ($5,000,000.00) and Nine Million Dollars ($9,000,000.00), inclusive; plus (ii) One Percent (1%) of the Corporation's Annual Net Income that is between Nine Million Dollars ($9,000,000.00) and Twelve Million Dollars ($12,000,000.00), inclusive. In the event the Corporation's Annual Net Income for any given fiscal year is Five Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a Performance Bonus with respect to such fiscal year. With respect to the period beginning May 1, 1998 and ending December 31, 1998, the Corporation shall pay the Employee an amount equal to Sixty-Six and 7/10 Percent (66.7%) of the Performance Bonus (if any) to which the Employee would have been entitled if the Employee had been employed by the Corporation for the entire fiscal year ending December 31, 1998. -2- For purposes of the calculation of the Performance Bonus, the Corporation's "Annual Net Income" means the consolidated net profit of the Corporation and its subsidiaries, for a given fiscal year, as determined by the firm of independent certified public accountants providing auditing services to the Corporation, using generally accepted accounting principles consistently applied, and calculated without regard to (a) any bonuses paid to the Corporation's Chairman of the Board, President and any Vice-President; (b) federal and state income tax; and (c) any income or loss attributable to any other corporation or entity (including the assets of a corporation or entity that constitute an operating business) acquired by or merged into the Corporation subsequent to the effective date of this Agreement. If during the term of this Agreement outstanding debt of the Corporation is repaid through the proceeds of the sale of the Corporation's stock by the Corporation, the interest that otherwise would have been payable on such repaid debt shall be deemed to have been paid by the Corporation for purposes of calculating the Corporation's "Annual Net Income", as if such repayment of debt had not occurred. The Corporation shall pay to Employee any Performance Bonus due the Employee hereunder not later than fifteen (15) days after the receipt by the Corporation of its annual audited financial statements, which the Corporation expects to receive within ninety (90) days after the end of each fiscal year of the Corporation. (C) In addition to the Base salary and Performance Bonus (if any) Employee shall be entitled to receive such bonus compensation as the Board of Directors of the Corporation may authorize from time to time. 4. Duties of Employee. (A) Employee shall serve as Vice President and Chief Operating Officer of the Corporation or in such other positions as may be determined by the Board of Directors of the Corporation, and Employee shall perform such duties on behalf of the Corporation and its subsidiaries by such means and in such manner as may be specified from time to time by the officers or Board of Directors of the Corporation. (B) Employee agrees to abide by and conform to all rules established by the Corporation applicable to its employees. (C) Employee acknowledges that he is being employed as a full-time employee, and Employee agrees to devote so much of Employee's entire time, attention and energies to the business of the Corporation as is necessary for the successful operation of the Corporation and shall endeavor at all times to improve the business of the Corporation. -3- 5. Expenses. During the period of Employee's employment, except as otherwise specifically provided in this Agreement, the Corporation will pay directly, or reimburse Employee for, all items of reasonable and necessary business expenses approved in advance by the Corporation if such expenses are incurred by Employee in the interest of the business of the Corporation. The Corporation shall also reimburse Employee for automobile expenses incurred by Employee in the performance of Employee's duties hereunder. The amount of such reimbursement shall be in accordance with the automobile expense reimbursement policy adopted (and as it may be modified from time to time) by the Corporation's Board of Directors. All such expenses paid by Employee will be reimbursed by the Corporation upon presentation by Employee, from time to time (but not less than quarterly), of an itemized account of such expenditures in accordance with the Corporation's policy for verifying such expenditures. 6. Fringe Benefits. (A) Employee shall be entitled to participate in any health, accident and life insurance program and other benefits which have been or may be established by the Corporation for other employees of the Corporation performing duties similar to those of Employee. (B) Employee shall be entitled to an annual vacation without loss of compensation for such period as may be determined by the Board of Directors of the Corporation. (C) The Corporation shall furnish to the Employee during the term of his employment an automobile comparable to the automobiles furnished by the Corporation to other executives performing duties similar to those performed by Employee, to aid the Employee in the performance of his duties. 7. Covenants of Employee. (A) During the term of Employee's employment with the Corporation and for all time thereafter Employee covenants and agrees that Employee will not in any manner directly or indirectly, except as required in Employee's duties to the Corporation, disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company, directly or indirectly, any knowledge, devices, information, techniques, customer lists, business plans or other data belonging to the Corporation or developed by Employee on behalf of the Corporation during his employment with the Corporation, without regard to whether all of the foregoing matters will be deemed confidential, material or important, the parties hereto stipulating, as between them, that the same are important, material, confidential and the property of the Corporation, that disclosure of the same to or use of the same by third parties would greatly affect the effective and successful conduct of the business of the Corporation and the goodwill of the Corporation, and that any breach of the terms of this subparagraph (A) shall be a material breach of this Agreement. -4- (B) During the term of Employee's employment with the Corporation and for a period of two (2) years (the "Covenant Term") after cessation for whatever reason of such employment (except as hereinafter provided in subparagraph (C) of this paragraph 7), Employee covenants and agrees that Employee will not in any manner directly or indirectly: (i) solicit, divert, take away or interfere with any of the customers (or their respective affiliates or successors) of the Corporation; (ii) engage directly or indirectly, either personally or as an employee, partner, associate partner, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business which is competitive with the business of the Corporation. For purposes of this covenant a business will be deemed competitive if it is conducted in whole or in part within any geographic area wherein the Corporation is engaged in marketing its products, and if it involves the manufacture of component parts for commercial aircraft or any other business which is in any manner competitive, as of the date of cessation of Employee's employment, with any business then being conducted by the Corporation or as to which the Corporation has then formulated definitive plans to enter; (iii) induce any salesman, distributor, supplier, manufacturer, representative, agent, jobber or other person transacting business with the Corporation to terminate their relationship with the Corporation, or to represent, distribute or sell products in competition with products of the Corporation; or (iv) induce or cause any employee of the Corporation to leave the employ of the Corporation. (C) The parties agree that the Covenant Term provided for in the preceding subparagraph (B) shall be: (i) reduced to six (6) months in the event all of the operating assets or all of the common stock of the Corporation is sold to any entity or individuals unaffiliated with the Corporation, its successors or assigns; or (ii) eliminated if the business currently operated by the Corporation is terminated and the assets of the Corporation are liquidated. (D) All the covenants of Employee contained in this paragraph 7 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of these covenants. -5- (E) It is the intention of the parties to restrict the activities of Employee under this paragraph 7 only to the extent necessary for the protection of legitimate business interests of the Corporation, and the parties specifically covenant and agree that should any of the provisions set forth therein, under any set of circumstances not now foreseen by the parties, be deemed too broad for such purpose, said provisions will nevertheless be valid and enforceable to the extent necessary for such protection. 8. Documents. Upon cessation of Employee's employment with the Corporation, for whatever reason, all documents, records (including without limitation, customer records), notebooks, invoices, statements or correspondence, including copies thereof, relating to the business of the Corporation then in Employee's possession, whether prepared by Employee or others, will be delivered to and left with the Corporation, and Employee agrees not to retain copies of the foregoing documents without the written consent of the Corporation. 9. Remedies. In the event of the breach by Employee of any of the terms of this Agreement, notwithstanding anything to the contrary contained in this Agreement, the Corporation may terminate the employment of Employee by written notice thereof to Employee and with payment of the Base Salary to Employee only to the date of such termination. It is further agreed that any breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to the Corporation and will authorize recourse to injunction and/or specific performance as well as to other legal or equitable remedies to which the Corporation may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies by the Corporation shall not constitute a waiver of the right to pursue other available remedies. In the event it becomes necessary for the Corporation to institute a suit at law or in equity for the purpose of enforcing any of the provisions of this Agreement, the Corporation shall be entitled to recover from Employee the Corporation's reasonable attorneys' fees plus court costs and expenses. 10. Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any court of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof, shall continue in full force and effect and shall be interpreted as if such invalid agreements or covenants were not contained herein. -6- 11. Waiver or Modification. No waiver or modification of this Agreement or of any covenant, condition or limitation herein shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Paragraph may not be waived except as herein set forth. Failure of the Corporation to exercise or otherwise act with respect to any of its rights hereunder in the event of a breach of any of the terms or conditions hereof by Employee shall not be construed as a waiver of such breach nor prevent the Corporation from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 12. Assignability. The services to be performed by Employee hereunder are personal in nature and, therefore, Employee shall not assign Employee's rights or delegate Employee's obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 13. Successors. Subject to the provisions of paragraph 12, this Agreement shall be binding upon and shall inure to the benefit of the Corporation and Employee and their respective heirs, executors, administrators, legal administrators, successors and assigns. 14. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered personally or mailed by certified or registered mail, return receipt requested, if to the Corporation, to: Ronald S. Saks, President Leonard's Metal, Inc. P.O. Box 678 St. Charles, MO 63302-0678 and, if to Employee, to: Mr. Lawrence J. LeGrand 908 Claymark Drive St. Louis, MO 63131 or to such other address as may be specified by either of the parties in the manner provided under this paragraph 14. 15. Construction. This Agreement shall be deemed for all purposes to have been made in the State of Missouri and shall be - governed by and construed in accordance with the laws of the State of Missouri, notwithstanding either the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. -7- 16. Venue. The parties hereto agree that any suit filed arising out of or in connection with this Agreement shall be brought only in the Federal Court for the Eastern District of Missouri, unless said Court shall lack jurisdiction, in which case such action shall be brought only in the circuit Court in the County of St. Louis, Missouri. The parties have executed this Agreement as of January 1, 1998. LEONARD'S METAL, INC. ("Corporation") By: __________________________ Ronald S. Saks, President ------------------------------- Lawrence J. LeGrand ("Employee") -8- EX-10 10 EXHIBIT 10.5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and PHILLIP A. LAJEUNESSE ("Employee") hereby agree as follows: 1. Employment. The Corporation hereby employs Employee, and Employee accepts employment from the Corporation, upon the terms and conditions hereinafter set forth. Any and all employment agreements heretofore entered into between the Corporation and Employee are hereby terminated and cancelled, and each of the parties hereto mutually releases and discharges the other from any and all obligations and liabilities heretofore or now existing under or by virtue of any such employment agreements, it being the intention of the parties hereto that this Agreement, effective immediately, shall supersede and be in lieu of any and all prior employment agreements between them. 2. Term of Employment. The initial term of Employee's employment under this Agreement shall commence as of January 1, 1998 and shall continue for a two (2) year period terminating December 31, 1999; provided, however, that this Agreement shall be automatically extended for additional terms of one year each unless not later than October 31 of any year beginning in 1999, either party has given written notice to the other party of its or his intention not to extend the term of this Agreement; and provided, further, that the term of employment may be terminated upon the earlier occurrence of any of the following events: (a) Upon the termination of the business or corporate existence of the Corporation; (b) Upon the death of the Employee; (c) At the Corporation's option if Employee shall suffer a permanent disability; (For purpose of this Agreement "permanent disability" shall be defined as Employee's inability, through physical or mental illness or other cause, to perform the essential functions of Employee's usual duties, with or without a reasonable accommodation that would not cause an undue hardship to the Corporation, for a period of 12 months or more. The Corporation's option in this regard shall be exercised in writing and mailed or delivered to Employee or Employee's personal representative, and shall be effective on the date of mailing or delivery of the option as exercised.) or (d) At the Corporation's option upon ten (10) days written notice to Employee in the event of any breach or default by Employee of any of the terms of this Agreement or of any of Employee's duties or obligations hereunder, or in the event the Corporation determines that Employee is not performing the duties required of him hereunder to the satisfaction of the Corporation. Upon termination of employment for any reason, Employee shall be entitled to receive only the Base Salary (as that term is hereinafter defined) accrued but unpaid as of the date of termination and shall not be entitled to additional compensation except as expressly provided in this Agreement. 3. Compensation. (A) During the term of this Agreement the Corporation shall compensate Employee for Employee's services rendered hereunder by paying to Employee an annual salary (the "Base Salary") of One Hundred Twenty-Five Thousand Dollars ($125,000.00) for the fiscal year of the Company ending December 31, 1998, and the sum of One Hundred Thirty-Five Thousand Dollars ($135,000.00) for the fiscal year ending December 31, 1999. The Base Salary shall be payable in equal monthly installments. (B) With respect to each complete fiscal year of the Corporation during which (i) the Employee is employed under the terms of this Agreement as of the last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as that term is hereinafter defined) is more than Five Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in addition to the Base Salary, an annual "Performance Bonus". The amount of the annual Performance Bonus (if any) shall be equal to one percent (1%) of the Corporation's Annual Net Income that is between Five Million Dollars ($5,000,000.00) and Ten Million Dollars ($10,000,000.00), inclusive. In the event the Corporation's Annual Net Income for any given fiscal year is Five Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a Performance Bonus with respect to such fiscal year. Notwithstanding anything contained herein to the contrary, in the event the sum of the Employee's Performance Bonus with respect to a fiscal year plus the Employee's benefit under all performance/production incentive programs of the Corporation in which the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year exceeds Fifty Thousand Dollars ($50,000.00), the amount of the Employee's Performance Bonus for such year shall be reduced so that the sum of the Performance Bonus and the Incentive Benefit equals Fifty Thousand Dollars ($50,000.00). -2- For purposes of the calculation of the Performance Bonus, the Corporation's "Annual Net Income" means the consolidated net profit of the Corporation and its subsidiaries, for a given fiscal year, as determined by the firm of independent certified public accountants providing auditing services to the Corporation, using generally accepted accounting principles consistently applied, and calculated without regard to (a) any bonuses paid to the Corporation's Chairman of the Board, President and any Vice-President; (b) federal and state income tax; and (c) any income or loss attributable to any other corporation or entity (including the assets of a corporation or entity that constitute an operating business) acquired by or merged into the Corporation subsequent to the effective date of this Agreement. If during the term of this Agreement outstanding debt of the Corporation is repaid through the proceeds of the sale of the Corporation's stock by the Corporation, the interest that otherwise would have been payable on such repaid debt shall be deemed to have been paid by the Corporation for purposes of calculating the Corporation's "Annual Net Income", as if such repayment of debt had not occurred. The Corporation shall pay to Employee any Performance Bonus due the Employee hereunder not later than fifteen (15) days after the receipt by the Corporation of its annual audited financial statements, which the Corporation expects to receive within ninety (90) days after the end of each fiscal year of the Corporation. (C) In addition to the Base salary and Performance Bonus (if any) Employee shall be entitled to receive such bonus compensation as the Board of Directors of the Corporation may authorize from time to time. 4. Duties of Employee. (A) Employee shall serve as General Manager of the Corporation's plant located in Wichita, Kansas or in such other positions as may be determined by the Board of Directors of the Corporation, and Employee shall perform such duties on behalf of the Corporation and its subsidiaries by such means and in such manner as may be specified from time to time by the officers or Board of Directors of the Corporation. (B) Employee agrees to abide by and conform to all rules established by the Corporation applicable to its employees. (C) Employee acknowledges that he is being employed as a full-time employee, and Employee agrees to devote so much of Employee's entire time, attention and energies to the business of the Corporation as is necessary for the successful operation of the Corporation and shall endeavor at all times to improve the business of the Corporation. 5. Expenses. During the period of Employee's employment, except as otherwise specifically provided in this Agreement, the Corporation will pay directly, or reimburse Employee for, all items of reasonable and necessary business expenses approved in advance by the Corporation if such expenses are incurred by Employee in the interest of the business of the Corporation. The Corporation shall also reimburse Employee for automobile expenses incurred by Employee in the performance of Employee's duties hereunder. The amount of such reimbursement shall be in accordance with the automobile expense reimbursement policy adopted (and as it may be modified from time to time) by the Corporation's Board of Directors. All such expenses paid by Employee will be reimbursed by the Corporation upon presentation by Employee, from time to time (but not less than quarterly), of an itemized account of such expenditures in accordance with the Corporation's policy for verifying such expenditures. -3- 6. Fringe Benefits. (A) Employee shall be entitled to participate in any health, accident and life insurance program and other benefits which have been or may be established by the Corporation for other employees of the Corporation performing duties similar to those of Employee. (B) Employee shall be entitled to an annual vacation without loss of compensation for such period as may be determined by the Board of Directors of the Corporation. (C) The Corporation shall furnish to the Employee during the term of his employment an automobile comparable to the automobiles furnished by the Corporation to other executives performing duties similar to those performed by Employee, to aid the Employee in the performance of his duties. 7. Covenants of Employee. (A) During the term of Employee's employment with the Corporation and for all time thereafter Employee covenants and agrees that Employee will not in any manner directly or indirectly, except as required in Employee's duties to the Corporation, disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company, directly or indirectly, any knowledge, devices, information, techniques, customer lists, business plans or other data belonging to the Corporation or developed by Employee on behalf of the Corporation during his employment with the Corporation, without regard to whether all of the foregoing matters will be deemed confidential, material or important, the parties hereto stipulating, as between them, that the same are important, material, confidential and the property of the Corporation, that disclosure of the same to or use of the same by third parties would greatly affect the effective and successful conduct of the business of the Corporation and the goodwill of the Corporation, and that any breach of the terms of this subparagraph (A) shall be a material breach of this Agreement. (B) During the term of Employee's employment with the Corporation and for a period of two (2) years (the "Covenant Term") after cessation for whatever reason of such employment (except as hereinafter provided in subparagraph (C) of this paragraph 7), Employee covenants and agrees that Employee will not in any manner directly or indirectly: -4- (i) solicit, divert, take away or interfere with any of the customers (or their respective affiliates or successors) of the Corporation; (ii) engage directly or indirectly, either personally or as an employee, partner, associate partner, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business which is competitive with the business of the Corporation. For purposes of this covenant a business will be deemed competitive if it is conducted in whole or in part within any geographic area wherein the Corporation is engaged in marketing its products, and if it involves the manufacture of component parts for commercial aircraft or any other business which is in any manner competitive, as of the date of cessation of Employee's employment, with any business then being conducted by the Corporation or as to which the Corporation has then formulated definitive plans to enter; (iii) induce any salesman, distributor, supplier, manufacturer, representative, agent, jobber or other person transacting business with the Corporation to terminate their relationship with the Corporation, or to represent, distribute or sell products in competition with products of the Corporation; or (iv) induce or cause any employee of the Corporation to leave the employ of the Corporation. (C) The parties agree that the Covenant Term provided for in the preceding subparagraph (B) shall be: (i) reduced to six (6) months in the event all of the operating assets or all of the common stock of the Corporation is sold to any entity or individuals unaffiliated with the Corporation, its successors or assigns; or (ii) eliminated if the business currently operated by the Corporation is terminated and the assets of the Corporation are liquidated. (D) All the covenants of Employee contained in this paragraph 7 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of these covenants. -5- (E) It is the intention of the parties to restrict the activities of Employee under this paragraph 7 only to the extent necessary for the protection of legitimate business interests of the Corporation, and the parties specifically covenant and agree that should any of the provisions set forth therein, under any set of circumstances not now foreseen by the parties, be deemed too broad for such purpose, said provisions will nevertheless be valid and enforceable to the extent necessary for such protection. 8. Documents. Upon cessation of Employee's employment with the Corporation, for whatever reason, all documents, records (including without limitation, customer records), notebooks, invoices, statements or correspondence, including copies thereof, relating to the business of the Corporation then in Employee's possession, whether prepared by Employee or others, will be delivered to and left with the Corporation, and Employee agrees not to retain copies of the foregoing documents without the written consent of the Corporation. 9. Remedies. In the event of the breach by Employee of any of the terms of this Agreement, notwithstanding anything to the contrary contained in this Agreement, the Corporation may terminate the employment of Employee by written notice thereof to Employee and with payment of the Base Salary to Employee only to the date of such termination. It is further agreed that any breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to the Corporation and will authorize recourse to injunction and/or specific performance as well as to other legal or equitable remedies to which the Corporation may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies by the Corporation shall not constitute a waiver of the right to pursue other available remedies. In the event it becomes necessary for the Corporation to institute a suit at law or in equity for the purpose of enforcing any of the provisions of this Agreement, the Corporation shall be entitled to recover from Employee the Corporation's reasonable attorneys' fees plus court costs and expenses. 10. Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any court of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof, shall continue in full force and effect and shall be interpreted as if such invalid agreements or covenants were not contained herein. -6- 11. Waiver or Modification. No waiver or modification of this Agreement or of any covenant, condition or limitation herein shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Paragraph may not be waived except as herein set forth. Failure of the Corporation to exercise or otherwise act with respect to any of its rights hereunder in the event of a breach of any of the terms or conditions hereof by Employee shall not be construed as a waiver of such breach nor prevent the Corporation from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 12. Assignability. The services to be performed by Employee hereunder are personal in nature and, therefore, Employee shall not assign Employee's rights or delegate Employee's obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 13. Successors. Subject to the provisions of paragraph 12, this Agreement shall be binding upon and shall inure to the benefit of the Corporation and Employee and their respective heirs, executors, administrators, legal administrators, successors and assigns. 14. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered personally or mailed by certified or registered mail, return receipt requested, if to the Corporation, to: Ronald S. Saks, President Leonard's Metal, Inc. P.O. Box 678 St. Charles, MO 63302-0678 and, if to Employee, to: Mr. Phillip A. Lajeunesse =========================== or to such other address as may be specified by either of the parties in the manner provided under this paragraph 14. 15. Construction. This Agreement shall be deemed for all purposes to have been made in the State of Missouri and shall be - governed by and construed in accordance with the laws of the State of Missouri, notwithstanding either the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. -7- 16. Venue. The parties hereto agree that any suit filed arising out of or in connection with this Agreement shall be brought only in the Federal Court for the Eastern District of Missouri, unless said Court shall lack jurisdiction, in which case such action shall be brought only in the circuit Court in the County of St. Louis, Missouri. The parties have executed this Agreement as of January 1, 1998. LEONARD'S METAL, INC. ("Corporation") By: __________________________ Ronald S. Saks, President ------------------------------- Phillip A. Lajeunesse ("Employee") -8- EX-10 11 EXHIBIT 10.6 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and ROBERT T. GRAH ("Employee") hereby agree as follows: 1. Employment. The Corporation hereby employs Employee, and Employee accepts employment from the Corporation, upon the terms and conditions hereinafter set forth. Any and all employment agreements heretofore entered into between the Corporation and Employee are hereby terminated and cancelled, and each of the parties hereto mutually releases and discharges the other from any and all obligations and liabilities heretofore or now existing under or by virtue of any such employment agreements, it being the intention of the parties hereto that this Agreement, effective immediately, shall supersede and be in lieu of any and all prior employment agreements between them. 2. Term of Employment. The initial term of Employee's employment under this Agreement shall commence as of January 1, 1998 and shall continue for a two (2) year period terminating December 31, 1999; provided, however, that this Agreement shall be automatically extended for additional terms of one year each unless not later than October 31 of any year beginning in 1999, either party has given written notice to the other party of its or his intention not to extend the term of this Agreement; and provided, further, that the term of employment may be terminated upon the earlier occurrence of any of the following events: (a) Upon the termination of the business or corporate existence of the Corporation; (b) Upon the death of the Employee; (c) At the Corporation's option if Employee shall suffer a permanent disability; (For purpose of this Agreement "permanent disability" shall be defined as Employee's inability, through physical or mental illness or other cause, to perform the essential functions of Employee's usual duties, with or without a reasonable accommodation that would not cause an undue hardship to the Corporation, for a period of 12 months or more. The Corporation's option in this regard shall be exercised in writing and mailed or delivered to Employee or Employee's personal representative, and shall be effective on the date of mailing or delivery of the option as exercised.) or (d) At the Corporation's option upon ten (10) days written notice to Employee in the event of any breach or default by Employee of any of the terms of this Agreement or of any of Employee's duties or obligations hereunder, or in the event the Corporation determines that Employee is not performing the duties required of him hereunder to the satisfaction of the corporation. Upon termination of employment for any reason, Employee shall be entitled to receive only the Base Salary (as that term is hereinafter defined) accrued but unpaid as of the date of termination and shall not be entitled to additional compensation except as expressly provided in this Agreement. 3. Compensation. (A) During the term of this Agreement the Corporation shall compensate Employee for Employee's services rendered hereunder by paying to Employee an annual salary (the "Base Salary") as follows: (i) One Hundred Five Thousand Dollars ($105,000.00) payable in equal monthly installments during the calendar year 1998; and (ii) One Hundred Fifteen Thousand Dollars ($115,000.00) payable in equal monthly installments during the calendar year 1999. (B) With respect to each complete fiscal year of the Corporation during which (i) the Employee is employed under the terms of this Agreement as of the last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as that term is hereinafter defined) is more than Five Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in addition to the Base Salary, an annual "Performance Bonus". The amount of the annual Performance Bonus (if any) shall be equal to one percent (1%) of the Corporation's Annual Net Income that is between Five Million Dollars ($5,000,000.00) and Twelve Million Dollars ($12,000,000.00), inclusive. In the event the Corporation's Annual Net Income for any given fiscal year is Five Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a Performance Bonus with respect to such fiscal year. Notwithstanding anything contained herein to the contrary, in the event the sum of the Employee's Performance Bonus with respect to a fiscal year plus the Employee's benefit under all performance/production incentive programs of the Corporation in which the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year exceeds Seventy Thousand Dollars ($70,000.00), the amount of the Employee's Performance Bonus for such year shall be reduced so that the sum of the Performance Bonus and the Incentive Benefit equals Seventy Thousand Dollars ($70,000.00). -2- For purposes of the calculation of the Performance Bonus, the Corporation's "Annual Net Income" means the consolidated net profit of the Corporation and its subsidiaries, for a given fiscal year, as determined by the firm of independent certified public accountants providing auditing services to the Corporation, using generally accepted accounting principles consistently applied, and calculated without regard to (a) any bonuses paid to the Corporation's Chairman of the Board, President and any Vice-President; (b) federal and state income tax; and (c) any income or loss attributable to any other corporation or entity (including the assets of a corporation or entity that constitute an operating business) acquired by or merged into the Corporation subsequent to the effective date of this Agreement. If during the term of this Agreement outstanding debt of the Corporation is repaid through the proceeds of the sale of the Corporation's stock by the Corporation, the interest that otherwise would have been payable on such repaid debt shall be deemed to have been paid by the Corporation for purposes of calculating the Corporation's "Annual Net Income", as if such repayment of debt had not occurred. The Corporation shall pay to Employee any Performance Bonus due the Employee hereunder not later than fifteen (15) days after the receipt by the Corporation of its annual audited financial statements, which the Corporation expects to receive within ninety (90) days after the end of each fiscal year of the Corporation. (C) In addition to the Base salary and Performance Bonus (if any) Employee shall be entitled to receive such bonus compensation as the Board of Directors of the Corporation may authorize from time to time. 4. Duties of Employee. (A) Employee shall serve as General Manager of the LMI Finishing, Inc. plant located in Tulsa, Oklahoma (a subsidiary of the Corporation) or in such other positions as may be determined by the Board of Directors of the Corporation, and Employee shall perform such duties on behalf of the Corporation and its subsidiaries by such means and in such manner as may be specified from time to time by the officers or Board of Directors of the Corporation. (B) Employee agrees to abide by and conform to all rules established by the Corporation applicable to its employees. (C) Employee acknowledges that he is being employed as a full-time employee, and Employee agrees to devote so much of Employee's entire time, attention and energies to the business of the Corporation as is necessary for the successful operation of the Corporation and shall endeavor at all times to improve the business of the Corporation. 5. Expenses. During the period of Employee's employment, except as otherwise specifically provided in this Agreement, the Corporation will pay directly, or reimburse Employee for, all items of reasonable and necessary business expenses approved in advance by the Corporation if such expenses are incurred by Employee in the interest of the business of the Corporation. The Corporation shall also reimburse Employee for automobile expenses incurred by Employee in the performance of Employee's duties hereunder. The amount of such reimbursement shall be in accordance with the automobile expense reimbursement policy adopted (and as it may be modified from time to time) by the Corporation's Board of Directors. All such expenses paid by Employee will be reimbursed by the Corporation upon presentation by Employee, from time to time (but not less than quarterly), of an itemized account of such expenditures in accordance with the Corporation's policy for verifying such expenditures. -3- 6. Fringe Benefits. (A) Employee shall be entitled to participate in any health, accident and life insurance program and other benefits which have been or may be established by the Corporation for other employees of the Corporation performing duties similar to those of Employee. (B) Employee shall be entitled to an annual vacation without loss of compensation for such period as may be determined by the Board of Directors of the Corporation. (C) The Corporation shall furnish to the Employee during the term of his employment an automobile comparable to the automobiles furnished by the Corporation to other executives performing duties similar to those performed by Employee, to aid the Employee in the performance of his duties. 7. Covenants of Employee. (A) During the term of Employee's employment with the Corporation and for all time thereafter Employee covenants and agrees that Employee will not in any manner directly or indirectly, except as required in Employee's duties to the Corporation, disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company, directly or indirectly, any knowledge, devices, information, techniques, customer lists, business plans or other data belonging to the Corporation or developed by Employee on behalf of the Corporation during his employment with the Corporation, without regard to whether all of the foregoing matters will be deemed confidential, material or important, the parties hereto stipulating, as between them, that the same are important, material, confidential and the property of the Corporation, that disclosure of the same to or use of the same by third parties would greatly affect the effective and successful conduct of the business of the Corporation and the goodwill of the Corporation, and that any breach of the terms of this subparagraph (A) shall be a material breach of this Agreement. -4- (B) During the term of Employee's employment with the Corporation and for a period of two (2) years (the "Covenant Term") after cessation for whatever reason of such employment (except as hereinafter provided in subparagraph (C) of this paragraph 7), Employee covenants and agrees that Employee will not in any manner directly or indirectly: (i) solicit, divert, take away or interfere with any of the customers (or their respective affiliates or successors) of the Corporation; (ii) engage directly or indirectly, either personally or as an employee, partner, associate partner, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business which is competitive with the business of the Corporation. For purposes of this covenant a business will be deemed competitive if it is conducted in whole or in part within any geographic area wherein the Corporation is engaged in marketing its products, and if it involves the manufacture of component parts for commercial aircraft or any other business which is in any manner competitive, as of the date of cessation of Employee's employment, with any business then being conducted by the Corporation or as to which the Corporation has then formulated definitive plans to enter; (iii) induce any salesman, distributor, supplier, manufacturer, representative, agent, jobber or other person transacting business with the Corporation to terminate their relationship with the Corporation, or to represent, distribute or sell products in competition with products of the Corporation; or (iv) induce or cause any employee of the Corporation to leave the employ of the Corporation. (C) The parties agree that the Covenant Term provided for in the preceding subparagraph (B) shall be: (i) reduced to six (6) months in the event all of the operating assets or all of the common stock of the Corporation is sold to any entity or individuals unaffiliated with the Corporation, its successors or assigns; or (ii) eliminated if the business currently operated by the Corporation is terminated and the assets of the Corporation are liquidated. (D) All the covenants of Employee contained in this paragraph 7 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of these covenants. -5- (E) It is the intention of the parties to restrict the activities of Employee under this paragraph 7 only to the extent necessary for the protection of legitimate business interests of the Corporation, and the parties specifically covenant and agree that should any of the provisions set forth therein, under any set of circumstances not now foreseen by the parties, be deemed too broad for such purpose, said provisions will nevertheless be valid and enforceable to the extent necessary for such protection. 8. Documents. Upon cessation of Employee's employment with the Corporation, for whatever reason, all documents, records (including without limitation, customer records), notebooks, invoices, statements or correspondence, including copies thereof, relating to the business of the Corporation then in Employee's possession, whether prepared by Employee or others, will be delivered to and left with the Corporation, and Employee agrees not to retain copies of the foregoing documents without the written consent of the Corporation. 9. Remedies. In the event of the breach by Employee of any of the terms of this Agreement, notwithstanding anything to the contrary contained in this Agreement, the Corporation may terminate the employment of Employee by written notice thereof to Employee and with payment of the Base Salary to Employee only to the date of such termination. It is further agreed that any breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to the Corporation and will authorize recourse to injunction and/or specific performance as well as to other legal or equitable remedies to which the Corporation may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies by the Corporation shall not constitute a waiver of the right to pursue other available remedies. In the event it becomes necessary for the Corporation to institute a suit at law or in equity for the purpose of enforcing any of the provisions of this Agreement, the Corporation shall be entitled to recover from Employee the Corporation's reasonable attorneys' fees plus court costs and expenses. 10. Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any court of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof, shall continue in full force and effect and shall be interpreted as if such invalid agreements or covenants were not contained herein. -6- 11. Waiver or Modification. No waiver or modification of this Agreement or of any covenant, condition or limitation herein shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Paragraph may not be waived except as herein set forth. Failure of the Corporation to exercise or otherwise act with respect to any of its rights hereunder in the event of a breach of any of the terms or conditions hereof by Employee shall not be construed as a waiver of such breach nor prevent the Corporation from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 12. Assignability. The services to be performed by Employee hereunder are personal in nature and, therefore, Employee shall not assign Employee's rights or delegate Employee's obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 13. Successors. Subject to the provisions of paragraph 12, this Agreement shall be binding upon and shall inure to the benefit of the Corporation and Employee and their respective heirs, executors, administrators, legal administrators, successors and assigns. 14. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered personally or mailed by certified or registered mail, return receipt requested, if to the Corporation, to: Ronald S. Saks, President Leonard's Metal, Inc. P.O. Box 678 St. Charles, MO 63302-0678 and, if to Employee, to: Mr. Robert T. Grah ___________________________ ___________________________ or to such other address as may be specified by either of the parties in the manner provided under this paragraph 14. 15. Construction. This Agreement shall be deemed for all purposes to have been made in the State of Missouri and shall be governed by and construed in accordance with the laws of the State of Missouri, notwithstanding either the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. -7- 16. Venue. The parties hereto agree that any suit filed arising out of or in connection with this Agreement shall be brought only in the Federal Court for the Eastern District of Missouri, unless said Court shall lack jurisdiction, in which case such action shall be brought only in the circuit Court in the County of St. Louis, Missouri. The parties have executed this Agreement as of January 1, 1998. LEONARD'S METAL, INC. ("Corporation") By: __________________________ Ronald S. Saks, President -------------------------------- Robert T. Grah ("Employee") -8- EX-10 12 EXHIBIT 10.7 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and BRADLEY L. NELSON ("Employee") hereby agree as follows: 1. Employment. The Corporation hereby employs Employee, and Employee accepts employment from the Corporation, upon the terms and conditions hereinafter set forth. Any and all employment agreements heretofore entered into between the Corporation and Employee are hereby terminated and cancelled, and each of the parties hereto mutually releases and discharges the other from any and all obligations and liabilities heretofore or now existing under or by virtue of any such employment agreements, it being the intention of the parties hereto that this Agreement, effective immediately, shall supersede and be in lieu of any and all prior employment agreements between them. 2. Term of Employment. The initial term of Employee's employment under this Agreement shall commence as of January 1, 1998 and shall continue for a two (2) year period terminating December 31, 1999; provided, however, that this Agreement shall be automatically extended for additional terms of one year each unless not later than October 31 of any year beginning in 1999, either party has given written notice to the other party of its or his intention not to extend the term of this Agreement; and provided, further, that the term of employment may be terminated upon the earlier occurrence of any of the following events: (a) Upon the termination of the business or corporate existence of the Corporation; (b) Upon the death of the Employee; (c) At the Corporation's option if Employee shall suffer a permanent disability; (For purpose of this Agreement "permanent disability" shall be defined as Employee's inability, through physical or mental illness or other cause, to perform the essential functions of Employee's usual duties, with or without a reasonable accommodation that would not cause an undue hardship to the Corporation, for a period of 12 months or more. The Corporation's option in this regard shall be exercised in writing and mailed or delivered to Employee or Employee's personal representative, and shall be effective on the date of mailing or delivery of the option as exercised.) or (d) At the Corporation's option upon ten (10) days written notice to Employee in the event of any breach or default by Employee of any of the terms of this Agreement or of any of Employee's duties or obligations hereunder, or in the event the Corporation determines that Employee is not performing the duties required of him hereunder to the satisfaction of the Corporation. Upon termination of employment for any reason, Employee shall be entitled to receive only the Base Salary (as that term is hereinafter defined) accrued but unpaid as of the date of termination and shall not be entitled to additional compensation except as expressly provided in this Agreement. 3. Compensation. (A) During the term of this Agreement the Corporation shall compensate Employee for Employee's services rendered hereunder by paying to Employee an annual salary (the "Base Salary") as follows: (i) One Hundred Five Thousand Dollars ($105,000.00) payable in equal monthly installments during the calendar year 1998; and (ii) One Hundred Fifteen Thousand Dollars ($115,000.00) payable in equal monthly installments during the calendar year 1999. (B) With respect to each complete fiscal year of the Corporation during which (i) the Employee is employed under the terms of this Agreement as of the last day of such fiscal year, and (ii) the Corporation's "Annual Net Income" (as that term is hereinafter defined) is more than Five Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in addition to the Base Salary, an annual "Performance Bonus". The amount of the annual Performance Bonus (if any) shall be equal to one percent (1%) of the Corporation's Annual Net Income that is between Five Million Dollars ($5,000,000.00) and Twelve Million Dollars ($12,000,000.00), inclusive. In the event the Corporation's Annual Net Income for any given fiscal year is Five Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a Performance Bonus with respect to such fiscal year. Notwithstanding anything contained herein to the contrary, in the event the sum of the Employee's Performance Bonus with respect to a fiscal year plus the Employee's benefit under all performance/production incentive programs of the Corporation in which the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year exceeds Seventy Thousand Dollars ($70,000.00), the amount of the Employee's Performance Bonus for such year shall be reduced so that the sum of the Performance Bonus and the Incentive Benefit equals Seventy Thousand Dollars ($70,000.00). For purposes of the calculation of the Performance Bonus, the Corporation's "Annual Net Income" means the consolidated net profit of the Corporation and its subsidiaries, for a given fiscal year, as determined by the firm of independent certified public accountants providing auditing services to the Corporation, using generally accepted accounting principles consistently applied, and calculated without regard to (a) any bonuses paid to the Corporation's Chairman of the Board, President and any Vice-President; (b) federal and state income tax; and (c) any income or loss attributable to any other corporation or entity (including the assets of a corporation or entity that constitute an operating business) acquired by or merged into the Corporation subsequent to the effective date of this Agreement. If during the term of this Agreement outstanding debt of the Corporation is repaid through the proceeds of the sale of the Corporation's stock by the Corporation, the interest that otherwise would have been payable on such repaid debt shall be deemed to have been paid by the Corporation for purposes of calculating the Corporation's "Annual Net Income", as if such repayment of debt had not occurred. -2- The Corporation shall pay to Employee any Performance Bonus due the Employee hereunder not later than fifteen (15) days after the receipt by the Corporation of its annual audited financial statements, which the Corporation expects to receive within ninety (90) days after the end of each fiscal year of the Corporation. (C) In addition to the Base salary and Performance Bonus (if any) Employee shall be entitled to receive such bonus compensation as the Board of Directors of the Corporation may authorize from time to time. 4. Duties of Employee. (A) Employee shall serve as General Manager of the Corporation's plant located in Auburn, Washington or in such other positions as may be determined by the Board of Directors of the Corporation, and Employee shall perform such duties on behalf of the Corporation and its subsidiaries by such means and in such manner as may be specified from time to time by the officers or Board of Directors of the Corporation. (B) Employee agrees to abide by and conform to all rules established by the Corporation applicable to its employees. (C) Employee acknowledges that he is being employed as a full-time employee, and Employee agrees to devote so much of Employee's entire time, attention and energies to the business of the Corporation as is necessary for the successful operation of the Corporation and shall endeavor at all times to improve the business of the Corporation. 5. Expenses. During the period of Employee's employment, except as otherwise specifically provided in this Agreement, the Corporation will pay directly, or reimburse Employee for, all items of reasonable and necessary business expenses approved in advance by the Corporation if such expenses are incurred by Employee in the interest of the business of the Corporation. The Corporation shall also reimburse Employee for automobile expenses incurred by Employee in the performance of Employee's duties hereunder. The amount of such reimbursement shall be in accordance with the automobile expense reimbursement policy adopted (and as it may be modified from time to time) by the Corporation's Board of Directors. All such expenses paid by Employee will be reimbursed by the Corporation upon presentation by Employee, from time to time (but not less than quarterly), of an itemized account of such expenditures in accordance with the Corporation's policy for verifying such expenditures. -3- 6. Fringe Benefits. (A) Employee shall be entitled to participate in any health, accident and life insurance program and other benefits which have been or may be established by the Corporation for other employees of the Corporation performing duties similar to those of Employee. (B) Employee shall be entitled to an annual vacation without loss of compensation for such period as may be determined by the Board of Directors of the Corporation. (C) The Corporation shall furnish to the Employee during the term of his employment an automobile comparable to the automobiles furnished by the Corporation to other executives performing duties similar to those performed by Employee, to aid the Employee in the performance of his duties. 7. Covenants of Employee. (A) During the term of Employee's employment with the Corporation and for all time thereafter Employee covenants and agrees that Employee will not in any manner directly or indirectly, except as required in Employee's duties to the Corporation, disclose or divulge to any person, entity, firm or company whatsoever, or use for Employee's own benefit or the benefit of any other person, entity, firm or company, directly or indirectly, any knowledge, devices, information, techniques, customer lists, business plans or other data belonging to the Corporation or developed by Employee on behalf of the Corporation during his employment with the Corporation, without regard to whether all of the foregoing matters will be deemed confidential, material or important, the parties hereto stipulating, as between them, that the same are important, material, confidential and the property of the Corporation, that disclosure of the same to or use of the same by third parties would greatly affect the effective and successful conduct of the business of the Corporation and the goodwill of the Corporation, and that any breach of the terms of this subparagraph (A) shall be a material breach of this Agreement. -4- (B) During the term of Employee's employment with the Corporation and for a period of two (2) years (the "Covenant Term") after cessation for whatever reason of such employment (except as hereinafter provided in subparagraph (C) of this paragraph 7), Employee covenants and agrees that Employee will not in any manner directly or indirectly: (i) solicit, divert, take away or interfere with any of the customers (or their respective affiliates or successors) of the Corporation; (ii) engage directly or indirectly, either personally or as an employee, partner, associate partner, officer, manager, agent, advisor, consultant or otherwise, or by means of any corporate or other entity or device, in any business which is competitive with the business of the Corporation. For purposes of this covenant a business will be deemed competitive if it is conducted in whole or in part within any geographic area wherein the Corporation is engaged in marketing its products, and if it involves the manufacture of component parts for commercial aircraft or any other business which is in any manner competitive, as of the date of cessation of Employee's employment, with any business then being conducted by the Corporation or as to which the Corporation has then formulated definitive plans to enter; (iii) induce any salesman, distributor, supplier, manufacturer, representative, agent, jobber or other person transacting business with the Corporation to terminate their relationship with the Corporation, or to represent, distribute or sell products in competition with products of the Corporation; or (iv) induce or cause any employee of the Corporation to leave the employ of the Corporation. (C) The parties agree that the Covenant Term provided for in the preceding subparagraph (B) shall be: (i) reduced to six (6) months in the event all of the operating assets or all of the common stock of the Corporation is sold to any entity or individuals unaffiliated with the Corporation, its successors or assigns; or (ii) eliminated if the business currently operated by the Corporation is terminated and the assets of the Corporation are liquidated. (D) All the covenants of Employee contained in this paragraph 7 shall be construed as agreements independent of any other provision of this Agreement, and the existence of any claim or cause of action against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of these covenants. -5- (E) It is the intention of the parties to restrict the activities of Employee under this paragraph 7 only to the extent necessary for the protection of legitimate business interests of the Corporation, and the parties specifically covenant and agree that should any of the provisions set forth therein, under any set of circumstances not now foreseen by the parties, be deemed too broad for such purpose, said provisions will nevertheless be valid and enforceable to the extent necessary for such protection. 8. Documents. Upon cessation of Employee's employment with the Corporation, for whatever reason, all documents, records (including without limitation, customer records), notebooks, invoices, statements or correspondence, including copies thereof, relating to the business of the Corporation then in Employee's possession, whether prepared by Employee or others, will be delivered to and left with the Corporation, and Employee agrees not to retain copies of the foregoing documents without the written consent of the Corporation. 9. Remedies. In the event of the breach by Employee of any of the terms of this Agreement, notwithstanding anything to the contrary contained in this Agreement, the Corporation may terminate the employment of Employee by written notice thereof to Employee and with payment of the Base Salary to Employee only to the date of such termination. It is further agreed that any breach or evasion of any of the terms of this Agreement by Employee will result in immediate and irreparable injury to the Corporation and will authorize recourse to injunction and/or specific performance as well as to other legal or equitable remedies to which the Corporation may be entitled. No remedy conferred by any of the specific provisions of this Agreement is intended to be exclusive of any other remedy and each and every remedy given hereunder or now or hereafter existing at law or in equity by statute or otherwise. The election of any one or more remedies by the Corporation shall not constitute a waiver of the right to pursue other available remedies. In the event it becomes necessary for the Corporation to institute a suit at law or in equity for the purpose of enforcing any of the provisions of this Agreement, the Corporation shall be entitled to recover from Employee the Corporation's reasonable attorneys' fees plus court costs and expenses. 10. Severability. All agreements and covenants contained herein are severable, and in the event any of them shall be held to be invalid by any court of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof, shall continue in full force and effect and shall be interpreted as if such invalid agreements or covenants were not contained herein. -6- 11. Waiver or Modification. No waiver or modification of this Agreement or of any covenant, condition or limitation herein shall be valid unless in writing and duly executed by the party to be charged therewith, and no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration or litigation between the parties hereto arising out of or affecting this Agreement, or the rights or obligations of the parties hereunder, unless such waiver or modification is in writing, duly executed as aforesaid, and the parties further agree that the provisions of this Paragraph may not be waived except as herein set forth. Failure of the Corporation to exercise or otherwise act with respect to any of its rights hereunder in the event of a breach of any of the terms or conditions hereof by Employee shall not be construed as a waiver of such breach nor prevent the Corporation from thereafter enforcing strict compliance with any and all of the terms and conditions hereof. 12. Assignability. The services to be performed by Employee hereunder are personal in nature and, therefore, Employee shall not assign Employee's rights or delegate Employee's obligations under this Agreement, and any attempted or purported assignment or delegation not herein permitted shall be null and void. 13. Successors. Subject to the provisions of paragraph 12, this Agreement shall be binding upon and shall inure to the benefit of the Corporation and Employee and their respective heirs, executors, administrators, legal administrators, successors and assigns. 14. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if delivered personally or mailed by certified or registered mail, return receipt requested, if to the Corporation, to: Ronald S. Saks, President Leonard's Metal, Inc. P.O. Box 678 St. Charles, MO 63302-0678 and, if to Employee, to: Mr. Bradley L. Nelson 12358 105th Place, NE Kirkland, WA 98034 or to such other address as may be specified by either of the parties in the manner provided under this paragraph 14. 15. Construction. This Agreement shall be deemed for all purposes to have been made in the State of Missouri and shall be - governed by and construed in accordance with the laws of the State of Missouri, notwithstanding either the place of execution hereof, nor the performance of any acts in connection herewith or hereunder in any other jurisdiction. -7- 16. Venue. The parties hereto agree that any suit filed arising out of or in connection with this Agreement shall be brought only in the Federal Court for the Eastern District of Missouri, unless said Court shall lack jurisdiction, in which case such action shall be brought only in the circuit Court in the County of St. Louis, Missouri. The parties have executed this Agreement as of January 1, 1998. LEONARD'S METAL, INC. ("Corporation") By: __________________________ Ronald S. Saks, President ------------------------------- Bradley L. Nelson ("Employee") -8- EX-10 13 EXHIBIT 10.12 PROFIT SHARING PLAN AND AMENDMENTS LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST ARTICLE I INTRODUCTION Leonard's Metal, Inc. (formerly known as Leonard's Metal Forming Company, Inc.) adopted the Leonard's Metal Forming Company Employee's Profit Sharing Plan and Trust (the "Plan") effective as of July 1, 1953, and the Plan has been amended several times since then in order to maintain its qualified status and benefit eligible employees. This instrument amends and restates the Plan effective as of January 1, 1989, unless otherwise specifically provided in the instrument. The provisions of the Plan as amended and incorporated herein shall govern the rights and benefits, if any, of each Employee (as that term and all other defined terms in this Introduction are defined in Article II hereof) who retires or otherwise incurs a Termination of Employment on or after January 1, 1989, except as otherwise specifically provided in the Plan. The Plan, as amended effective as of January 1, 1989, and from time to time thereafter, shall continue in force the Plan in effect prior to such amendment and all benefits payable to or funded for a Participant under the Plan shall be included in and shall be a part of the benefits provided by the Plan. The rights and benefits, if any, of any Employee who incurred a Termination of Employment prior to the effective date of any particular amendment shall be determined pursuant to the provisions of the Plan as in effect on the date of Termination of Employment, except as otherwise specifically provided in the Plan. The Plan set forth herein is intended to provide a means whereby the Company, through sharing its profits with its qualified Employees on a deferred basis, may encourage them to establish a regular method of savings and to create a fund available for their use at retirement or in the event of disability. It is intended that the Plan shall qualify as a profit sharing plan and as a cash or deferred plan under section 401 of the Internal Revenue Code. ARTICLE II DEFINITIONS 2.1 Account - shall mean the entire interest of a Participant in the Trust Fund as of the date of reference. A Participant's Account shall consist of any or all of the following subaccounts: Employer Contribution Account, Cash or Deferred Contribution Account, Matching Contribution Account and Rollover Account. 2.2 Active Participant - shall mean a Participant who: (A) completed 1,000 Hours of Service during the Plan Year and who was a Covered Employee on the last day of the Plan Year; (B) retired, suffered a Total Disability or died during a Plan Year; or (C) remained in the employ of the Employer through the end of the Plan Year, but changed from an eligible to an ineligible classification during the Plan Year, provided, however, that such Participant shall be deemed to be an Active Participant only with respect to his Covered Compensation while in an eligible status. 2.3 Affiliate - shall mean any corporation or other business entity that from time to time is, along with the Company, a member of a controlled group of businesses, as defined in sections 414(b) and 414(c) of the Code, or a member of an affiliated service group, as defined in section 414(m) of the Code and any other entity required to be aggregated with the Company pursuant to section 414(o) of the Code and the regulations thereunder. A business entity is an Affiliate only while a member of such group. 2.4 Age - shall mean the chronological age attained by the Employee at his most recent birthday or as of such other date of reference as is set forth in the Plan. 2.5 Anniversary Date - shall mean the last day in each Plan Year. 2.6 Beneficiary - shall mean the person or persons (natural or otherwise) designated as such by a Participant in accordance with the provisions of the Plan. 2.7 Break in Service - shall mean any Plan Year during which the Employee has not completed more than 500 Hours of Service. Any Break in Service shall be deemed to have commenced on the first day of the period in which it occurs. A Break in Service shall not be deemed to have occurred merely because an Employee fails to complete more than 500 Hours of Service during a Plan Year solely because of his or her retirement or death during such Plan Year. 2.8 Cash or Deferred Contributions - shall mean all contributions made to this Plan pursuant to a Participant's election in accordance with Section 4.3 hereof. 2.9 Cash or Deferred Contribution Account - shall mean so much of a Participant's Account which reflects the Participant's Cash or Deferred Contributions and the income, loss, appreciation and depreciation attributable thereto. 2.10 Code - shall mean the Internal Revenue Code of 1986, as amended. Reference to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. 2.11 Company - shall mean Leonard's Metal, Inc. 2.12 Compensation - shall mean the total amount paid by an Employer to an Employee during the Plan Year as regular or base salary or wages which is required to be reported as wages subject to federal income tax withholding on the Employee's Form W-2. Notwithstanding the above, Compensation shall include any amount which is contributed by the Employer pursuant to a salary reduction agreement and which is not includible in the Employee's gross income under sections 125, 402(e)(3), 402(h)(1)(B) or 403(b) of the Code. "Compensation" shall not include contributions to, or distributions from, this or any other profit sharing, pension, insurance, health, welfare or similar plan. For Plan Years ending on or before December 31, 1993, the Compensation of each Participant taken into account for any Plan Year shall not exceed $200,000, as such amount is adjusted by the Secretary of the Treasury at the same time and in the same manner as under section 415(d) of the Code. For Plan Years beginning on or after January 1, 1994, the Compensation of each Participant taken into account for any Plan Year shall not exceed $150,000, as such amount is adjusted by the Secretary of the Treasury in the manner provided under Section 401(a)(17)(B) of the Code. In determining the Compensation of a Participant for purposes of this limitation, the rules of section 414(q)(6) of the Code shall apply, except in applying such rules, the term "family" shall include only the Spouse of a Participant and any lineal descendants of the Participant who have not attained 19 years of age before the close of the Plan Year. 2.13 Contract - shall mean any annuity, pension, income or insurance policy or contract providing benefits under the Plan. 2.14 Controlled Group - shall mean the Company and each Affiliate. 2.15 Covered Compensation - shall mean the Compensation paid to an individual while he is both a Covered Employee and a Participant. 2.16 Covered Employee - shall mean an Employee who performs services for an Employer other than an Employee whose terms and conditions of employment are determined by collective bargaining with a third party and with respect to whom inclusion in the Plan has not been provided for in the collective bargaining agreement setting forth those terms and conditions of employment. 2.17 Date of Hire - shall mean the first day upon which an Employee performing duties for a member of the Controlled Group for which the Employee is paid or entitled to be paid. 2.18 Effective Date - shall mean, with respect to this amendment and restatement of the Plan, January 1, 1989. The Effective Date of the original profit sharing plan shall mean July 1, 1953. 2.19 Eligible Rollover Distribution - shall mean with respect to any distribution from this Plan to a Participant, all or any portion of such Participant's Account (other than a distribution which would not be included in the gross income of the Participant if distributed directly to the Participant); provided, however, an Eligible Rollover Distribution shall not include: (A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made -- (1) over the life or life expectancy of the Participant or the joint lives or life expectancies of the Participant and the Participant's Beneficiary, or (2) for a period of ten years or more; or (B) any distribution to the extent that such distribution is required under section 401(a)(9) of the Code. 2.20 Eligibility Computation Period - shall mean with respect to each Employee: (A) the 12-month period commencing on his or her most recent date of employment commencement; and (B) each and every full Plan Year (including Plan Years falling partially within the period described in the preceding subparagraph (A)) during which an Employee is in the service of the Employer. 2.21 Employee - shall mean any person employed by the Employer or any Affiliate. Any "Leased Employee" shall also be treated as an Employee. 2.22 Employer - shall mean any business entity that adopts the Plan. 2.23 Employer Contribution Account - shall mean so much of a Participant's Account that reflects the Participant's share of Profit Sharing Contributions and forfeitures and the income, loss, appreciation and depreciation attributable thereto. 2.24 Entry Date - shall mean each January 1 and July 1 during which this Plan remains in effect. 2.25 ERISA - shall mean the Employee Retirement Income Security Act of 1974, as amended. Reference to a section of ERISA shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. 2.26 General Trust Fund - shall mean all assets held by the Trustee in accordance with this Plan which have not been transferred to segregated self-directed accounts in accordance with Article VII hereof. 2.27 Highly Compensated Employee - shall mean for any Plan Year any Employee who, during the Plan Year or the preceding Plan Year: (A) Was at any time a five percent (5%) owner of the Employer; (B) Received Compensation from the Employer in excess of $75,000; (C) Received Compensation from the Employer in excess of $50,000 and was among the twenty percent (20%) of Employees paid the greatest Compensation for such year; or (D) Was at any time an officer of the Employer and received Compensation during such year from the Employer greater than fifty percent (50%) of the dollar limit in effect under section 415(b)(1)(A) of the Code for such year; as defined in accordance with section 414(q) of the Code; provided that, an Employee described in subsections (B), (C) or (D) for the Plan Year, but not the preceding Plan Year, shall be a Highly Compensated Employee only if the Employee is among the 100 Employees paid the greatest Compensation during the Plan Year. The dollar amounts in subsections (B) and (C) shall be adjusted in accordance with section 415(d) of the Code. If no officer has satisfied the compensation requirement of subsection (D) during either the current Plan Year or the prior Plan Year, the highest paid officer for such year shall be treated as a Highly Compensated Employee. A former Employee shall be treated as a Highly Compensated Employee if he was a Highly Compensated Employee when he incurred a Termination of Employment or he was a Highly Compensated Employee after attaining 55 years of age. If an Employee is, during the Plan Year or preceding Plan Year, a family member of a five percent (5%) owner who is an active or former Employee or a family member of a Highly Compensated Employee who is one of the ten most Highly Compensated Employees ranked on the basis of Compensation paid by the Employer during such year, then the family member and the five percent (5%) owner or top ten Highly Compensated Employee shall be aggregated. In such case, the family member and five percent (5%) owner or top ten Highly Compensated Employee shall be treated as a single Employee receiving Compensation and Plan contributions or benefits equal to the sum of such Compensation and contributions or benefits of the family member and five percent (5%) owner or top ten Highly Compensated Employee. For purposes of this Section, family member includes the Spouse, lineal ascendants and descendants of the Employee or former Employee and the Spouses of such lineal ascendants and descendants. 2.28 Hour of Service - shall mean each hour for which: (A) An Employee is paid, or entitled to payment, for the performance of duties for a member of the Controlled Group, directly or indirectly, which shall be credited to the computation period in which the duties are performed; (B) An Employee is paid, or entitled to payment of, compensation by a member of the Controlled Group, directly or indirectly, on account of a period of time during which no duties are performed, (regardless of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence which is calculated on the basis of units of time (such as a week's pay for vacation), which shall be credited to the computation period of periods in which such inactive period occurs, beginning with the first unit of time to which the payment relates; (C) An Employee is paid, or entitled to payment of, compensation by a member of the Controlled Group, directly or indirectly, on account of a period of time during which no duties are performed, (regardless of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability) layoff, jury duty, military duty or leave of absence which is not calculated on the basis of units of time (such as lump sum payment for disability through a disability insurance plan to which the Employer pays premiums), which shall be credited to the computation period or periods in which such inactive period occurs, provided that Hours of Service attributable to any one such payment shall not be allocated between more than two computation periods; and (D) Back pay, irrespective of mitigation of damages, is either awarded or agreed to by a member of the Controlled Group, which shall be credited to the computation period or periods to which the award or agreement for back pay pertains. In the case of payment of compensation on account of a period of time during which no duties are performed that is not calculated on the basis of units of time, as described in subsection (C) above, the number of Hours of Service to be credited shall be equal to the amount of the payment divided by the Employee's most recent hourly rate of compensation. The hourly rate of compensation for an hourly Employee shall be the Employee's most recent hourly rate of compensation; the hourly rate of compensation for a salaried Employee shall be the Employee's most recent rate of compensation per pay period divided by the number of hours regularly scheduled for the performance of duties during such period; and the hourly rate of compensation for an Employee compensated on some other basis (such as commissions) shall be deemed to be the minimum wage. Solely to determine whether a Break in Service has occurred, an Employee who is absent from work: (A) By reason of the pregnancy of the Employee; (B) By reason of the birth of a child of the Employee; (C) By reason of the placement of a child with the Employee for adoption by the Employee; or (D) To care for such child beginning immediately after such birth or placement; shall be credited with the Hours of Service which otherwise would normally have been credited to such Employee but for such actions or, when such Hours of Service cannot be determined, eight Hours of Service per day of absence. Such hours shall be credited in the Plan Year in which the absence begins, if the crediting is necessary to prevent a one year Break in Service in that year, or, in all other cases, in the immediately following Plan Year. In no event shall more than 501 Hours of Service be credited to an Employee on account of any single continuous period during which the Employee performs no duties. Nothing contained in this Section shall be construed to alter, amend, modify, invalidate, impair or supersede any law of the United States or any rule or regulation issued under any such law. Nothing contained herein shall be construed as denying an Employee credit for an Hour of Service if credit is required by separate federal law. 2.29 Leased Employee - shall mean any individual other than a common law employee, who pursuant to an agreement between any member of the Controlled Group and any other person, has performed services for such member, or for any person related to such member, as defined in section 414(n)(6) of the Code, on a substantially full-time basis for a period of at least one year and such services are of a type historically performed by employees in the business field of such member. An individual who becomes a Leased Employee shall be deemed to be an Employee for the purpose of eligibility to participate and vesting at the time the individual first begins performing services for such member. An individual shall not be considered a Leased Employee if: (A) Such individual is covered by a money purchase pension plan which provides: (1) a nonintegrated employer contribution rate of at least ten percent (10%) of compensation, as defined in section 415(c)(3) of the Code, but including amounts contributed by the Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code, (2) immediate participation, and (3) full and immediate vesting, as described in section 414(n)(5) of the Code; and (B) Leased Employees (determined without regard to this sentence) do not constitute more than twenty percent (20%) of such member's nonhighly compensated work force. 2.30 Matching Contributions Account - shall mean so much of a Participant's Account which reflects the Matching Contributions made by the Employer for the benefit of the Participant and the income, loss, appreciation and depreciation attributable thereto. 2.31 Matching Contributions - shall mean all contributions made to this Plan in accordance with Section 4.6 hereof. 2.32 Named Fiduciary - shall mean the Employer, the Trustee and the Plan Administrator (if other than the Employer). Each Named Fiduciary shall have only those particular powers, duties, responsibilities and obligations that are specifically given to him under this Plan. 2.33 Net Earnings - shall mean the current and accumulated earnings of the Employer before federal and state taxes and contributions to this and any other qualified plan. 2.34 Normal Retirement Age - shall mean the date the Employee attains 65 years of age. 2.35 Participant - shall mean any Employee who has met the requirements of Article III hereof and who has not yet received distribution of, or lost his rights to, the amount credited to his Account in accordance with the Plan. The term "Participant" shall include "Active Participant" (as defined in Section 2.2 hereof), "Retired Participant" (a former Employee who is presently receiving benefits under this Plan) and "Vested Participant" (a former Employee who is entitled at some future date to the distribution of benefits from this Plan). 2.36 Plan - shall mean the Leonard's Metal, Inc. Profit Sharing and Savings Plan and Trust, as set forth herein. 2.37 Plan Administrator - shall mean the person or committee so designated by the Company (if none is so designated, then the Company), or such successor person or committee as may be appointed by the Company from time to time in accordance with such procedures as the Company may establish. 2.38 Plan Year - shall mean the 12 consecutive month period commencing on January 1 and ending on the following December 31. For the period prior to September 1, 1986, such term shall mean the 12-month period commencing September 1 and ending on the subsequent August 31. Such term shall also include the short period from September 1, 1986 to December 1, 1986. 2.39 Profit Sharing Contributions - shall mean all contributions made to this Plan in accordance with Section 4.1 hereof. 2.40 Rollover Account - shall mean so much of a Participant's Account which reflects the Participant's Rollover Contributions and the income, loss, appreciation and depreciation attributable thereto. 2.41 Rollover Contributions - shall mean all contributions made to this Plan in accordance with Section 4.11 hereof. 2.42 Spouse or Surviving Spouse - shall mean the spouse or surviving spouse of the Participant, provided that a former spouse will be treated as the Spouse or Surviving Spouse and a current spouse will not be treated as the Spouse or Surviving Spouse to the extent provided under a qualified domestic relations order as described in section 414(p) of the Code. 2.43 Taxable Year - shall mean the taxable year of the Company. 2.44 Termination of Employment - shall occur when an Employee ceases employment for any reason with any member of the Controlled Group. Transfer of employment from an Employer to an Affiliate, from an Affiliate to an Employer, or from one Affiliate to another Affiliate shall not constitute a Termination of Employment. 2.45 Total Disability - shall mean a physical or mental condition of such severity and probable prolonged duration as to entitle the Participant to disability retirement benefits under the Federal Social Security Act. 2.46 Trust - shall mean the trust created hereunder. 2.47 Trust Fund or Fund - shall mean all of the assets of the Plan held by the Trustee (or any nominee thereof) at any time hereunder. 2.48 Trustee - shall mean the person(s) or entity so designated by the Company or such successor person(s) or entity as may be appointed by the Company from time to time in accordance with such procedures as the Company may establish. 2.49 Valuation Date - shall mean the last business day of the Plan Year, and each interim date on which the Trustee in his discretion values the Trust Fund. 2.50 Year of Service - shall have the following meanings when used in this Plan: (A) When applied to the eligibility provisions of this Plan, a "Year of Service" shall mean an Eligibility Computation Period during which an Employee completes at least 1,000 Hours of Service for an Employer. An Employee completes a Year of Service for entry on the last date of such Eligibility Computation Period. (B) When applied to the vesting provisions of this Plan, and subject to such exclusions as are provided in Article VIII hereof, any Plan Year during which an Employee completes at least 1,000 Hours of Service. ARTICLE III ELIGIBILITY AND PARTICIPATION 3.1 General Rule. Each Covered Employee who, as of the Effective Date of this restatement of the Plan, was a Participant in the Plan, shall remain a Participant. Each other Covered Employee shall be eligible to become a Participant on the Entry Date coincident with or next following the date on which he completes one Year of Service within an Eligibility Computation Period. Notwithstanding the foregoing, no person shall be admitted as a Participant if he is no longer an Employee on the Entry Date as of which he would otherwise have become a Participant. 3.2 Reemployed Former Employee. A former Employee who is reemployed by the Employer shall be eligible to participate in the Plan on the later of: (A) The date of such reemployment as a Covered Employee; or (B) The Entry Date specified for such Employee in Section 3.1. The Employee's initial Date of Hire shall be used to determine whether the Employee shall have satisfied the service requirement of Section 3.1. 3.3 Change in Status. An Employee who transfers from an Affiliate to an Employer as a Covered Employee and an Employee who transfers to a position in which he becomes a Covered Employee shall be eligible to participate in Plan on the later of: (A) The date of such transfer; or (B) The Entry Date specified for such Employee in Section 3.1. The Employee's initial Date of Hire shall be used to determine whether the Employee shall have satisfied the service requirement of Section 3.1. 3.4 Procedure for and Effect of Admission. Each Employee who becomes eligible for admission to participation in this Plan shall complete such forms and provide such data as are reasonably required by the Plan Administrator as a precondition of such admission. By becoming a Participant, each Employee shall for all purposes be conclusively deemed to have assented to the provisions of this Plan and to all amendments thereto. ARTICLE IV CONTRIBUTIONS 4.1 Profit Sharing Contributions. For each Taxable Year during which this Plan is in effect, the Employer may contribute to the Plan an amount, if any, as a Profit Sharing Contribution as the Employer in its sole discretion may determine. This provision shall not be construed as requiring the Employer to make a Profit Sharing Contribution in any specific Plan Year or Taxable Year. The Employer shall pay the Profit Sharing Contribution to the Trustee on or before the date established for the filing of the Employer's federal income tax return (including any extensions thereof) for the Taxable Year with respect to which such Profit Sharing Contribution is made. Amounts contributed for a Taxable Year pursuant to this Section 4.1 shall be deemed paid as of the last day of the Plan Year ending within such Taxable Year. The Employer shall designate the Taxable Year for which each Profit Sharing Contribution is made. Such contributions may be made whether or not the Employer has Net Earnings. All contributions made by the Employer pursuant to this Section 4.1 will be allocated to Employer Contribution Accounts of Participants in accordance with Section 6.5 hereof. 4.2 No Mandatory Participant Contributions. No contributions shall be required of any Participant under this Plan. 4.3 Cash or Deferred Contributions. Each Participant may elect to contribute to the Trust Fund through uniform payroll deductions an amount not less than one percent (1%) nor more than fifteen percent (15%) of his Covered Compensation for the Plan Year. Such a contribution shall be deemed a Cash or Deferred Contribution. A Participant may initiate contributions through uniform payroll deductions pursuant to this Section 4.3 or may increase or decrease his contributions only as of the first day of the Plan Year and the first day of the seventh month of the Plan Year (i.e., each January 1 or July 1). An election to make Cash or Deferred Contributions shall continue in effect until the Participant revokes or amends the election. A Participant may discontinue contributions at any time effective as soon as practicable after written notice is provided to the Plan Administrator. All Participant elections made pursuant to this Section 4.3 must be in writing and must be delivered to the Plan Administrator at such time as the Plan Administrator deems appropriate prior to the time when it is to take effect. The Employer shall pay the Cash or Deferred Contribution to the Trustee as soon as is administratively practicable after being deducted from a Participant's Covered Compensation, but in no event later than 30 days after the end of the month to which such Cash or Deferred Contribution relates. All contributions made to the Trust Fund pursuant to this Section 4.3 will be allocated to the Cash or Deferred Contribution Accounts of affected Participants in accordance with Section 6.6 hereof. 4.4 Limitation on Amount of Cash or Deferred Contributions. In no event may a Participant elect to have Cash or Deferred Contributions made under this Plan or any other qualified plan maintained by the Employer during the Participant's taxable year in excess of the amount specified in section 402(g) of the Code, as adjusted annually for any applicable increases in the cost of living in accordance with section 415(d) of the Code. The Plan Administrator in its discretion may from time to time decrease or curtail the percentage of a Participant's Cash or Deferred Contributions in order to comply with the limits imposed by this Section 4.4 and to assure that a Participant's Cash or Deferred Contributions shall be withheld approximately ratably throughout the Plan Year. 4.5 Distribution of Excess Elective Deferrals. A Participant may assign to this Plan any Excess Elective Deferrals (as defined below) made during a taxable year of the Participant by notifying the Plan Administrator before April 15 of the amount of the Excess Elective Deferrals to be assigned to this Plan. Notwithstanding anything to the contrary contained in this Plan, Excess Elective Deferrals, plus any income and minus any loss allocable thereto, shall be distributed no later than April 15 to any Participant to whose Account Excess Elective Deferrals were assigned for the preceding year and who claims Excess Elective Deferrals for such taxable year. For purposes of this Section 4.5, "Elective Deferrals" shall mean any Employer contributions made to this Plan at the election of the Participant, in lieu of cash compensation, and shall include contributions made pursuant to a salary reduction agreement or other deferral mechanism. With respect to any taxable year, a Participant's Elective Deferral is the sum of all Employer contributions made on behalf of such Participant pursuant to an election to defer under any qualified CODA as described in section 401(k) of the Code, any simplified employee pension cash or deferred arrangement as described in section 402(h)(1)(B) of the Code, any eligible deferred compensation plan under section 457 of the Code, any plan as described under section 501(c)(18) of the Code, and any Employer contributions made on the behalf of a Participant for the purchase of an annuity contract under section 403(b) of the Code pursuant to a salary reduction agreement. For purposes of this Section 4.5, "Excess Elective Deferrals" shall mean those Elective Deferrals that are includible in a Participant's gross income under section 402(g) of the Code to the extent such Participant's Elective Deferrals for a taxable year exceed the dollar limitation under such Code section. Excess Elective Deferrals shall be treated as Annual Additions under the Plan. Excess Elective Deferrals shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Elective Deferrals is the sum of: (A) Income or loss allocable to the Participant's Cash or Deferred Account for the taxable year multiplied by a fraction, the numerator of which is such Participant's Excess Elective Deferrals for the year and the denominator of which is the Participant's Account balance attributable to Elective Deferrals without regard to any income or loss occurring during such taxable year; and (B) Ten percent (10%) of the amount determined under clause (A) above multiplied by the number of whole calendar months between the end of the Participant's taxable year and the date of distribution, counting the month of distribution if distribution occurs after the 15th of such month. 4.6 Matching Contributions. For each Plan Year during which this Plan is in effect, the Employer may, in its sole discretion, make a Matching Contribution on behalf of each Active Participant who has made Cash or Deferred Contributions for such Plan Year. Prior to the beginning of each Plan Year, the Employer shall give written notice to all Participants as to the rate or dollar amounts, if any, it is prepared to contribute to the Matching Contribution Accounts of those Participants who make contributions to their Cash or Deferred Accounts during such Plan Year. At any time during such Plan Year, the Employer may determine to match Participant contributions to their Cash or Deferred Accounts at a greater rate than that previously announced and so notify Participants. The percentage or amount, if any, of such Matching Contributions shall be in the sole discretion of the Employer. This provision shall not be construed as requiring the Employer to make Matching Contributions in any specific Plan Year or Taxable Year. The Employer shall make Matching Contributions as of the last day of the Plan Year, but only for Active Participants (but without respect to the requirement that such Participant has completed 1,000 Hours of Service during such Plan Year) as of the last day of such Plan Year who make Cash or Deferred Contributions through the end of such Plan Year (unless prohibited by limitations on such contributions in the Plan or the Code); provided, however, if a Participant incurs a Termination of Employment by reason of death, a Total Disability or retirement during a Plan Year, a Matching Contribution shall be made for the benefit of such Participant. The Employer shall pay the Matching Contribution to the Trustee within 30 days after the end of the month for which the contribution is made. Amounts contributed to the Plan for a Taxable Year pursuant to this Section 4.6 shall be deemed paid as of the last day of the Plan Year ending within such Taxable Year. 4.7 Definitions for Special Discrimination Testing. The following definitions shall apply for purposes of this Article IV: (A) Eligible Employee - shall mean each Employee who is entitled to make Cash or Deferred Contributions for a Plan Year, as described in Section 4.3 hereof. (B) The NHC Group - for a Plan Year shall consist of all Eligible Employees who are not Highly Compensated Employees. (C) The HC Group - for a Plan Year shall consist of all Eligible Employees who are Highly Compensated Employees. (D) The 401(k) Basic Percentage - shall mean the greater of (1) and (2), as follows: (1) The 401(k) Actual Deferral Percentage for Eligible Employees in the NHC Group multiplied by 1.25; and (2) The 401(k) Actual Deferral Percentage for Eligible Employees in the NHC Group multiplied by 2.0; provided, however, that the 401(k) Actual Deferral Percentage for Eligible Employees in the HC Group does not exceed the 401(k) Actual Deferral Percentage for all Eligible Employees in the NHC Group by more than two percent (2%) or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. (E) The 401(k) Individual Deferral Percentage - of each Eligible Employee for a Plan Year shall be computed in the following manner: (1) First, divide the amount of each Eligible Employee's Cash or Deferred Contributions, if any, allocated to the Account of the Eligible Employee for the Plan Year by the Eligible Employee's Covered Compensation for the Plan Year; and (2) Second, multiply this quotient by one hundred (100). (F) The 401(k) Actual Deferral Percentage for Eligible Employees in the NHC Group - for a Plan Year shall be the average of the 401(k) Individual Deferral Percentages for the year of each Eligible Employee in the NHC Group. (G) The 401(k) Actual Deferral Percentages for Eligible Employees in the HC Group - for a Plan Year shall be the average of the 401(k) Individual Deferral Percentages for the year for each Eligible Employee in the HC Group. 4.8 Reduction of Cash or Deferred Contributions. In no event shall the amount of Cash or Deferred Contributions made by all Eligible Employees in the HC Group cause the 401(k) Actual Deferral Percentage for Eligible Employees in the HC Group to exceed the 401(k) Basic Percentage. The Plan Administrator may, in its sole discretion, reduce the amount of Cash or Deferred Contributions which any Eligible Employee in the HC Group may contribute for the Plan Year in order to avoid such excess contributions. Such reductions shall be made by reducing the 401(k) Individual Deferral Percentage of Eligible Employees in the HC Group beginning with the individuals with the highest 401(k) Individual Deferral Percentage. 4.9 Distribution of Excess Contributions. Notwithstanding anything to the contrary contained in this Plan, Excess Contributions (as defined below), plus any income and minus any loss allocable thereto, shall be distributed no later than the last day of each Plan Year to Participants to whose Accounts such Excess Contributions were allocated for the preceding Plan Year. If such excess amounts are distributed more than two and one-half (2-1/2) months after the last day of the Plan Year in which such excess amounts arose, a ten percent (10%) excise tax will be imposed on the Employer maintaining the Plan with respect to such amounts. Such distributions shall be made to Highly Compensated Employees on the basis of the respective portion of the Excess Contributions attributable to each such Employee. Excess Contributions shall be allocated to Participants who are subject to the family member aggregation rules of section 414(g)(6) of the Code in the manner prescribed by Treasury Regulations. Excess Contributions shall be treated as Annual Additions under the Plan. Excess Contributions shall be adjusted for any income or loss up to the date of distribution. The income or loss allocable to Excess Contributions is the sum of: (1) Income or loss allocable to the Participant's Cash or Deferred Account for the Plan Year multiplied by a fraction, the numerator of which is such Participant's Excess Contributions for the year and the denominator of which is the Participant's Account balance attributable to Cash or Deferred Contributions without regard to any income or loss occurring during such Plan Year; and (2) Ten percent (10%) of the amount determined under clause (1) above multiplied by the number of whole calendar months between the end of the Plan Year and the date of distribution, counting the month of distribution if distribution occurs after the fifteenth (15th) of such month. Excess Contributions shall be distributed from the Participant's Cash or Deferred Account in proportion to the Participant's Cash or Deferred Contributions for the Plan Year. For purposes of this Section 4.9, "Excess Contributions" shall mean the excess of the aggregate amount of Cash or Deferred Contributions actually made on behalf of Participants in the HC Group over the maximum amount of such contributions permitted without exceeding the 401(k) Basic Percentage. Any distributions pursuant to this Section shall be made beginning with individuals with the highest 401(k) Individual Deferral Percentage. 4.10 Allocation of Contribution and Forfeitures Among Employers. Each of the respective adopting Employers maintaining the Plan shall pay that portion of the total aggregate Employer contribution for each Plan Year that is allocated to the Accounts of the Participants for such year on the basis of the Compensation paid by such Employer. Forfeitures resulting from contributions of an adopting Employer cannot be reallocated for the benefit of another adopting Employer. 4.11 Rollover Contributions. The Trustee, in the sole discretion of the Plan Administrator in each case, may accept on behalf of an Employee an Eligible Rollover Distribution, but only if the initial source of such distribution is an eligible retirement plan within the meaning of section 402(c)(8)(B) of the Code. The Trustee shall not accept a Rollover Contribution that is paid by the Employee personally unless the Employee shall certify in writing on a form satisfactory to the Plan Administrator that such amount was received within the prior 60 days as a distribution which may be rolled over in accordance with the Code sections described in the preceding paragraph. In addition, no Rollover Contribution will be accepted which consists, in whole or in part, of insurance contracts with respect to which future premium payments are or may become due unless the Plan Administrator is satisfied that there are sufficient other segregated account assets being transferred so as to make maintenance of such contract(s) feasible without violation of any limitations on assets which may be applied for that purpose. In the event an amount contributed to this Plan pursuant to this Section shall be determined not to qualify as a Rollover Contribution, as defined above, the balance credited to such Rollover Account shall be distributed to the Employee who made the contribution thereto. No portion of any Rollover Contribution Account which represents a contribution to another qualified plan pursuant to section 401(k) of the code shall be distributed in violation of the provisions of that section. 4.12 Exclusive Benefit; Refund of Contributions. All contributions under this Plan shall be paid to the Trustee and deposited in the Trust Fund. All assets of the Trust Fund, including investment income, shall be held for the exclusive benefit of Participants and Beneficiaries and shall be used to pay benefits to such persons or to pay administrative expenses of the Plan and Trust Fund. No asset of the Trust Fund shall be diverted to or used for any other purpose or revert to or inure to the benefit of the Employer. Notwithstanding the above, amounts contributed to the Trust Fund by the Employer may be refunded to the Employer to the extent that such refunds do not, in themselves, deprive the Plan of its qualified status, under the following circumstances and subject to the following limitations: (A) Initial Nonqualification. If the Plan fails initially to satisfy the qualification requirements of section 401(a) of the Code, and if the Employer declines to amend the Plan to satisfy such qualification requirements, contributions made prior to the determination that the Plan has failed to qualify shall be returned to the Employer. (B) Disallowance of Deduction. To the extent that a federal income tax deduction is disallowed for any contribution made by the Employer, the Trustee shall refund to the Employer the amount so disallowed within one year of the date of such disallowance. (C) Loss of Qualified Status. If it is determined that the Plan does not constitute a qualified plan for any Plan Year, any contribution made by the Employer with respect to any year in which qualified status is denied shall be returned to the Employer upon demand; provided that, such demand is made by the Employer and refund is made by the Trustee within one year of the date of denial of qualification of the Plan. (D) Mistake of Fact. In the event a contribution is made in whole or in part by reason of a mistake of fact (for example, incorrect information as to the eligibility or Compensation of a Participant, or a mathematical error), so much of such contribution as is attributable to the mistake of fact shall be returned to the Employer on demand, upon presentation of evidence of the mistake of fact to the Trustee and of calculation as to the impact of such mistake. For purposes of this Section 4.12, a contribution which cannot be allocated to the Account of a Participant pursuant to Article VI hereof shall be considered to be made because of a mistake of fact. Demand and repayment must be effectuated within one year after the payment of the contribution to which the mistake applies. Any refund that is paid to the Employer hereunder, shall be made without interest and shall be deducted from among the Employer Contribution Accounts of the Participants as an investment loss; provided that, to the extent that the amount of the refund can be attributed to one or more specific Participants (as in the case of certain mistakes of fact or disallowances of compensation resulting in reduction of deductible contributions), the amount of such refund shall be deducted directly from such Participant's Employer Contribution Account. Notwithstanding anything to the contrary contained in this Section 4.12, no refund shall be made to the Employer which is specifically chargeable to the Account of any Participant in excess of one hundred percent (100%) of the amount in such Account nor shall a refund be made by the Trustee of any funds, otherwise subject to refund hereunder, which have been distributed to Participants or Beneficiaries; provided that, the Employer shall have a claim directly against the distributees to the extent of the refund to which it is entitled. All refunds pursuant to subsections (B), (C), and (D) above shall be limited in amount, circumstances and timing in accordance with section 403(c) of ERISA, and no such refund shall be made if, solely on account of such refund, the Plan would cease to be a qualified plan in accordance with section 401(a) of the Code. 4.13 Make-Up Allocations. In the event that a Participant who shall have been entitled under the terms of this Plan to an allocation of Profit Sharing Contributions to his Account for a prior Plan Year was denied or failed to receive such an allocation, and it is subsequently demonstrated or discovered that such Participant shall have been entitled to such an allocation, at the direction of the Plan Administrator, in addition to the regular contribution for the Plan Year, the Employer shall contribute an amount equal to the amount of the allocation to which Participant was otherwise entitled but failed to receive for the prior year and such amount shall be allocated to the Employer Contribution Account of such Participant. 4.14 Restoration Contributions. Any former Participant who once again qualifies as an Active Participant and who has received a "cash out" of his vested interest attributable to his prior participation in this Plan may, after reinstatement as an Active Participant, restore to the Trustee the full amount of the "cash out" he previously received, if such restoration contribution is made: (A) Prior to the close of the Plan Year within which the Participant has incurred five consecutive one year Breaks in Service; or (B) Within five years of the Participant's resumption of employment covered by the Plan, whichever is the earlier to occur. All amounts received by the Trustee shall be credited to the Participant's Employer Contribution Account as of the Valuation Date coincident with or next following his restoration to Active Participant status, but such amount shall be established in a separate subaccount. Any Participant who fails to make his restoration contribution within the time limitations herein established shall be deemed to have waived his right to make such a contribution. ARTICLE V LIMITATION ON ALLOCATION OF CONTRIBUTIONS 5.1 General Rule. In no event shall the amount contributed by or on behalf of a Participant, as a result of Employer contributions (including Cash or Deferred Contributions), Employee contributions (other than amounts attributable to Rollover Contributions) and forfeitures, for the Plan Year exceed the lesser of: (A) The amount specified in section 415(c)(1)(A) of the Code, as adjusted annually for any applicable increases in the cost of living in accordance with section 415(d) of the Code, as in effect for the last day of the Plan Year ($30,000 for 1989 through 1994); and (B) Twenty-five percent (25%) of the Participant's compensation, as defined in section 415 of the Code, for such year. For purposes of this Article V, section 415 of the Code, which limits the benefits and contributions under qualified plans, is hereby incorporated by reference. 5.2 Reduction of Benefits. Reduction of benefits or contributions to all plans where required to comply with section 415 of the Code shall be accomplished by first reducing the Participant's benefit under any defined benefit plans maintained by the Group in which he participated, such reduction to be made first with respect to the plan in which he most recently accrued benefits and thereafter in such priority as shall be determined by the Plan Administrator and the administrators of such other plans, and next by reducing contributions or allocating forfeitures for defined contribution plans in which the Participant participated. Employer contributions under this Plan that cannot be credited to the account of a particular Participant for a Plan Year because of the limitations imposed by section 415 of the Code shall be reallocated to eligible Participants as a forfeiture for that year in accordance with the provisions of Section 6.5. For purposes of this Article V, "Group" means Leonard's Metal, Inc. and any other corporation or other business entity that from time to time is, along with the Company, a member of a controlled group as defined in section 414 of the Code, as modified by section 415(h) of the Code (fifty percent (50%) control test). ARTICLE VI ACCOUNTING AND INVESTMENT OF ASSETS 6.1 Individual Accounts. The Plan Administrator shall establish and maintain a separate Account for each Participant which shall consist of any or all of the following subaccounts, as appropriate: (A) Employer Contribution Account; (B) Cash or Deferred Account; (C) Matching Contributions Account; and (D) Rollover Account. 6.2 Value of Fund. As soon as is practicable after each Valuation Date, the Trustee shall determine the fair market value of the Trust Fund as of such Valuation Date. The fair market value of the General Trust Fund means the value of all assets and liabilities allocable to such General Trust Fund as of the close of business on the Valuation Date, including income, loss, appreciation and depreciation since the immediately preceding Valuation Date, and less the dollar amount of contributions, if any, paid to the Trustee for the period subsequent to the subject Valuation Date. 6.3 Accounting Procedure. As of each Valuation Date, within a reasonable time after the fair market value of the General Trust Fund on such date has been determined, and the amount of the contributions for the Plan Year ending on such date have been determined, the Plan Administrator shall: (A) First, charge to the proper Accounts all payments or distributions made from Participants' Accounts that have not been charged previously, in accordance with Section 6.4 hereof; (B) Next, reduce Account balances to reflect forfeitures, if any, in accordance with Section 10.2 hereof; (C) Next, adjust the net credit balances of the Accounts of all Participants in the General Trust Fund upward or downward, pro rata, in proportion to the net credit balances of the Accounts before such adjustments, so that the total of the net credit balances of such Accounts after such adjustment will equal the fair market value of the General Trust Fund as of such date determined in accordance with Section 6.2 hereof; and (D) Next, allocate and credit contributions and forfeitures in accordance with Sections 6.5 and 6.6 hereof. 6.4 Charges to Accounts. The Plan Administrator shall charge to the appropriate Account of each Participant all expenses directly allocable to such Account and all payments and distributions made under the Plan to or for the benefit of such Participant or his Beneficiary since the immediately preceding Valuation Date. 6.5 Allocation of Profit Sharing Contributions and Forfeitures. As of each Anniversary Date, the Plan Administrator shall allocate to the Employer Contribution Account of each Active Participant that portion of the Profit Sharing Contribution and that portion of the forfeitures for the Plan Year ending on the Anniversary Date based on the ratio that such Participant's Covered Compensation for the Plan Year bears to the total Covered Compensation of all Active Participants for the Plan Year. 6.6 Allocation of Cash or Deferred Contributions. As of the date such contribution is made, the Plan Administrator shall allocate to the Cash or Deferred Account of each Participant the Cash or Deferred Contributions made on behalf of such Participant for the Plan Year. 6.7 Allocation of Matching Contributions. As of the date such contribution is made, the Plan Administrator shall allocate to the Matching Contribution Account of each Active Participant the Matching Contribution made on behalf of such Participant for the Plan Year. 6.8 Allocation of Rollover Contributions. As of the date such contribution is made, the Plan Administrator shall allocate to the Rollover Account of such Participant the Rollover Contributions made by the Participant for the Plan Year. 6.9 Investment of Assets in a Contract. In the event that a group Contract has been issued to the Company or to the Trustee, so long as such Contract is in effect and to the extent that the Trust Fund is invested in the Contract, the value of each Participant's Account shall be equal to the Participant's account under the Contract. A separate account shall be maintained on behalf of each Participant under such Contract until such account is distributed in accordance with the terms of this Plan. ARTICLE VII SELF-DIRECTED INVESTMENTS 7.1 Self-Directed Accounts. Each Participant shall direct the investment of assets credited to his Employer Contribution Account, Cash or Deferred Account and Matching Contributions Account in accordance with the provisions of this Article VII. In the event a Rollover Account is maintained for a Participant under the Plan, such Participant may, at his option: (A) direct the investment of the assets credited to his Rollover Account in accordance with the provisions of this Article VII; or (B) direct the Trustee to invest the assets credited to such Participant's Rollover Account as part of the General Trust Fund. In the event a Participant fails to direct the manner in which assets credited to his Employer Contribution Account, Cash or Deferred Account or Matching Contributions Account shall be invested, such assets shall be invested by the Trustee as part of the General Trust Fund. 7.2 Permissible Investment. A Participant may direct the investment of assets allocated to his Employer Contribution Account, Cash or Deferred Account, Matching Contributions Account and Rollover Account (if applicable) in any one or a combination of common or preferred stocks (including employer securities as herein provided), corporate bonds, mutual funds, government securities or other investments as chosen by the Trustee and communicated to Participants. Specific investment opportunities may be added or deleted from time to time as the Trustee shall determine. 7.3 Investment Directions. A Participant's investment direction shall specify the particular investment in which assets credited to his Employer Contribution Account, Cash or Deferred Account, Matching Contributions Account and Rollover Account (if applicable) shall be invested. The Trustee may establish rules regarding the minimum percentage of a Participant's Cash or Deferred Account, Matching Contributions Account and Rollover Account (if applicable) which may be subject to an investment change at any time. A Participant's investment direction shall cover the full amount credited to his Employer Contribution Account, Cash or Deferred Account, Matching Contributions Account and Rollover Account (if applicable) which is subject to self-direction. A Participant may change his investment directions at such times as the Plan Administrator may establish and communicate to the Participants. An investment direction once given shall be deemed to be a continuing direction until explicitly changed by the Participant by a subsequent written direction delivered to the Plan Administrator. The Plan Administrator shall deliver such directions to the Trustee, who shall acknowledge receipt of such directions and execute such directions. The Trustee shall have no duty or responsibility to monitor the manner in which the Participant directs the investment of his Account. 7.4 Prohibited Transactions. Notwithstanding anything to the contrary contained in this Plan, a Trustee shall not execute an investment direction which he determines in good faith to be a nonexempt Prohibited Transaction, as defined in section 4975 of the Code or section 406 of ERISA. 7.5 Charges to Accounts. Brokerage commissions, transfer taxes and other charges and expenses incurred in connection with the specific purchase or sale of investments as directed by a Participant for his Cash or Deferred Account shall be added to the cost of such investments or be deducted from the proceeds thereof, as the case may be. Expenses directly allocable to the execution of such transactions and administration with respect to such Cash or Deferred Account shall be charged to such Account. 7.6 Transfers Between Funds. The Trustee shall transfer amounts between the respective investment options equal to the net change in investments directed by the Participants in accordance with Section 7.3 as soon as is practicable after the effective date of an investment direction. All transfers shall be made as of such effective date. 7.7 Direction of Investment After Termination of Employment. A Participant who incurs a Termination of Employment shall be permitted to direct the investment of his Cash or Deferred Account; provided, however, after a Termination of Employment a Participant may not invest in employer securities. 7.8 Investment in Employer Securities. The Trustee may acquire and hold qualifying employer securities (within the meaning of Section 407(d)(5) of ERISA). To the extent that employer securities are a permissible investment option within the plan, the Plan Administrator shall set forth guidelines relative to the availability of and limitations on such investment to Participants. Such guidelines shall be uniformly applied among participants and shall take into account applicable limitations contained in Federal and state securities laws and ERISA. In the event that the number of shares of Employer stock is insufficient to fully satisfy any election relative to investment in such stock, the number of shares allocated to each electing Participant's Account on a pro rata basis. ARTICLE VIII VESTING 8.1 General Rules. (A) Every Participant shall at all times be fully vested in his Cash or Deferred Account, Matching Contribution Account and Rollover Account, if any. (B) Every Participant shall at all times be fully vested in so much of his Employer Contribution Account as consists of restoration contributions made pursuant to the provisions of Section 4.14 hereof, and the earnings and accretions, if any, attributable thereto. (C) The vested and nonforfeitable percentage of the amount credited to the Participant's Employer Contribution Account upon his Termination of Employment prior to his Normal Retirement Age shall be determined in accordance with the following vesting schedule: Years of Service Vested Percentage ---------------- ----------------- Less than one 0% One, but less than two 10% Two, but less than three 20% Three, but less than four 30% Four, but less than five 40% Five, but less than six 60% Six, but less than seven 80% Seven, or more 100% (D) The amount credited to the Employer Contribution Account of a Participant who is employed by an Employer or an Affiliate on the date he attains his Normal Retirement Age or of a Participant who has completed the required number of Years of Service in accordance with Subsection (C) above shall be fully vested and nonforfeitable. (E) The amount credited to the Employer Contribution Account of a Participant who incurs a Termination of Employment prior to his Normal Retirement Age because of death or Total Disability shall be fully vested and nonforfeitable. 8.2 Amendment to Vesting Schedule. If the vesting schedule under this Plan is amended, each Participant who has completed at least two Years of Service shall be subject to whichever vesting schedule vests his benefit at a more rapid rate. In no event shall this Restatement of the Plan reduce the nonforfeitable percentage of the Employer Contribution Account of any Participant. 8.3 Accreditation of Years of Service. A Participant shall be credited with all Years of Service for vesting, except that a Participant's Years of Service completed prior to the date he attains 18 years of age shall be disregarded for purposes of determining the nonforfeitable percentage of his Employer Contribution Account. 8.4 Forfeiture Restoration. If a Participant who incurred a Termination of Employment before his Account was fully vested is rehired prior to incurring five consecutive one year Breaks in Service, the nonvested portion of such Participant's Account shall not be forfeited in accordance with Section 10.2 hereof, or, if such a forfeiture has already occurred, the amount previously forfeited shall be restored to his Account. Notwithstanding the foregoing, if such Participant has received a distribution of the entire vested portion of such Participant's Account, restoration shall be made only if the Participant repays to the Trust Fund the full amount previously received, prior to the earlier of (i) the fifth anniversary of his date of rehire, or (ii) the date on which he incurs five consecutive one year Breaks in Service. If such Participant is rehired after incurring five consecutive one year Breaks in Service, amounts previously forfeited shall not be restored. The amount of the restoration to which such a Participant is entitled shall be allocated out of the Profit Sharing Contributions and forfeitures for the Plan Year with respect to which such restoration is made, before such contribution and forfeitures are allocated to Participants' Accounts in accordance with Section 6.5 hereof for such Plan Year. The Employer in its discretion may make a separate Profit Sharing Contribution in order to fund such restoration. If Profit Sharing Contributions and forfeitures for such Plan Year are insufficient to make such restorations, the Employer shall make a Profit Sharing Contribution in addition to any regular Profit Sharing Contribution pursuant to Section 4.1 hereof sufficient to restore the forfeited portion of such Participant's Employer Contribution Account. ARTICLE IX LOANS 9.1 Availability of Loans. A Participant may apply to the Plan Administrator to borrow from the Trust Fund. Loans shall be granted in a uniform and nondiscriminatory manner and shall be made subject to the provisions of this Article IX. No loan shall be made by the Plan without the approval of the Plan Administrator, whose action thereon shall be final. The Plan Administrator may establish additional rules governing the granting of loans; provided that such rules are consistent with the provisions of this Article IX and applicable regulations. Loans shall not be made available to Participants who are Highly Compensated Employees in an amount greater than the amount made available to other Participants. All references in this Article IX to a Participant shall be deemed to include a deceased Participant's Beneficiary. 9.2 Amount of Loan. The amount which may be borrowed by a Participant from the Trust Fund, when added to all other loans to the Participant that are outstanding under this and all other tax qualified retirement plans maintained by the Employer or an Affiliate, shall not exceed the lesser of: (A) $50,000 reduced by the excess, if any, of: (1) the highest outstanding balance of loans from the Plan during the one-year period on the day before the date on which such loan was made, over (2) the outstanding balance of loans from the Plan on the date on which such loan was made; or (B) Fifty percent (50%) of the then vested balance in such Participant's Account. The minimum amount which may be borrowed by a Participant is $500.00. 9.3 Length and Amortization of Loan. The terms of each loan shall require that principal and interest be amortized in level payments, payable not less frequently than quarterly, over a period not exceeding five years from the date of the loan. The preceding notwithstanding, if the purpose of the loan is to acquire any dwelling unit which within a reasonable time is to be used as the Participant's principal residence, the loan term may exceed five years. 9.4 Frequency of Loans. No more than one loan may be granted to a Participant under this Plan during a calendar year. A Participant shall not have more than two loans outstanding at any time. 9.5 Repayment. Repayment normally shall be accomplished through direct payment by the Participant to the Trustee. Notwithstanding the foregoing, the Plan Administrator may authorize repayment to be mae through regular payroll deductions. The Participant shall execute all necessary documents to effectuate such withholding and may not rescind such withholding as long as there is an outstanding loan balance. A Participant shall be entitled to prepay without penalty the total outstanding balance on a loan. In the discretion of the Plan Administrator, on the basis of uniform and nondiscriminatory rules, a Participant may also prepay without penalty a portion of the outstanding balance on a loan. In the event that a Participant with an outstanding loan is on authorized leave of absence for any reason, or is absent from work due to any disability, the Participant shall be required to make monthly installment payments equal to the normal monthly installment payments that would have been made through payroll withholding. 9.6 Note, Interest Rate and Security. Each loan shall be evidenced by a promissory note executed by the Participant and the Participant's Spouse and delivered to the Plan Administrator. Each loan shall bear interest at a reasonable rate that provides the Plan with a return commensurate with the interest rates charged by persons in the business of lending money for loans which would be made under similar circumstances as determined by the Plan Administrator in accordance with applicable regulations. The Trustee shall charge interest at the prevailing prime interest rate plus one-half percent unless the Trustee determines that such rate is not in accordance with applicable regulations. Each loan shall be secured by the assets credited to the Participant's Account and by such other security as the Plan Administrator may require. 9.7 Spousal Consent. The Participant's Spouse (if the Participant is married) must consent in writing to the use of the Participant's Account as security for such loan. Such consent shall be obtained no earlier than 90 days before the date on which the loan is to be so secured and must be notarized or witnessed by a Plan representative. Such consent shall thereafter be binding with respect to the consenting Spouse or any subsequent spouse with respect to that loan. A new consent shall be required if the Account balance is used for renegotiation, extension, renewal or other revision of the loan. If a valid spousal consent has been obtained in accordance with the preceding paragraph, then, notwithstanding anything to the contrary contained in this Plan, the portion of the Participant's vested Account balance used as a security interest held by the Plan for an outstanding loan shall be taken into account to determine the amount of the Account balance payable at the time of death or distribution, but only if the reduction is used as repayment of the loan. If less than one hundred percent (100%) of the Participant's vested Account balance (determined without regard to the preceding sentence) is payable to the Surviving Spouse, then the Account balance shall be adjusted by first reducing the vested Account balance by the amount of the security used as repayment of the loan, and then determining the benefit payable to the Surviving Spouse. 9.8 Administrative Expenses. In the event that the Plan incurs any direct cost incident to a Participant loan, the Participant may be charged an administrative fee to equal to cover the cost of processing the loan application. 9.9 No Prohibited Transactions. No loan shall be made unless such loan is exempt from the tax imposed on prohibited transactions by section 4975 of the Code (or would be exempt from the tax if the Participant were a disqualified person as defined in section 4975(e)(2) of the Code by reason of section 4975(d)(1) of the Code). 9.10 Default on Loan. A Participant's loan shall be considered in default if the amount due and payable is not received by the Plan Administrator on the designated due date. The Participant's death shall also constitute default. In case of default which is not cured within ten days after notice from the Plan Administrator, the Plan Administrator may sell, foreclose upon or otherwise dispose of the security pledge. However, the Plan Administrator shall not be required to commence such actions immediately upon a default. Instead, the Plan Administrator shall not be required to commence such actions immediately upon a default. Instead, the Plan Administrator may grant the Participant reasonable rights to cure any default, provided such actions would constitute a prudent and reasonable course of conduct for a professional lender in like circumstances. In addition, if no risk of loss of principal or income would result to the Plan, the Plan Administrator may choose, in its discretion, to defer enforcement proceedings. If the qualified status of the Plan is not jeopardized, the Plan Administrator may treat a loan that has been defaulted upon and not cured within a reasonable period of time as a deemed distribution from the Plan equal to the amount of the unpaid loan balance plus interest accrued thereon from the date of the last payment. 9.11 No Loans to Shareholder-Employee or Owner-Employee. In no event may a loan be made to a Participant who is or was a Shareholder-Employee or an Owner-Employee. ARTICLE X PAYMENT OF BENEFITS (OTHER THAN DEATH BENEFITS) 10.1 Payment of Benefits - Fully Vested Participant. In the event of a Termination of Employment of a Participant whose Account is fully vested, the amount credited to his Account shall become distributable. Such amount, as adjusted in accordance with the provisions of this Article X, shall be paid to or for the benefit of such Participant or his Beneficiary, as the case may be, at the time and in the manner provided in this Article X or in Article XI. 10.2 Payment of Benefits - Partially Vested Participant. In the event of a Termination of Employment of a Participant before the amount allocated to his Employer Contribution Account is fully vested, the amount credited to his Employer Contribution Account as of the Valuation Date coincident with or immediately preceding his Termination of Employment and after all the adjustments as of that date required under Article VI hereof have been made, shall be reduced to the extent that such subaccount is not then vested. The balance then remaining in such partially vested subaccount and the total amount credited to his Cash or Deferred Account, Matching Contribution Account and Rollover Account, if any, as adjusted in accordance with the provisions of this Article X, shall be paid to or for the benefit of such Participant or his Beneficiary at the time and in the manner provided in this Article X or in Article XI. The amount by which the Participant's Account was reduced shall be placed in a separate account and shall be forfeited on the Anniversary Date of the Plan Year following that during which he incurs a Termination of Employment. Such forfeitures shall be allocated to remaining Participants in accordance with Section 6.5 hereof. 10.3 Time of Payment. Subject to the provisions of Section 10.4 hereof, payment of the benefit to which a Participant shall be entitled under the Plan shall commence within 60 days after the close of the Plan Year in which the Participant incurs a Termination of Employment. Commencement of any benefit which is distributable to a Participant pursuant to this Section 10.3 (other than a benefit of $3,500 or less) may be deferred by a Participant to a date no later than such Participant's Required Beginning Date (as that term is defined in Section 10.4 hereof). If at the date of Termination of Employment or any subsequent Valuation Date the vested account balance of the Participant exceeds $3,500 and the Participant has not attained Normal Retirement Age, the Participant (and the Participant's Spouse if the Participant is married) must consent to any distribution in writing on a form acceptable to the Plan Administrator to the Plan Administrator before any portion of such Account may be distributed to the Participant. 10.4 Latest Time of Payment. Unless the Participant elects otherwise in writing, the latest date on which payment of benefits must commence shall be the 60th day after the close of the Plan Year in which the latest of the following events occurs: (A) The Participant attains his Normal Retirement Age; (B) The Participant incurs a Termination of Employment; or (C) Ten years have elapsed from the time the Participant commenced participation in the Plan. If payment in full is not feasible within the time limits prescribed by this Section 10.4, the Plan Administrator may direct interim payments from the Participant's Account. Notwithstanding anything to the contrary contained in this Plan, payment of benefits shall commence no later than the Participant's Required Beginning Date. For purposes of this Article X, "Required Beginning Date" shall mean the April 1 of the calendar year following the calendar year in which the Participant attains 70-1/2 years of age; provided that payments to a Participant who attains 70-1/2 years of age before January 1, 1988, and who is not a five percent (5%) owner, as defined in section 416(i) of the Code, at any time during the Plan Year ending with or within the calendar year in which such individual attained 66-1/2 years of age or any subsequent Plan Year, need not commence until the April 1 of the calendar year following the calendar year in which the Participant actually retires. Payment of benefits may not be made over a period longer than the joint life and last survivor expectancy of the Participant and his designated Beneficiary. The Participant may elect to have his life expectancy and/or that of his Spouse, if the Spouse is the Participant's designated Beneficiary, recalculated annually. Such election must be made no later than the Participant's Required Beginning Date. As of such date the election shall be irrevocable and shall apply to all subsequent years. In the event no election is made by the Participant, life expectancies will not be recalculated. For calendar years beginning after December 31, 1988, the amount to be distributed each year for which a minimum distribution is required (i.e., the "Distribution Calendar Year") shall not be less than the quotient obtained by dividing the Participant's vested Account balance by the lesser of (1) The Applicable Life Expectancy, or (2) If the Participant's Spouse is not the designated Beneficiary, the applicable divisor determined from the table in Q&A-4 of section 1.401(a)(9)-2 of the Treasury Regulations. Distributions after the Participant's death shall be distributed using the Applicable Life Expectancy as the relevant divisor without regard to section 1.401(a)(9)-2 of the Treasury Regulations. For purposes of this Section 10.4, "Applicable Life Expectancy" shall mean the life expectancy (or joint and last survivor expectancy) calculated using the attained age of the Participant (or designated Beneficiary) as of the Participant's (or designated Beneficiary's) birthday in the Applicable Calendar year reduced by one for each calendar year which has elapsed since the date life expectancy was first calculated. If life expectancy is being recalculated, the Applicable Life Expectancy shall be the life expectancy as so recalculated. For purposes of this Section 10.4, the "Applicable Calendar Year" shall be the first Distribution Calendar Year, and if life expectancy is being recalculated, each succeeding calendar year. If annuity payments commence before the Required Beginning Date, the Applicable Calendar Year is the year such payments commence. If distribution is in the form of an immediate annuity purchased after the Participant's death with the Participant's remaining interest, the Applicable Calendar Year is the year of purchase. Notwithstanding anything to the contrary contained in this Plan, distribution shall be made in accordance with regulations issued by the Secretary of the Treasury under section 401(a)(9) of the Code. Any distribution required under the incidental death benefit requirements of section 401(a) of the Code shall be treated as a distribution required under section 401(a)(9) of the Code. Plan provisions reflecting section 401(a)(9) of the Code shall override any other distribution options that may be inconsistent with said section 401(a)(9). Notwithstanding the other requirements of this Section 10.4 and subject to the requirements of Sections 10.5 and 10.6 hereof, distribution on behalf of any Participant may be made in accordance with all of the following requirements (regardless of when such distribution commences): (A) The distribution by the Trust would not have disqualified such Trust under section 401(a)(9) of the Code as in effect prior to the Deficit Reduction Act of 1984; (B) The distribution is in accordance with a method of distribution designated by the Participant whose interest in the Trust is being distributed or, if the Participant is deceased, by a Beneficiary of such Participant; (C) Such designation was in writing and was signed by the Participant or the Beneficiary before January 1, 1984; (D) The Participant had accrued a benefit under this Plan or a predecessor plan as of December 31, 1983; and (E) The method of distribution designated by the Participant or the Beneficiary specifies the time at which distribution will commence, the period over which distributions will be made, and in the case of any distribution upon the Participant's death, the Beneficiaries of the Participant listed in order of priority. 10.5 Normal Form of Payment. If the vested amount credited to the Participant's Account exceeds, or at any time exceeded, $3,500, the Participant's benefit hereunder shall be distributed: (A) In one lump sum payment; or (B) In annual or more frequent periodic installments of reasonably equal amounts over a period not exceeding the life expectancy of such Participant and his Beneficiary; provided, however, if the Beneficiary is not the Spouse of the Participant, the method of distribution elected must assure that at least fifty percent (50%) of the present value of the benefit is payable over the life expectancy of the Participant. Notwithstanding the foregoing, in the event that the vested portion of the Participant's account balance is $3,500 or less as of the end of the Plan Year in which his Termination of Employment occurs, such Participant's benefit shall be distributed in one lump sum within 60 days after the close of the Plan Year in which such Participant incurs a Termination of Employment. 10.6 Accounts of Former Employees. The amount credited to the Account of a Participant, if any, after the Termination of Employment of such Participant shall be adjusted in accordance with Article VI as of each Valuation Date following such Termination of Employment until such amount shall have been distributed in full in accordance with this Article X or Article XI hereof. Distribution of: (A) The balance of the amount in the General Trust Fund credited to the Account of a Participant, determined as of the Valuation Date immediately preceding such distribution; and (B) The value of the assets set aside in the self-directed Account of such Participant, if any, determined as of the date of distribution, shall constitute payment in full of the benefits of such Participant hereunder. Any balance of such Accounts remaining unpaid at the death of a Participant or Beneficiary shall be distributed to the Beneficiary designated in accordance with Article XI hereof. 10.7 Postdistribution Credits. In the event that after a lump sum distribution has been made funds shall be credited to the Participant's Account, such funds shall be paid to the Participant (or to the Beneficiary of a deceased Participant) in cash within one year. In the event that after an installment payout from the Trust Fund has commenced funds shall be credited to the Participant's Account, the Trustee shall make adjustments to the remaining installment payouts so as to include such credited sums, as nearly evenly as possible, in the remaining installment payments. 10.8 Hardship Distributions. Distribution of the amounts allocated to a Participant's Cash or Deferred Account, only, may be made to a Participant in the event of hardship. For the purposes of this Section 10.8 hardship is defined as an immediate and heavy financial need of the Participant where such Participant lacks other available resources. Hardship distributions are subject to the spousal consent requirements contained in sections 401(a) (11) and 417 of the Code. The distribution will be deemed to be made on account of an immediate and heavy financial need if the distribution is on account of: (A) Medical expenses (within the meaning of section 213 of the Code) incurred by the Participant, the Participant's Spouse or dependents; (B) The purchase (excluding mortgage payments) of the principal residence of the Participant; (C) Payment of tuition for the next semester or quarter of post-secondary education for the Participant, the Participant's Spouse or dependents; or (D) The need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence. A distribution will be considered as necessary to satisfy an immediate and heavy financial need of the Participant only if: (A) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; (B) All plans maintained by the Employer provide that the Participant's Cash or Deferred Contributions will be suspended for 12 months after the receipt of the hardship distribution; (C) The distribution is not in excess of the amount of an immediate and heavy financial need; and (D) All plans maintained by the Employer provide that the Participant may not make Cash or Deferred Contributions for the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under section 402(g) of the Code for such taxable year less the amount of such Participant's Cash or Deferred Contributions for the taxable year of the hardship distribution. For purposes of this Section 10.8, the Participant's resources shall be deemed to include those assets of his Spouse and minor children that are reasonably available to the Participant. Notwithstanding anything to the contrary in this Section 10.8, in no event may a Participant receive a hardship distribution of any earnings attributable to Cash or Deferred Contributions. 10.9 Direct Transfer of Eligible Rollover Distributions. If a Participant or Beneficiary is entitled to receive an Eligible Rollover Distribution and elects to have such distribution paid directly to an eligible retirement plan which shall include another qualified trust (under section 401(a) of the Code) which is a defined contribution plan accepting such transfers, an annuity plan (under section 403(a) of the Code), or an individual retirement account or annuity (under section 408 of the Code), and specifies the eligible retirement plan to which such distribution is to be paid in writing on a form acceptable to the Plan Administrator, the Plan Administrator shall direct the Trustee to make a direct trustee-to-trustee transfer of the Eligible Rollover Distribution to specified eligible retirement plan. ARTICLE XI DEATH BENEFITS 11.1 Death Benefits. Upon the death of a Participant prior to the time that all assets in his Account have been distributed, the amount credited to such Account shall become distributable. Such amount, as adjusted in accordance with Article X, shall be paid for the benefit of such deceased Participant at the time and in the manner provided in this Article XI. 11.2 Beneficiary Designation. Each Participant from time to time, on a form acceptable to the Plan Administrator, may designate any person or persons (including a trust) (concurrently, contingently or successively) to whom his benefits under the Plan are to be paid if he dies before he receives all of such benefits. The election of a Beneficiary shall be effective only when the form is filed in writing with the Plan Administrator by the Participant and shall cancel all such forms previously signed and filed by the Participant. The designation of a Beneficiary other than the Participant's Spouse shall be valid only if the Surviving Spouse of the Participant shall have consented in writing to such designation, the consent acknowledges the effect of such designation and the consent is witnessed by a Plan representative or notary public. 11.3 Failure to Designate a Beneficiary. If a Participant fails to name a Beneficiary in accordance with Section 11.2 hereof, or if the named Beneficiary or Beneficiaries predecease(s) the Participant or dies before the complete distribution of the Participant's Account, then the Participant's death benefit shall be payable to the following classes of takers, each class to take to the exclusion of all subsequent classes, and all members of each class to share equally: (A) The Participant's Surviving Spouse; (B) The Participant's surviving descendants per stirpes; (C) The Participant's surviving parents; and (D) The legal representative of the estate of the last to die of the Participant and his Beneficiary. The Trustee and Plan Administrator shall have no further responsibility or liability with respect to the deceased Participant's Account once such distribution is completed. 11.4 Renunciation of Death Benefit. A Beneficiary who is entitled to a death benefit under this Plan may renounce his right to all or any portion of such benefit by filing a written irrevocable and unqualified disclaimer with the Plan Administrator before payment to him of any such benefit but no later than nine months after the date of the Participant's death. Any benefit so disclaimed shall be distributable to the person or persons (and in the proportions) to which such benefit would have been distributable if the Beneficiary who disclaimed such benefit had predeceased such Participant. 11.5 Payment of Benefit. If the vested amount credited to the Participant's Account exceeds $3,500, the death benefit shall be distributed in any one or a combination of the following forms as the Beneficiary in his discretion may determine: (A) In one lump sum payment (which may represent either all of such benefit or only the portion remaining after distribution of a portion thereof pursuant to subsection (B) hereof); or (B) In installments of reasonably equal amounts over a period not exceeding the joint life expectancy of the Beneficiary; provided, however, if such installments are payable to the Participant's spouse, such designation may permit distributions to be made in a manner so as to permit the Participant's estate to qualify for the estate tax marital deduction and may permit additional encroachments upon the Participants Account for the benefit of such Spouse. If the vested amount credited to the Participant's Account does not exceed $3,500, the Participant's benefit hereunder shall be distributed in one lump sum payment. A Beneficiary's election as to the form of death benefit shall be made in writing, on a form acceptable to the Plan Administrator, not less than 30 days prior to the commencement of payments. 11.6 Time of Payment. Subject to Section 11.7 hereof, payment of a death benefit shall commence as soon as is practicable after the Valuation Date coincident with or next following the date of death of the Participant; provided that the Beneficiary furnishes proof satisfactory to the Plan Administrator of the death of the Participant. 11.7 Latest Time for Payment. If a Participant dies after distribution of benefits has commenced but before his entire interest has been distributed, the remaining portion of such interest shall be distributed at least as rapidly as under the method of distribution in effect at the time of the Participant's death. If a Participant dies before a distribution of benefits has commenced, the entire interest shall be distributed no later than five years after the Participant's death; unless any portion of the interest is payable to or for a Beneficiary over a period not to exceed the life or life expectancy of such Beneficiary and payments commence within one year after the Participant's death. However, if the Beneficiary is the Surviving Spouse, distribution need not commence before the date when the Participant would have attained 70-1/2 years of age; provided that, if the Surviving Spouse dies before distribution to such Spouse begins, this paragraph shall be applied as if the Surviving Spouse were the Participant. ARTICLE XII CLAIMS AND REVIEW PROCEDURE 12.1 Claims for Benefits. A Participant or Beneficiary who believes that he is being denied or will be denied benefits to which he is entitled under this Plan may file a written request for such benefits setting forth his claim with the Plan Administrator. 12.2 Written Denials of Claims. Within a reasonable time after receipt of the request described in Section 12.1 hereof, the Plan Administrator shall provide to each claimant who is denied a claim for benefits, a written notice setting forth in a manner calculated to be understood by the claimant: (A) The specific reason or reasons for the denial; (B) Specific reference to pertinent Plan provisions on which the denial is based; (C) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (D) An explanation of the claim review procedure. If such a denial is not furnished within 60 days from the time the claim is filed, the claim shall be deemed denied for the purposes of Section 12.3. 12.3 Appeal of Denial. Within 60 days after a claim is denied, the claimant or his duly authorized representative may appeal such denial to the Plan Administrator by filing a written notice of appeal of the claim denial with the Plan Administrator; provided that, if the claimant or his duly authorized representative fails to file such appeal within 60 days after the claim is denied, the claimant shall be deemed to have waived any right to appeal the denial of the claim. The notice of appeal shall reasonably apprise the Plan Administrator of the reasons and grounds for such appeal and shall specify the scope of review desired by requesting any or all of the procedures as follows: (A) A review of documents pertinent to the claim; (B) Submission of issues and comments in writing; and (C) Demand for written response to particular questions submitted in writing. The Plan Administrator shall furnish a written decision on review not later than sixty (60) days after the notice of appeal is filed, written in a manner calculated to be understood by the claimant, with specific references to the pertinent Plan provisions on which the decision is based. If the decision on review is not furnished within such time, the claim shall be deemed denied on review. ARTICLE XIII ALLOCATION OF AUTHORITY AND DUTIES AMONG NAMED FIDUCIARIES 13.1 Authority and Duties of the Company. The Company shall be deemed a "Named Fiduciary" only with respect to the authority and duties set forth in this Section 13.1. The Company, as a Named Fiduciary, has the authority and duty to: (A) Appoint the Trustee and the Plan Administrator, to monitor each of their performances, and to terminate such appointments when appropriate; (B) Provide to the other Named Fiduciaries such information as each needs for the proper performance of its duties; (C) Provide a process through which each Named Fiduciary can communicate with each other and, when appropriate, with the Participants and their Beneficiaries; (D) Establish, in its discretion, a funding policy for the Plan and to communicate such funding policy to the Trustee; and (E) Appoint, in its discretion, one or more Investment Managers, as defined in section 3(38) of ERISA (concurrently or consecutively), to monitor the performance of any investment manager so appointed, and to terminate such appointment when appropriate. In addition, the Company shall perform such duties as are imposed by the Code or ERISA and shall serve as Plan Administrator in the absence of an appointed Plan Administrator. 13.2 Authority and Duties of the Plan Administrator. The Plan Administrator shall be deemed a "Named Fiduciary" only with respect to the authority and duties set forth in Article XIV hereof. 13.3 Authority and Duties of the Trustee. The Trustee shall be deemed a "Named Fiduciary" only with respect to investment of Trust Fund assets and shall have the authority and duties set forth in Article XV hereof. 13.4 Authority and Duties of an Investment Manager. Any Investment Manager appointed by the Employer shall be deemed a "Named Fiduciary" only with respect to the authority and duties set forth in Article XV hereof. 13.5 Limitation on Obligations of Named Fiduciaries. No Named Fiduciary shall have the authority or the duty to deal with matters other than as delegated to it under this Plan, or by operation of law. In no event shall a Named Fiduciary be liable for breach of fiduciary responsibility or duty by another fiduciary (including Named Fiduciaries) if the responsibility for the act or omission deemed to be a breach was not within the scope of the said Named Fiduciary's authority or delegated responsibility. 13.6 General Fiduciary Standard of Conduct. Each Named Fiduciary shall discharge its duties hereunder solely in the interests of the Participants and their Beneficiaries and for the exclusive purpose of providing benefits to Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan. Each Named Fiduciary shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, in accordance with the terms of the Plan insofar as it is consistent with this standard. 13.7 Service in Multiple Capacities. Any person may serve in more than one fiduciary capacity with respect to this Plan. Nothing in this Plan shall be construed to prevent any Named Fiduciary from receiving any benefit to which he may be entitled as a Participant or Beneficiary, so long as such benefit is computed and paid in accordance with the terms of this Plan as applied to all other Participants and Beneficiaries. 13.8 Compensation of Named Fiduciaries. Any Named Fiduciary may receive reasonable compensation for services rendered on behalf of this Plan; provided that no person who renders services to this Plan who already receives full-time pay from an Employer shall receive compensation from this Plan, except for the reimbursement of expenses properly and actually incurred. 13.9 Expenses of Administration. The Company in its discretion may assume and pay, in addition to its contributions under this Plan, such compensation to the Named Fiduciaries as may be determined, from time to time, by agreement between the Company and the Named Fiduciary and all other expenses of administration and taxes of this Plan, including the compensation of any employee or counsel employed by the Plan Administrator or the Company. All such compensation and expenses not voluntarily paid by the Company shall be paid by the Trustee out of the Trust Fund. To the extent that the Plan Administrator determines in its discretion that any such taxes, compensation or other expenses paid out of the Trust Fund are properly allocable to the Account of a particular Participant, the Plan Administrator shall charge the same against such Participant's Account, and, in all other cases, such taxes, compensation or other expenses shall be charged pro-rata against the Accounts of all Participants. ARTICLE XIV THE PLAN ADMINISTRATOR 14.1 Appointment and Tenure. The Company shall appoint a Plan Administrator to serve at the Company's discretion. The Plan Administrator shall consist of a committee of one or more members. The Company may dismiss any committee member at any time, with or without cause, upon ten days prior written notice. Any committee member may resign by delivering his written resignation to the Company. Vacancies arising by the death, resignation or removal of a committee member shall be filled by the Company. If the Company fails to act, and in any event, until the Company so acts, the remaining members of the committee may appoint an interim committee member to fill any vacancy occurring on the committee. If no person has been appointed to the committee, or if no person remains on the committee, the Company shall be deemed to be the Plan Administrator. If the Company serves as Plan Administrator, it shall designate individuals to carry out specified fiduciary responsibilities under the Plan in such manner and to such an extent that Employees and other interested parties are able to ascertain the person or persons responsible for operating the Plan. 14.2 Meetings; Majority Rule. Any action taken at a meeting by the Plan Administrator shall be by a majority of all members of the committee. The Plan Administrator may act by vote taken in a meeting (at which a majority of members shall constitute a quorum) if all members of the committee have received at least ten days prior written notice of such meeting or have waived notice. The Plan Administrator may also act without the formality of convening a meeting with the written concurrence of a majority of the committee. 14.3 Delegation. The Plan Administrator may delegate to each or any one of its members or to its secretary authority to sign any documents on its behalf, or to perform ministerial acts; provided that no person to whom such authority is delegated shall perform any act involving the exercise of any discretion without first obtaining the concurrence of a majority of the committee, even though the person alone may sign any document required by a third party. The Plan Administrator shall elect one of its members to serve as Chairman. The Chairman shall preside at all meetings of the committee or shall delegate such responsibility to another committee member. The committee shall elect one person to serve as secretary to the committee. The secretary may, but need not, be a member of the committee. Any third party may rely on any communication signed by the secretary, acting as such, as an official communication from the Plan Administrator. 14.4 Authority and Duty of the Plan Administrator. The Plan Administrator shall have the authority and duty to administer the Plan in all its details, except the duty and power to invest and reinvest Trust assets which is assigned to the Trustee or the Investment Manager pursuant to the provisions of Article XV hereof. The authority and duty of the Plan Administrator shall include, but not be limited to, the following: (A) To establish and maintain a separate Account for each Participant and allocate benefits thereto in accordance with Article VI hereof; (B) To keep accurate and detailed records of the administration of the Plan, which records shall be open to inspection by the Company at all reasonable times, and, with respect to records pertaining to his Account, open to inspection by each Participant; (C) To interpret the Plan provisions and to decide all questions concerning the Plan and the eligibility of any Employee to participate in the Plan; (D) To authorize the payment of benefits; (E) To establish and enforce such rules, regulations and procedures as it shall deem necessary or proper for the efficient administration of the Plan; (F) To furnish the reports and Plan descriptions to the Secretary of Labor and to each Participant as required by Part I of Title I of ERISA; (G) To delegate to any agents such duties and powers (both ministerial and discretionary) as it deems appropriate by an instrument in writing which specifies which such duties are so delegated and to whom each duty is so delegated; and (H) To arrange for bonding. 14.5 Construction of the Plan. The Plan Administrator shall take such steps as it considers necessary and appropriate to remedy any inequity that results from incorrect information received or communicated in good faith or due to an administrative error. It shall endeavor to act, whether by general rules or by particular decisions, so as not to discriminate in favor of or against any person and so as to treat all similar circumstances uniformly. 14.6 Engagement of Assistants and Advisors. The Plan Administrator shall have the right to hire such professional assistants and consultants as it, in its discretion, deems necessary or advisable, including, but not limited to accountants, actuaries, attorneys, clerical personnel, consultants or medical practitioners. To the extent that the costs for such assistants and advisors are not paid by the Company, they shall be paid from the Trust Fund as an expense of the Trust Fund at the direction of the committee. 14.7 Indemnification of the Plan Administrator. To the extent not prohibited by the Code or by ERISA, the Company shall indemnify the Plan Administrator for any expenses (other than amounts paid by it in settlement to which the Employer had not consented) incurred in connection with its duties as Plan Administrator, except for matters in which it was negligent or in which it engaged in willful misconduct. The foregoing right to indemnification shall be in addition to such other rights as the Plan Administrator may enjoy as a matter of law or by reason of insurance coverage of any kind. Rights granted hereunder shall be in addition to and not in lieu of any rights to indemnification to which the Plan Administrator may be entitled pursuant to the bylaws of the Company. ARTICLE XV PROVISIONS RELATING TO THE TRUSTEE 15.1 Control of Trust Assets. The Trustee shall accept all contributions made pursuant to the terms of this Plan, and only such contributions, and shall hold, invest and reinvest Plan assets in accordance with this Plan for the exclusive benefit of Plan Participants and their Beneficiaries. Although separate records of account shall be kept on behalf of each Participant, this in no way shall restrict the Trustee in its investment of the Trust Fund which may be administered as a single fund. The Trustee in its discretion may hold in cash such portion of the Trust Fund as shall be reasonable under the circumstances, pending investment or payment of expenses or distribution of benefits. To the extent that the Trust Fund is invested in a Contract pursuant to an agreement entered into between an insurance company and the Company or the Trustee for purposes of holding, investing and distributing the assets of the Trust Fund, the Trustee shall have no authority or discretion with respect to investment of assets held by the insurance company. In the event of any conflict between provisions of the Plan and the terms of any Contract issued under the Plan, the provisions of the Plan will control. The Trustee shall be under no duty, express or implied, to verify or determine the amount of any contribution to be made by the Employer under the Plan or to compel any payment to be made to it by an Employer. The Trustee shall, subject to the other provisions of this Plan, invest and reinvest the principal and income of the Trust Fund and keep the Trust Fund invested, without distinction between principal and income, in any kind of property whatsoever, real or personal, foreign or domestic, without being restricted to property authorized by the laws of the State of Missouri for trust investment, whether or not productive of income and without regard to the proportion that such property or property of a similar character held, may bear to the entire Trust Fund. The Trustee is authorized to invest in such bonds, notes, debentures, mortgages, equipment trust certificates, preferred or common stocks, mutual funds, annuity policies, and ordinary life insurance policies and term life insurance policies on Participants in the Plan, as the Trustee, in the proper exercise of its fiduciary responsibilities, may deem advisable. In no event shall the total premiums paid for ordinary life insurance policies with respect to any Participant exceed fifty percent (50%) of the total Employer contributions allocated to the Participant's Account and in no event shall the total premiums paid for term life insurance policies with respect to any Participant exceed twenty-five percent (25%) of the total Employer contributions allocated to the Participant's Account. In the event the Trustee shall invest in both ordinary life insurance policies and term life insurance policies covering the same Participant, the sum of fifty percent (50%) of the total premiums paid for such ordinary life insurance and one hundred percent (100%) of the total premiums paid for such term life insurance shall not exceed twenty-five percent (25%) of the total contributions by the Employer allocated to the Participant's Account. 15.2 Accounting. The Trustee shall adopt and employ such generally accepted accounting practices as it shall see fit. The Trustee shall keep full and complete records of its administration of the Trust Fund and the Company may examine such records at any time during business hours. The Trustee shall prepare and deliver to the Company an accounting of the administration of the Trust Fund at such times as the Company may direct but in no event less than once each year. Within 60 days after it receives the accounting, the Company may direct the Trustee to furnish such other or additional information with respect to the administration of the Trust Fund as may be deemed necessary prior to its approval thereof. If the Company has not notified the Trustee in writing of its disapproval thereof within 60 days after the delivery to the Company of any such accounting, then such accounting shall constitute an account stated between the Company and the Trustee as to all matters embraced therein with the same force and effect as though such accounting or corrected accounting had been duly approved in writing by the Company. The Company or the Trustee shall not be precluded from having its accounts judicially settled by a court of competent jurisdiction. 15.3 Income and Expenses. The Trustee shall collect the income of the Trust. The expenses incurred by the Trustee in the performance of its duties, including fees for legal and accounting services rendered to the Trustee, shall be paid from the Trust Fund as an expense of the Trust Fund at the direction of the Plan Administrator to the extent that such expenses are not paid by the Company. All taxes of any and all kind shall constitute a charge upon the Trust Fund. All taxes of any and all kind that may be levied or assessed under existing or future laws upon or in respect of the Trust Fund or the income thereof shall be paid from the Trust Fund. 15.4 Indemnification of the Trustee. To the extent not prohibited by the Code or by ERISA, the Company shall indemnify the Trustee (other than a corporate Trustee) against any liability which it may incur in the exercise and performance of its powers and duties under this Plan and Trust, except for matters in which it was negligent or in which it engaged in willful misconduct. 15.5 Advice of Employer or Counsel. If the Trustee is uncertain regarding the course that it should follow in connection with any matter relating to the Plan, it may request the Company's advice with respect thereto. The Trustee may consult with legal counsel, who may be counsel for the Company, or its own counsel, with respect to the meaning or construction of this Plan and Trust and its obligations and duties hereunder. 15.6 Distributions from the Plan. The Trustee shall have no discretion with respect to making distributions under the Plan and shall make distributions only at such times and in such manner as the Plan Administrator directs. The Trustee shall have no responsibility to ascertain whether such directions of the Plan Administrator comply with the Plan. 15.7 Appointment of Trustees. The Company shall select an individual or individuals or institution able to serve as Trustee. 15.8 Resignation; Removal; Successors. Any Trustee may resign at any time by delivering to the Company a written notice of such resignation to take effect not less than 60 days after such delivery, unless the Company shall accept as adequate a shorter notice. Any Trustee may be removed by the Company by mailing a certified copy of such resolution by certified or registered mail addressed to the Trustee at the Trustee's last known address, or by delivery of said certified copy to the Trustee, in either instance the certified copy to be accompanied by a written notification that removal is to take effect on the date specified therein, unless the Trustee shall accept as adequate a shorter notice. No such removal shall become effective until the appointment by the Company and the qualification of a successor Trustee. Upon the resignation or removal of a Trustee, the Trustee shall have the right to a settlement of its accounts at the expense of the Company or the Trust Fund. Upon completion of such accounting and payment to the Trustee of its expenses, such Trustee shall transfer, assign, convey and deliver such Trust Fund as it may then be constituted and shall execute all documents necessary to transfer any insurance contracts and rights under them, and shall thereupon be discharged from further accountability for the Trust Fund. The Company covenants that it will forthwith appoint a successor Trustee in case of resignation or removal of a Trustee. Any successor Trustee shall qualify as such by executing, acknowledging and delivering to the Company an instrument accepting such appointment hereunder on a form acceptable to the Company, and thereupon such successor Trustee shall become vested with all title, rights, powers, discretion, duties and obligations of its predecessor Trustee with the same effect as if originally named as Trustee herein except that no successor Trustee shall be liable for the acts or omissions of any other Trustee. 15.9 Powers of Trustee. Subject to other provisions of this Plan and Trust, the Trustee is authorized and empowered to hold, manage, improve, repair and control all property, real or personal at any time forming part of the Trust Fund; to sell, convey, transfer, exchange, partition, lease for any term, even though extending beyond the duration of this Trust Fund, and otherwise dispose of the same from time to time in such manner, for such consideration and upon such terms and conditions as the Trustee shall determine; to make, execute, acknowledge and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; to employ such agents and counsel as may be reasonably necessary in managing and protecting the Trust Fund and to pay them reasonable compensation; to settle, compromise, adjust or abandon all claims and demands in favor of or against the Trust Fund; to vote any corporate stock either in person or by proxy for any purpose; to exercise any conversion privilege or subscription rights given to the Trustee as the owner of any security forming a part of the Trust Fund; to consent to take any action in connection with and to receive and retain any securities resulting from any reorganization, consolidation, merger, readjustment of the financial structure or sale of the assets of any corporation or other organization, the securities of which may constitute a portion of the Trust Fund; to cause any securities or other property which may at any time form a part of the Trust Fund to be issued, held or registered in the name of its nominee, or in such form that title will pass by delivery; to borrow from anyone except any party in interest, including the Employer, such sum or sums, at any time and from time to time, as the Trustee may consider necessary and desirable and for the best interests of the Trust Fund and for that purpose to mortgage or pledge all or any part of the Trust Fund; to pay any estate, inheritance, income or other tax charge or assessment which the Trustee shall be required to pay out of the Trust Fund for the Account of any Participant or Beneficiary whose interest hereunder may be liable for such tax; and, in addition to the enumerated powers herein, to do all other acts in the Trustee's judgment necessary or desirable for the proper administration of the Trust Fund. In addition to the foregoing the Trustee shall have all of the powers granted to Trustees under section 456.520, of the Revised Statutes of Missouri. 15.10 Investment Manager. (A) The Company may direct, by written notice, the segregation of any portion or portions of the Trust Fund in a separate investment account or investment accounts and, in such event, may appoint an Investment Manager to direct the investment and reinvestment of any such investment account pursuant to this Article XV. (B) Any such Investment Manager shall either (1) be registered as an investment advisor under the Investment Advisers Act of 1940; (2) be a bank, as defined in that Act; or (3) be an insurance company qualified to perform investment management services under the laws of more than one state. If investment of the Trust Fund is to be directed in whole or in part by an Investment Manager, the Employer shall deliver to the Trustee a copy of the instruments appointing the Investment Manager and evidencing the Investment Manager's acceptance of such appointment, an acknowledgement by the Investment Manager that it is a fiduciary of the Plan, and a certificate evidencing the Investment Manager's current registration under said Act. (C) The Trustee shall follow the directions of the Investment Manager regarding the investment and reinvestment of the Trust Fund, or such portion thereof as shall be under management by the Investment Manager and shall exercise the powers set forth in this Article XVI as directed by the Investment Manager. The Trustee shall be under no duty or obligation to review any investment to be acquired, held or disposed of pursuant to such directions nor to make any recommendations with respect to the disposition or continued retention of any such investment or the exercise or nonexercise of the powers in this Article. The Trustee shall have no liability or responsibility for acting pursuant to the direction of, or failing to act in the absence of any direction from the Investment Manager, unless the Trustee knows that by such action or failure to act it would be itself committing or participating in a breach of fiduciary duty by the Investment Manager. The Employer hereby agrees to indemnify the Trustee and hold it harmless from and against any claim or liability which may be asserted against the Trustee by reason of its acting or not acting when such acts are pursuant to any direction from the Investment Manager or when such failing to act is in the absence of any such direction, except where the Trustee knows that by such action or failure to act it is itself committing or participating in a breach of fiduciary duty by the Investment Manager. (D) The Investment Manager at any time and from time to time may issue orders for the purchase or sale of securities directly to a broker; and in order to facilitate such transaction, the Trustee upon request shall execute and deliver appropriate trading authorizations. Written notification of the issuance of each such order shall be given promptly to the Trustee by the Investment Manager, and the execution of each such order shall be confirmed by written advice to the Investment Manager by the broker. Such notification shall be authority for the Trustee to pay for securities purchased against receipt thereof and to deliver securities sold against payment therefor, as the case may be. (E) In the event that an Investment Manager should resign or be removed by the Trustee, the Trustee shall manage the investment of the Trust Fund pursuant to this Article XVI unless and until the Employer shall appoint another Investment Manager with respect thereto as provided in this Article. (F) The accounts, books and records of the Trustee shall reflect the segregation, pursuant to the provisions of this Article, of any portion or portions of the Trust Fund in a separate investment account or accounts. 15.11 Powers of Corporate Trustee. In the event a bank or similar financial institution is serving as Trustee, the Trustee may invest all or substantially all of the money of the Trust Fund in one or more collective investment of assets of employee benefit plans, and at such time and so long as any assets of the Trust Fund are invested through the medium of such collective trust fund the declaration of trust establishing the collective trust fund shall be adopted as a part of this Plan. Assets of the Trust Fund so added to any such collective trust fund and the earnings and increment thereto shall be subject to all the provisions of such declaration of trust as it may be amended from time to time. The Trustee may from time to time determine how much of the assets of the Trust Fund shall be invested in any one or more of such collective investment funds. The Trustee also may make deposits with a bank (or other financial institution), which bank may be the Trustee or affiliated with the Trustee. 15.12 Bond. The Trustee shall arrange for such bonding as is required by law, but no bonding in excess of the amount required by law shall be considered required by this Plan. ARTICLE XVI AMENDMENT, TERMINATION, MERGERS AND CONSOLIDATION OF THE PLAN 16.1 Amendment. The Company reserves the right at any time and from time to time to modify or amend the Plan in whole or in part by delivering to the Trustee an executed copy of the modifying provisions or amendments to the Plan; provided that no such modification or amendment shall operate to modify, amend or diminish any rights of Participants accrued to the date of such modification or amendment, and, further, that no amendment shall increase or materially change the duties of the Trustee without the specific agreement of the Trustee. 16.2 Termination. The Company reserves the right at any time to terminate the Plan in whole or in part by delivering to the Trustee a copy of the notice of termination. All rights shall vest as of the effective date of the termination or a complete discontinuance of contributions by the Employers, and there shall be no forfeitures thereafter. In the event of a partial termination, all rights to benefits with respect to which the Plan terminated shall be fully vested and nonforfeitable as of the date of such partial termination. 16.3 Mergers and Consolidations of Plans. In the event of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each Participant in this Plan shall be entitled to a benefit immediately after the merger, consolidation or transfer if the other plan then terminated that is equal to or greater than the benefit he would have been entitled to receive immediately before such merger, consolidation, or transfer if this Plan had then been terminated. ARTICLE XVII MISCELLANEOUS PROVISIONS 17.1 Anti-Assignation. The payments, benefits or interest provided for under this Plan shall not be subject to any claim of any creditor of any Participant in law or in equity and shall not be subject to attachment, garnishment, execution or other legal process by any such creditor; nor shall the Participant have any right to assign, transfer, encumber, anticipate or otherwise dispose of any such payments, benefits or interest. Notwithstanding anything in this Section 17.1 to the contrary, the Plan Administrator may: (A) Comply with a "qualified domestic relations order," as defined in section 414(p) of the Code, to the extent it does not alter the amount or form of benefit specified under the Plan except as required by law; and (B) Surrender to the government of the United States of America any portion of the Trust Fund which is subject to a federal tax levy made pursuant to section 6331 of the Code. If any portion of the Trust Fund which is attributable to the benefits, rights or interest of any Participant is transferred to any other entity pursuant to subsection (A) or (B) to satisfy a debt or other obligation of such Participant, the amount credited to the account of such Participant shall be reduced by the amount so transferred. 17.2 No Contract of Employment. Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefit shall be construed as giving any Participant or Employee, or any person whomsoever, the right to be retained in the service of an Employer, and all Participants and other Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 17.3 Actions by a Corporation. Whenever under the terms of this Plan a corporation is permitted or required to take some action, such action may be taken by any officer of the corporation who has been duly authorized by the Board of Directors of such corporation. 17.4 Severability of Provisions. If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 17.5 Heirs, Assigns and Personal Representatives. This Plan shall be binding upon the heirs, executors, administrators, successors and assigns of the parties, including each Participant and Beneficiary, present and future. 17.6 Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 17.7 Gender and Number. Except where otherwise clearly indicated by context, the masculine and the neuter shall include the feminine and the neuter, the singular shall include the plural, and vice versa. 17.8 Rules of Construction. The terms and provisions of this Plan shall be construed according to the principles and in the priority as follows: first, in accordance with the meaning under, and which will bring the Plan into conformity with the Code and with ERISA; and, secondly, in accordance with the laws of the State of Missouri. The Plan shall be deemed to contain the provisions necessary to comply with such laws. 17.9 Title to Assets. No Participant or Beneficiary shall have any right to, or interest in, any assets of the Trust Fund upon termination of his employment or otherwise, except as provided from time to time under this Plan, and then only to the extent of the benefits payable under the Plan to such Participant or out of the assets of the Trust Fund. All payments of benefits as provided for in this Plan shall be made from the assets of the Trust Fund, and neither the Employer nor any other person shall be liable therefor in any manner. 17.10 Payments to Legal Incompetents. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of executing a receipt therefor shall be deemed paid when paid to such person's guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Trustee, the Plan Administrator, the Employer and all other persons with respect thereto. 17.11 Address for Notification. Each Participant and each Beneficiary of a deceased Participant must file with the Plan Administrator from time to time, in writing, his post office address and any change of post office address. Any communication, statement or notice addressed to a Participant, or Beneficiary, at his last post office address filed with the Plan Administrator, or as shown on the records of the Employer, binds the Participant, or Beneficiary, for all purposes of this Plan. 17.12 Reliance on Data. An Employer, the Trustee and the Plan Administrator (if other than the Employer), shall have the right to rely on the veracity and accuracy of any data provided by the Participant or by any Beneficiary, including representations as to age, health and marital status. Such representations are binding upon any party seeking to claim a benefit through a Participant, and the Employer, the Trustee and the Plan Administrator are all absolved completely from inquiring into the accuracy or veracity of any representation made at any time by a Participant or Beneficiary. 17.13 Lost Payees. In the event the amount credited to the Account of a Participant remains unclaimed for more than seven years after such amount became distributable, and the Plan Administrator is unable to locate such Participant (or his Beneficiary), the Plan Administrator may, with the consent of the Employer, direct such amount to be allocated to the Accounts of the remaining Participants employed as of such date in accordance with Section 6.6 hereof; provided that, if such Participant (or his Beneficiary) subsequently claims such amounts, the Employer shall contribute an amount to the Plan which will cause the balance of such Participant's Account to equal the amount which would have been credited to such Account as of such date if such amounts had never been reallocated pursuant to this Section 17.13. 17.14 Adoption of Plan by an Affiliate. With the consent of the Company, any Affiliate legally eligible to do so may adopt this Plan and thereby become an Employer and become bound as an Employer by all of the terms of the Plan as herein provided with respect to such of its Employees who are eligible to participate in this Plan. Any such Affiliate may adopt the Plan by executing and filing with the Company an adoption agreement, or the Affiliate will be deemed to have consented by making contributions to the Plan. ARTICLE XVIII TOP HEAVY PROVISIONS 18.1 Applicability. Notwithstanding anything to the contrary contained in this Plan, the provisions of this Article XVIII shall govern the administration of the Plan during any Plan Year following a Determination Date as to which it is determined that the Required Aggregation Group is a Top Heavy Group (or if this is the only qualified plan maintained by the Employer, that the Plan is a Top Heavy Plan). Notwithstanding the preceding sentence, in the event this Plan contains: (A) A single benefit structure that satisfies the requirements of sections 416(b) and (c) of the Code for each Plan Year; and (B) A vesting schedule at least as favorable as the statutory schedules of section 416(b)(1) of the Code, the Plan need not operate in accordance with the provisions of this Article XVIII, if it is deemed to be a Top Heavy Plan. 18.2 Definitions. The following definitions shall apply for purposes of this Article XVIII: (A) Annual Compensation - shall mean compensation as defined in section 415(c)(3) of the Code, but including amounts contributed by an Employer pursuant to a salary reduction agreement which are excludable from the Employee's gross income under sections 125, 402(a)(8), 402(h) or 403(b) of the Code. (B) Determination Date - shall mean the last day of the preceding Plan Year. (C) Key Employee - shall mean an Employee, former Employee or Employee's Beneficiary who, at any time during the Plan Year or any of the four preceding Plan Years, is: (1) An officer of the Employer having Annual Compensation greater than fifty percent (50%) of the amount in effect under section 415(b)(1)(A) of the Code for any such Plan Year; (2) One of the ten Employees having Annual Compensation from the Employer of more than the limitation in effect under section 415(c)(1)(A) of the Code and owning (or considered as owning within the meaning of section 318 of the Code) one of the largest interests in the Employer; (3) A five percent (5%) owner of the Employer; or (4) A one percent (1%) owner of the Employer having an Annual Compensation from the Employer of more than $150,000; as defined in accordance with section 416 (i)(1) of the Code. (D) Non-Key Employee - shall mean any Employee who is not a Key Employee. (E) Permissive Aggregation Group - shall mean the Required Aggregation Group of plans and any other plan or plans of the Employer which, when considered as a group with the Required Aggregation Group, would continue to satisfy the requirements of sections 401(a)(4) and 410 of the Code. (F) Required Aggregation Group - shall mean: (1) each qualified plan of the Employer in which a Key Employee is or was a Participant (including this Plan); and (2) each other qualified plan of the Employer which enables any qualified plan described in clause (1) to meet the requirements of section 401(a)(4) or 410 of the Code. (G) Top Heavy Plan - shall mean the Plan if any of the following conditions exists: (1) If the Top Heavy Ratio for this Plan exceeds sixty percent (60%) and this Plan is not part of any Required Aggregation Group or Permissive Aggregation Group of plans. (2) If this Plan is a part of a Required Aggregation Group of plans but not part of a Permissive Aggregation Group and the Top Heavy Ratio for the group of plans exceeds sixty percent (60%). (3) If this Plan is a part of a Required Aggregation Group and part of a Permissive Aggregation Group of plans and the Top Heavy Ratio for the Permissive Aggregation Group exceeds sixty percent (60%). (H) Top Heavy Ratio - shall mean: (1) If the Employer maintains one or more defined contribution plans (including any simplified employee pension plan) and the Employer has not maintained any defined benefit plan which during the five year period ending on the Determination Date(s) has or has had accrued benefits, the Top Heavy Ratio for this Plan alone or for the Required or Permissive Aggregation Group as appropriate is a fraction, the numerator of which is the sum of the account balances of all Key Employees as of the Determination Date(s) (including any part of any account balance distributed in the five year period ending on the Determination Date(s)), and the denominator of which is the sum of all account balances (including any part of any account balance distributed in the five-year period ending on the Determination Date(s)), both computed in accordance with section 416 of the Code and the regulations thereunder. Both the numerator and denominator of the Top Heavy Ratio are increased to reflect any contribution not actually made as of the Determination Date, but which is required to be taken into account on that date under section 416 of the Code and the regulations thereunder. (2) If the Employer maintains one or more defined contribution plans (including any Simplified Employee Pension Plan) and the Employer maintains or has maintained one or more defined benefit plans which during the five year period ending on the Determination Date(s) has or has had any accrued benefits, the Top Heavy Ratio for any Required or Permissive Aggregation Group, as appropriate, is a fraction, the numerator of which is the sum of account balances under the aggregated defined contribution plan or plans for all Key Employees, determined in accordance with clause (1) above, and the present value of accrued benefits under the aggregated defined benefit plan or plans for all Key Employees as of the Determination Date(s), and the denominator of which is the sum of the Account balances under the aggregated defined contribution plan or plans for all Participants, determined in accordance with clause (1) above, and the present value of accrued benefits under the defined benefit plan or plans for all Participants as of the Determination Date(s), all determined in accordance with section 416 of the Code and the regulations thereunder. The accrued benefits under a defined benefit plan in both the numerator and denominator of the Top Heavy Ratio are increased for any distribution of an accrued benefit made in the five year period ending on the Determination Date. (3) For purposes of clauses (1) and (2) above the value of account balances and the present value of accrued benefits will be determined as of the most recent Valuation Date that falls within or ends with the 12-month period ending on the Determination Date, except as provided in section 416 of the Code and the regulations thereunder for the first and second plan years of a defined benefit plan. The Account balances and accrued benefits of a Participant (a) who is not a Key Employee but who was a Key Employee in a prior year, or (b) who has not been credited with at least one Hour of Service with any Employer maintaining the Plan at any time during the five year period ending on the Determination Date will be disregarded. The calculation of the Top Heavy Ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with section 416 of the Code and the regulations thereunder. Deductible Employee contributions will not be taken into account for purposes of computing the Top Heavy Ratio. When aggregating plans the value of Account balances and accrued benefits will be calculated with reference to the Determination Dates that fall within the same calendar year. The accrued benefit of a Participant other than a Key Employee shall be determined under (a) the method, if any, that uniformly applies for accrual purposes under all defined benefit plans maintained by the Employer, or (b) if there is not such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional rule of section 411(b)(1)(C) of the Code. (I) Valuation Date - shall mean the Determination Date. 18.3 Contributions. For any Plan Year for which the provisions of this Article XVIII are in effect, the Employer shall contribute on behalf of each Participant who is a Non-Key Employee and who is employed on the Anniversary Date (whether or not the Non-Key Employee completed 1,000 Hours of Service during the Plan Year) an amount equal to the lesser of: (A) Three percent (3%) of such Participant's Covered Compensation during the Plan Year (five percent (5%) of such Participant's Covered Compensation if the Employer maintains a defined benefit pension plan during the Plan Year and such defined benefit pension plan does not provide a minimum benefit); and (B) The highest percentage of Covered Compensation allocated to the Account of a Key Employee for that year. Such contributions shall be allocated before any forfeitures are otherwise allocated in accordance with Section 6.6 hereof. 18.4 Adjustments to Section 415 Limits. For any Plan Year for which the provisions of this Article XVIII are in effect, paragraphs 2(B) and (3)(B) of section 415(e) of the Code shall be applied by substituting "1.0" for "1.25" unless: (1) Section 18.3 shall be applied by substituting "four percent (4%)" for "three percent (3%)"; and (2) the aggregate value of the Accounts of Key Employees does not exceed ninety percent (90%) of the aggregate value of the Accounts of all Participants under the Plan. 18.5 Vesting. During any Plan Year for which the provisions of this Article XVIII are in effect, a Participant shall be vested in his Employer Contribution Account (including amounts contributed thereto for the Plan Year during which the provisions of this Article XVIII are not in effect) according to the following schedule: Years of Service Vested Percentage ---------------- ----------------- less than 2 0% 2 20% 3 40% 4 60% 5 80% 6 100% 18.6 Subsequent Amendment of Provisions. In the event that it should be determined by statute or ruling by the Internal Revenue Service that the provisions of this Article XVIII are no longer necessary to qualify the Plan under the Code, this Article shall be ineffective without amendment to the Plan. IN WITNESS WHEREOF, Leonard's Metal, Inc., as the Company, has adopted the foregoing amendment as of the ____ day of ________________, 1994. LEONARD'S METAL, INC. By: Title: ATTEST: Secretary The undersigned, as Trustee of the Leonard's Metal, Inc. Profit Sharing and Savings Plan and Trust hereby acknowledge receipt of the foregoing instrument as of the _____ day of , 1994 and agree to serve as Trustees thereunder. THE GUARANTY TRUST COMPANY OF MISSOURI, TRUSTEE By: President ATTEST: Secretary LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST As Amended and Restated LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST ARTICLE SUBJECT MATTER PAGE I INTRODUCTION ............................................. 1 II DEFINITIONS .............................................. 2 III ELIGIBILITY AND PARTICIPATION ............................ 11 3.1 General Rule ................................. 11 3.2 Reemployed Former Employee ................... 11 3.3 Change in Status ............................. 11 3.4 Procedure for and Effect of Admission ........ 11 IV CONTRIBUTIONS............................................. 12 4.1 Profit Sharing Contributions.................. 12 4.2 No Mandatory Participant Contributions........ 12 4.3 Cash or Deferred Contributions................ 12 4.4 Limitation on Amount of Cash or Deferred Contributions ................. 13 4.5 Distribution of Excess Elective Deferrals.................................. 13 4.6 Matching Contributions........................ 14 4.7 Definitions for Special Discrimination Testing .................................... 14 4.8 Reduction of Cash or Deferred Contributions............................... 16 4.9 Distribution of Excess Contributions.......... 16 4.10 Allocation of Contribution and Forfeitures Among Employers................. 17 4.11 Rollover Contributions........................ 17 4.12 Exclusive Benefit; Refund of Contributions............................... 17 4.13 Make-Up Allocations........................... 19 4.14 Restoration Contributions..................... 19 V LIMITATION ON ALLOCATION OF CONTRIBUTIONS................. 20 5.1 General Rule.................................. 20 5.2 Reduction of Benefits......................... 20 VI ACCOUNTING AND INVESTMENT OF ASSETS....................... 21 6.1 Individual Accounts........................... 21 6.2 Value of Fund................................. 21 6.3 Accounting Procedure.......................... 21 6.4 Charges to Accounts........................... 22 6.5 Allocation of Profit Sharing Contributions and Forfeitures............... 22 6.6 Allocation of Cash or Deferred Contributions............................... 22 6.7 Allocation of Matching Contributions.......... 22 6.8 Allocation of Rollover Contributions.......... 22 6.9 Investment of Assets in a Contract............ 22 VII SELF-DIRECTED INVESTMENTS................................. 23 7.1 Self-Directed Accounts........................ 23 7.2 Permissible Investment........................ 23 7.3 Investment Directions......................... 23 7.4 Prohibited Transactions....................... 24 7.5 Charges to Accounts........................... 24 7.6 Transfers Between Funds....................... 24 7.7 Direction of Investment After Termination of Employment.................. 24 7.8 Investment in Employer Securities............. 24 VIII VESTING .............................................. 25 8.1 General Rules................................. 25 8.2 Amendment to Vesting Schedule................. 25 8.3 Accreditation of Years of Service............. 26 8.4 Forfeiture Restoration........................ 26 IX LOANS 9.1 Availability of Loans......................... 27 9.2 Amount of Loan................................ 27 9.3 Length and Amortization of Loan............... 27 9.4 Frequency of Loans............................ 27 9.5 Repayment..................................... 28 9.6 Note, Interest Rate and Security.............. 28 9.7 Spousal Consent............................... 28 9.8 Administrative Expenses....................... 29 9.9 No Prohibited Transactions.................... 29 9.10 Default on Loan............................... 29 9.11 No Loans to Shareholder-Employee or Owner-Employee.......................... 29 X PAYMENT OF BENEFITS (OTHER THAN DEATH BENEFITS)............................... 30 10.1 Payment of Benefits - Fully Vested Participant................................. 30 10.2 Payment of Benefits - Partially Vested Participant................................. 30 10.3 Time of Payment............................... 30 10.4 Latest Time of Payment........................ 31 10.5 Normal Form of Payment........................ 33 10.6 Accounts of Former Employees.................. 33 10.7 Postdistribution Credits...................... 33 10.8 Hardship Distributions........................ 33 10.9 Direct Transfer of Eligible Rollover Distributions..................... 35 XI DEATH BENEFITS............................................ 36 11.1 Death Benefits................................ 36 11.2 Beneficiary Designation....................... 36 11.3 Failure to Designate a Beneficiary............ 36 11.4 Renunciation of Death Benefit................. 36 11.5 Payment of Benefit............................ 37 11.6 Time of Payment............................... 37 11.7 Latest Time for Payment....................... 37 XII CLAIMS AND REVIEW PROCEDURE............................... 39 12.1 Claims for Benefits........................... 39 12.2 Written Denials of Claims..................... 39 12.3 Appeal of Denial.............................. 39 XIII ALLOCATION OF AUTHORITY AND DUTIES AMONG NAMED FIDUCIARIES......................................... 41 13.1 Authority and Duties of the Company........... 41 13.2 Authority and Duties of the Plan Administrator............................... 41 13.3 Authority and Duties of the Trustee........... 41 13.4 Authority and Duties of an Investment Manager. 41 13.5 Limitation on Obligations of Named Fiduciaries 41 13.6 General Fiduciary Standard of Conduct.......... 42 13.7 Service in Multiple Capacities................. 42 13.8 Compensation of Named Fiduciaries.............. 42 13.9 Expenses of Administration..................... 42 XIV THE PLAN ADMINISTRATOR..................................... 43 14.1 Appointment and Tenure ........................ 43 14.2 Meetings; Majority Rule........................ 43 14.3 Delegation..................................... 43 14.4 Authority and Duty of the Plan Administrator................................ 43 14.5 Construction of the Plan....................... 44 14.6 Engagement of Assistants and Advisors.......... 44 14.7 Indemnification of the Plan Administrator............................... 45 XV PROVISIONS RELATING TO THE TRUSTEE......................... 46 15.1 Control of Trust Assets........................ 46 15.2 Accounting..................................... 47 15.3 Income and Expenses............................ 47 15.4 Indemnification of the Trustee................. 47 15.5 Advice of Employer or Counsel.................. 47 15.6 Distributions from the Plan.................... 47 15.7 Appointment of Trustees........................ 48 15.8 Resignation; Removal; Successors............... 48 15.9 Powers of Trustee.............................. 48 15.10 Investment Manager............................. 49 15.11 Powers of Corporate Trustee.................... 50 15.12 Bond........................................... 51 XVI AMENDMENT, TERMINATION, MERGERS AND CONSOLIDATION OF THE PLAN ............................................... 51 16.1 Amendment............................................ 52 16.2 Termination.................................... 52 16.3 Mergers and Consolidations of Plans............ 52 XVII MISCELLANEOUS PROVISIONS................................... 53 17.1 Anti-Assignation............................... 53 17.2 No Contract of Employment...................... 53 17.3 Actions by a Corporation....................... 53 17.4 Severability of Provisions..................... 53 17.5 Heirs, Assigns and Personal Representatives.............................. 54 17.6 Headings and Captions.......................... 54 17.7 Gender and Number.............................. 54 17.8 Rules of Construction.......................... 54 17.9 Title to Assets................................ 54 17.10 Payments to Legal Incompetents................. 54 17.11 Address for Notification....................... 54 17.12 Reliance on Data............................... 54 17.13 Lost Payees.................................... 55 17.14 Adoption of Plan by an Affiliate............... 55 XVIII TOP HEAVY PROVISIONS....................................... 56 18.1 Applicability.................................. 56 18.2 Definitions.................................... 56 18.3 Contributions.................................. 59 18.4 Adjustments to Section 415 Limits.............. 60 18.5 Vesting........................................ 60 18.6 Subsequent Amendment of Provisions............. 60 FIRST AMENDMENT TO THE LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST, AS AMENDED AND RESTATED WHEREAS, Leonard's Metal, Inc. (formerly known as Leonard's Metal Forming Company) (the "Employer") adopted the Leonard's Metal Forming Company Employee's Profit Sharing Plan and Trust (the "Plan") effective as of July 1, 1953, and the Plan has been amended several times since then in order to maintain its qualified status and benefit eligible employees; and WHEREAS, the Plan was most recently amended and restated effective as of January 1, 1989 (the "Restated Plan"); and WHEREAS, pursuant to the provisions of Section 16.1 of the Restated Plan, the Employer reserved the right to again amend the Plan, in whole or in part, at any time and from time to time. NOW THEREFORE, in exercise of the power provided for in Section 16.1 of the Restated Plan, the Employer hereby amends the Restated Plan effective as of the dates set forth herein, in the following respects: 1. By adding the following sentence to Section 2.11 of Article II of the Restated Plan (on page 3 of the Restated Plan): "Commencing May 2, 1994 the term "Company" shall also mean LMI FINISHING, INC." 2. By adding the following language to Section 2.22 of Article II of the Restated Plan (on page 4 of the Restated Plan): "LMI Finishing, Inc. adopted this Plan effective May 2, 1994." 3. By adding the following language to Section 10.9 of the Restated Plan (on Page 35 of the Restated Plan): "If a distribution is one to which sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)9-11(c) of the Income Tax Regulations is given, provided that: (A) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (B) the Participant, after reciving the notice, affirmatively elects a distribution." 4. Except as expressly set forth in this First Amendment to the Restated Plan, all other provisions of the Restated Plan shall remain in full force and effect as originally written. IN WITNESS WHEREOF, the Employer has caused this First Amendment to be executed this 21st day of December, 1994. LEONARD'S METAL, INC. By: Title: Attest: LMI FINISHING, INC. By: Title: Attest: SECOND AMENDMENT TO THE LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST WHEREAS, Leonard's Metal, Inc. (the "Employer") adopted the Leonard's Metal Forming Company Employee's Profit Sharing Plan and Trust (the "Plan") effective as of July 1, 1953, and the Plan has been amended several times since then in order to maintain its qualified status and benefit eligible employees; and WHEREAS, the Plan was most recently amended and restated effective as of January 1, 1989 and thereafter amended effective December 21, 1994 (collectively the "Plan"); and WHEREAS, pursuant to the provisions of Section 16.1 of the Restated Plan, the Employer reserved the right to again amend the Plan, in whole or in part, at any time and from time to time. NOW THEREFORE, in exercise of the power provided for in Section 16.1 of the Restated Plan, the Employer hereby amends the Restated Plan effective as of the dates set forth herein, in the following respects: 1. By adding the following paragraph to Article XV of the Plan which shall henceforth be read as Section 15.13 of Article XV of the Plan: 15.13 Fiduciary Responsibility with Respect to Qualifying Employer Securities. Anything to the contrary contained herein notwithstanding, the Trustee shall act with respect to qualifying employer securities (within the meaning of section 407(d)(5) of ERISA) as directed by the Plan Administrator from time to time and upon such terms and conditions as the Plan Administrator shall direct, including but not limited to decisions with respect to the purchase, sale, retention, distribution, and voting of qualifying employer securities. The duties of the Trustee with respect to qualifying employer securities shall be limited to effecting the direction of the Plan Administrator with all discretionary and fiduciary responsibility being hereby allocated to the Plan Administrator. 2. Except as expressly set forth in this Second Amendment to the Plan, all other provisions of the Plan shall remain in full force and effect as heretofore amended. IN WITNESS WHEREOF, the Employer has caused this Second Amendment to be executed this 7th day of November 1996. LEONARD'S METAL, INC. By: Title: The undersigned Trustee acknowledges and accepts the foregoing amendment. THE GUARANTY TRUST COMPANY OF MISSOURI By: Title: Dated: , 1996 2 THIRD AMENDMENT TO THE LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST WHEREAS, Leonard's Metal, Inc. (the "Employer") adopted the Leonard's Metal Forming Company Employee's Profit Sharing Plan and Trust (the "Plan") effective as of July 1, 1953, and the Plan has been amended several times since then in order to maintain its qualified status and benefit eligible employees; and WHEREAS, the Plan was most recently amended and restated effective as of January 1, 1989 and most recently amended November 7, 1996 (collectively the "Plan"); and WHEREAS, pursuant to the provisions of Section 16.1 of the Restated Plan, the Employer reserved the right to again amend the Plan, in whole or in part, at any time and from time to time. NOW THEREFORE, in exercise of the power provided for in Section 16.1 of the Restated Plan, the Employer hereby amends the Restated Plan effective as January 1, 1997 (except as specifically provided herein) in the following respects: I. By adding the following sentence at the end of Section 4.8 of Article IV of the Plan, effective January 1, 1996: In the event that the Plan Administrator has reduced the amount of Cash or Deferred Contributions which any Eligible Employee in the HC Group may contribute for the Plan Year and later determines that such reduction was not necessary either in whole or in part, the Plan Administrator shall allow such Eligible Employee to resume Cash or Deferred Contributions; provided, however, in no event shall the aggregate amount of Cash or Deferred Contributions for such Eligible Employee for the Plan Year exceed the total amount which the Eligible Employee would have contributed if the election of such Eligible Employee in effect at the time of such reduction had remained in effect for the entire Plan Year. 2. By adding the following sentence at the end of Section 7.8 of Article VII of the Plan: Notwithstanding the foregoing, no Participant may invest in employer securities unless such Participant has met the eligibility requirements set forth in Article III hereof. 3. By deleting the last sentence of Section 9.2 of Article IX of the Plan and inserting in lieu thereof the following: The minimum amount which may be borrowed by a Participant is $1,000. 4. By deleting Section 15.13 of Article XV of the Plan and inserting in lieu thereof the following which shall henceforth be read as Section 15.13 of Article XV of the Plan: 15.13 Fiduciary Responsibility with Respect to Plan Investments. Anything to the contrary contained herein notwithstanding, the Trustee shall act with respect to plan investments as directed by the Plan Administrator from time to time and upon such terms and conditions as the Plan Administrator shall direct, including but not limited to decisions with respect to the investment alternatives, purchase, sale, retention, distribution, and voting of plan investments. The duties of the Trustee with respect to plan investments shall be limited to effecting the direction of the Plan Administrator with all discretionary and fiduciary responsibility with respect to plan investments being hereby allocated to the Plan Administrator. 5. Except as expressly set forth in this Third Amendment to the Plan, all other provisions of the Plan shall remain in full force and effect as heretofore amended. IN WITNESS WHEREOF, the Employer has caused this Third Amendment to be executed this 30th day of December 1996. LEONARD'S METAL, INC. By: Title: The undersigned Trustee acknowledges and accepts the foregoing amendment: THE GUARANTY TRUST COMPANY OF MISSOURI By: Title: Dated: _____________________, 1997 FOURTH AMENDMENT TO THE LEONARD'S METAL, INC. PROFIT SHARING AND SAVINGS PLAN AND TRUST WHEREAS, Leonard's Metal, Inc. (the "Employer") adopted the Leonard's Metal Forming Company Employee's Profit Sharing Plan and Trust (the "Plan") effective as of July 1, 1953, and the Plan has been amended several times since then in order to maintain its qualified status and benefit eligible employees; and WHEREAS, the Plan was most recently amended and restated effective as of January 1, 1989 and most recently amended December 30, 1996 (collectively the "Plan"); and WHEREAS, pursuant to the provisions of Section 16.1 of the Restated Plan, the Employer reserved the right to again amend the Plan, in whole or in part, at any time and from time to time. NOW THEREFORE, in exercise of the power provided for in Section 16.1 of the Restated Plan, the Employer hereby amends the Plan effective as April 1, 1997 (except as specifically provided herein) in the following respects: I. Article X of the Plan is hereby amended by adding the following section thereto which shall henceforth be read as Section 10.10 of the Plan: 10.10 Distributions to Alternate Payees. When an alternate payee acquires a right to a benefit under the Plan by reason of a qualified domestic relations order (as defined in Section 414(p) of the Code), not later than 60 days after the entry of such qualified domestic relations order, such alternate payee may elect to take a distribution of his or her entire benefit under the Plan in a single sum at the value determined as of the most recent Valuation Date. If the alternate payee fails to elect to receive an immediate distribution of the benefit of such alternate payee, distribution will be deferred until the earlier of the date on which the Participant (with respect to whom the qualified domestic relations order applies) is entitled to a distribution under the Plan or the earliest date on which such Participant could begin receiving benefits under the Plan if such Participant had separated from service. Upon receipt of such request the Trustee shall make such distribution as soon as administratively feasible. Notwithstanding the foregoing, in the event that the present value of the interest of the alternate payee is less than $3,500 as of the date of the entry of the qualified domestic relations order, the Trustee shall immediately upon receipt of such order distribute the benefit of the alternate payee in a single sum. 2. Except as expressly set forth in this Fourth Amendment to the Plan, all other provisions of the Plan shall remain in full force and effect as heretofore amended. IN WITNESS WHEREOF, the Employer has caused this Fourth Amendment to be executed this 5th day of May, 1997. LEONARD'S METAL, INC. By: Title: The undersigned Trustee acknowledges and accepts the foregoing amendment: THE GUARANTY TRUST COMPANY OF MISSOURI By: Title: Dated: _____________________, 1997 EX-10 14 EXHIBIT 10.13 - LOAN AGREEMENT LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made and entered into this 15th day of August, 1996, by and between LEONARD'S METAL, INC., a Missouri corporation ("Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"). W I T N E S S E T H: WHEREAS, Borrower has applied for a term loan from Bank in the original principal amount of Two Million Six Hundred Thousand Dollars ($2,600,000.00); and WHEREAS, Borrower has requested Bank to purchase a one hundred percent (100%) participation in that certain Letter of Credit (hereinafter defined); WHEREAS, Bank is willing to make said term loan and purchase the participation upon, and subject to, the terms, provisions and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby mutually agree and promise as follows: SECTION 1. TERM. The "Term" of this Agreement shall commence on the date hereof and shall end on such date as Borrower's Obligations shall have been paid in full and Bank has no further obligation to loan or advance monies to or for the account of Borrower. SECTION 2. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement or in any Exhibit or Schedule hereto, when used in this Agreement, the following terms shall have the following meanings (such meanings shall be equally applicable to the singular and plural forms of the terms used, as the context requires): Attorneys' Fees shall mean the reasonable out-of-pocket fees (and costs, charges and expenses related thereto) of attorneys retained by Bank from time to time (i) in connection with the negotiation, preparation, execution, delivery, administration and enforcement of this Agreement and/or any of the other Transaction Documents, (ii) to represent Bank in any litigation, contest, dispute, suit or proceeding, or to commence, defend or intervene in any litigation, contest, dispute, suit or proceeding, or to file any petition, complaint, answer, motion or other pleading or to take any other action in or with respect to any litigation, contest, dispute, suit or proceeding (whether instituted by Bank, Borrower or any other Person and whether in bankruptcy or otherwise) in any way or respect relating to the Collateral, any Third Party Collateral, this Agreement or any of the other Transaction Documents, Borrower, any Subsidiary of Borrower or any other Obligor, (iii) to protect, collect, lease, sell, take possession of or liquidate any of the Collateral or any Third Party Collateral, (iv) to attempt to enforce any security interest in or other Lien upon any of the Collateral or any Third Party Collateral or to give any advice with respect to such enforcement and (v) to enforce any of Bank's rights to collect any of Borrower's Obligations. Bond Documents shall have the meaning given thereto in the Reimbursement Agreement. Borrower's Obligations shall mean any and all indebtedness (principal, interest, fees and other amounts), liabilities and obligations of Borrower to Bank under the Note, this Agreement, the Security Agreement, any of the other Transaction Documents, the Reimbursement Agreement or any other agreement, document or instrument heretofore, now or hereafter executed and delivered by Borrower to or for the benefit of Bank, in each case whether now existing or hereafter arising, absolute or contingent, joint and/or several, secured or unsecured, direct or indirect, expressed or implied in law, contractual or tortious, liquidated or unliquidated, at law or in equity, or otherwise, and whether created directly or acquired by Bank by assignment or otherwise, and any and all costs of collection and/or Attorneys' Fees incurred or to be incurred in connection therewith. Business Day shall mean any day except a Saturday, Sunday or legal holiday observed by Bank. Capital Expenditure shall mean any expenditure which, in accordance with generally accepted accounting principles consistently applied, is or should be capitalized on the balance sheet of the Person making the same. Capitalized Lease shall mean any lease which, in accordance with generally accepted accounting principles consistently applied, is or should be capitalized on the balance sheet of the lessee. Code shall mean the Internal Revenue Code of 1986, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed to also refer to any successor sections. Collateral shall mean any Property or assets of Borrower which now or at any time hereafter secure the payment or performance of any of Borrower's Obligations. Consolidated Net Worth shall mean, at any date, the consolidated stockholders' equity of Borrower and its Consolidated Subsidiaries. Consolidated Subsidiary shall mean with respect to any Person at any date, any Subsidiary or other entity the assets and liabilities of which are or should be consolidated with those of such Person in its consolidated financial statements as of such date in accordance with generally accepted accounting principles consistently applied. Consolidated Tangible Net Worth shall mean, at any date, the consolidated stockholders' equity of Borrower and its Consolidated Subsidiaries (which shall be deemed to exclude subordinated indebtedness) less their Intangible Assets as of such date. For purposes of this definition, "Intangible Assets" shall mean the amount (to the extent reflected in determining such stockholders' equity) of (i) all write-ups in the book value of any asset owned by Borrower or a Consolidated Subsidiary of Borrower resulting from a revaluation thereof subsequent to the date of this Agreement and (ii) goodwill, unamortized debt discount and expense, unamortized deferred charges, patents, trademarks, service marks, trade names, copyrights, organizational and developmental expenses and other similar intangible items and assets. Current Assets shall mean all assets which, in accordance with generally accepted accounting principles consistently applied, should be classified as current assets on a balance sheet. Current Liabilities shall mean all liabilities which, in accordance with generally accepted accounting principles consistently applied, should be classified as current liabilities on a balance sheet. Default shall mean an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default as defined in Section 9 hereof. Distribution in respect of any corporation shall mean: (a) dividends or other distributions on capital stock of the corporation; and (b) the redemption, repurchase or other acquisition of such stock or of warrants, rights or other options to purchase such stock (except when solely in exchange for such stock). Environmental Laws shall mean the Resource Conservation and Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic Substances Control Act and any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials or any other hazardous, toxic or dangerous waste, substance or constituent or other substance, whether solid, liquid or gas, as now or at any time hereafter in effect. Environmental Lien shall have the meaning ascribed thereto in Section 8.01(k)(vii). ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. ERISA Affiliate shall mean any corporation, trade or business that is, along with Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. Event of Default shall have the meaning ascribed thereto in Section 9. Harris shall mean Harris Trust and Savings Bank, an Illinois banking corporation. Hazardous Materials shall mean any hazardous substance or pollutant or contaminant defined as such in (or for the purposes of) any Environmental Law and shall include, without limitation, petroleum, including crude oil or any fraction thereof which is liquid at standard conditions of temperature or pressure (60 degrees fahrenheit and 14.7 pounds per square inch absolute), any radioactive material, including, without limitation, any source, special nuclear or by-product material as defined in 42 U.S.C. Section 2011 et seq., as amended or hereafter amended, and asbestos in any form or condition. Indebtedness of any Person shall mean and include, without duplication, any and all indebtedness, liabilities and obligations of such Person which in accordance with generally accepted accounting principles consistently applied are or should be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (i) obligations of such Person for borrowed money or which have been incurred in connection with the acquisition of Property, (ii) obligations secured by any Lien or other charge upon any Property owned by such Person, provided that if such Person has not assumed or become liable for the payment of such obligations, such obligations shall still be included in Indebtedness but the determination of the amount of Indebtedness evidenced by such obligations shall be limited to the book value of such Property, (iii) obligations created or arising under any conditional sale or other title retention agreement with respect to any Property acquired by such Person, provided that if the rights and remedies of the seller, lender or lessor in the event of default under such agreement are limited to repossession or sale of such Property such obligations shall still be included in Indebtedness but the determination of the amount of Indebtedness evidenced by such obligations shall be limited to the book value of such Property, (iv) all Guarantees and other contingent indebtedness, liabilities and obligations of such Person whether or not reflected on the balance sheet of such Person and (v) all obligations of such Person as lessee under any Capitalized Lease. For the purpose of computing the "Indebtedness" of any Person, there shall be excluded any particular Indebtedness to the extent that, upon or prior to the maturity thereof, there shall have been deposited with the proper depository in trust the necessary funds (or evidences of such Indebtedness) for the payment, redemption or satisfaction of such Indebtedness; and thereafter such funds and evidences of Indebtedness so deposited shall not be included in any computation of the assets of such Person. Kansas Mortgage shall have the meaning ascribed thereto in Section 6. Letter of Credit shall mean that certain irrevocable transferable direct pay letter of credit, as amended, in the form of Appendix I to the Reimbursement Agreement, issued by Harris for the account of Borrower in favor of the Trustee, for the benefit of the owners from time to time of the $5,000,000 aggregate principal amount of the Variable Rate Demand Industrial Development Revenue Bonds, Series 1990 (Leonard's Metal, Inc. Project) issued by The Industrial Development Authority of St. Charles County, Missouri. Lien shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on common law, statute or contract, including, without limitation, any security interest, mortgage, deed of trust, pledge, hypothecation, judgment lien or other lien or encumbrance of any kind or nature whatsoever, any conditional sale or trust receipt and any lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. Loan shall mean the Term Loan. Missouri Deed of Trust shall have the meaning ascribed thereto in Section 6. Multiemployer Plan shall mean a "multi-employer plan" as defined in Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any ERISA Affiliate or any Subsidiary of Borrower. Note or Term Loan Note shall mean the Promissory Note evidencing the Term Loan. Obligor shall mean Borrower and each other Person who is or shall become primarily or secondarily liable on any of Borrower's Obligations or who grants Bank a Lien upon any of the Property or assets of such Person as security for any of Borrower's Obligations. Occupational Safety and Health Laws shall mean the Occupational Safety and Health Act of 1970, as amended, and any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability or standards of conduct concerning employee health and/or safety, as now or at any time hereafter in effect. Participation Agreement shall mean that certain Participation Agreement dated as of August 15, 1996, by and between Harris and Bank. PBGC shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. Pension Plan shall mean a "pension plan," as such term is defined in Section 3(2) of ERISA, which is subject to the provisions of Title IV of ERISA and which is established or maintained by Borrower, any ERISA Affiliate or any Subsidiary of Borrower, other than a Multiemployer Plan. Person shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity or government (whether national, Federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). Prime Rate shall mean, as of any date, the highest Prime Rate reported in the Money Rates column of The Wall Street Journal, currently defined as being the base rate on corporate loans posted by at least 75% of the nation's 30 largest banks (regardless of whether such rate has actually been charged by any such bank). In the event The Wall Street Journal ceases publication of the Prime Rate, then "Prime Rate" shall mean the "prime rate" or "base rate" announced by Bank or any other bank designated by Bank, from time to time, (regardless of whether such rate has actually been charged by such bank). In the event The Wall Street Journal (a) publishes more than one Prime Rate, the highest of such rates shall be the "Prime Rate", or (b) publishes a retraction or correction of any such rate, the rate reported in such retraction or correction shall be the "Prime Rate". Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. Properties shall mean the plural of Property. For purposes of this Agreement, Borrower and each Subsidiary of Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes. Reimbursement Agreement shall mean that certain Reimbursement Agreement dated as of September 1, 1990, between Borrower and Harris, as from time to time supplemented and amended, under the terms of which Harris has issued and delivered the Letter of Credit. Related Party shall mean any Person (other than a wholly-owned Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by or is under common control with, Borrower or any Subsidiary of Borrower, (ii) which beneficially owns or holds ten percent (10%) or more of the equity interest of Borrower or (iii) ten percent (10%) or more of the equity interest of which is beneficially owned or held by Borrower or a Subsidiary of Borrower. The term "control" shall mean the possession, directly or indirectly, of the power to vote ten percent (10%) or more of the capital stock of any Person or the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Reportable Event shall have the meaning given to such term in ERISA. Security Agreement shall mean the Security Agreement (Equipment) to be executed by Borrower and delivered to Bank pursuant to Section 6, as the same may from time to time be amended. Subsidiary shall mean, with respect to any Person, any corporation of which fifty percent (50%) or more of the issued and outstanding capital stock entitled to vote for the election of directors (other than by reason of default in the payment of dividends) is at the time owned directly or indirectly by such Person. Term shall have the meaning ascribed thereto in Section 1. Term Loan shall have the meaning ascribed thereto in Section 4.01. Third Party Collateral shall mean any Property or assets of any Obligor other than Borrower which now or at any time hereafter secure the payment or performance of any of Borrower's Obligations. Transaction Documents shall mean this Agreement, the Note, the Security Agreement, the Kansas Mortgage, the Missouri Deed of Trust and all other agreements, documents and instruments heretofore, now or hereafter delivered to Bank with respect to or in connection with or pursuant to this Agreement, any Loans made hereunder or any other of Borrower's Obligations, and executed by or on behalf of Borrower, all as the same may from time to time be amended, modified, extended or renewed. Trustee shall mean Mark Twain Bank or any successor trustee serving as such under that certain Indenture of Trust dated September 1, 1990, by and between The Industrial Development Authority of St. Charles County, Missouri and Mark Twain Bank. SECTION 3. THE LETTER OF CREDIT. 3.01 Purchase of Participation. Bank agrees to purchase a 100% participation in the Letter of Credit, all drawings made thereunder and Borrower's reimbursement and payment obligations to Harris pursuant to the terms of the Reimbursement Agreement and in the collateral and other documents executed in favor of Harris in connection therewith. Such participation shall be evidenced by the Participation Agreement. Borrower acknowledges and agrees that Bank shall be entitled to the benefits of the Reimbursement Agreement and any and all collateral and other documents executed in favor of Harris in connection therewith as if it were a direct party thereto. 3.02 Direct Recourse Against Borrower. Borrower acknowledges that pursuant to the terms of the Participation Agreement, Bank shall be required to fund the full amount of all drawings under the Letter of Credit. Any funds so advanced by Bank shall bear interest and be repaid by Borrower in accordance with the terms of the Reimbursement Agreement. All such payments shall be paid by Borrower to Harris for the benefit of Bank and shall be remitted by Harris to Bank in accordance with the terms of the Participation Agreement; provided, however, that at its election, Bank shall be entitled to enforce repayment of all such sums in its own name directly against Borrower and to otherwise invoke and enforce in its own name any and all rights and remedies provided for in the Reimbursement Agreement and any collateral or other documents executed in connection therewith. Any statement of account delivered by Bank to Borrower relating to amounts advanced by Bank pursuant to the Participation Agreement or the Reimbursement Agreement shall be rebuttably presumed correct and accurate and shall constitute an account stated between Borrower and Bank absent manifest error. 3.03 Obligations Absolute. The obligations of Borrower to Bank with respect to the Letter of Credit shall be absolute and unconditional and shall not be impaired or affected by: (a) any lack of validity or enforceability of the Reimbursement Agreement, the Letter of Credit, the Bond Documents and any other agreement or instrument relating thereto; (b) any amendment or waiver of or any consent to departure from all or any of the Reimbursement Agreement, the Letter of Credit, the Bond Documents and any other agreement or instrument relating thereto without the express written consent of Bank; or (c) the existence of any claim, set-off, defense or other rights which Borrower may have at any time against any beneficiary of the Letter of Credit or Harris, it being understood that any breach by Harris of its obligations to Bank under the Participation Agreement shall not relieve Borrower of its obligations to Bank. 3.04 Liability of the Bank. As between Borrower and Bank, Borrower assumes all risks of the acts or omissions of Harris with respect to the Letter of Credit, including, but not limited to, its honoring or refusing to honor drawings thereunder. SECTION 4. THE TERM LOAN. 4.01 Commitment of Bank. Bank agrees to make Borrower a term loan in the original principal amount of Two Million Six Hundred Thousand Dollars ($2,600,000.00) (the "Term Loan"), which Term Loan is being funded on the date hereof. The Term Loan shall be evidenced by a Promissory Note of Borrower dated the date hereof and payable to the order of Bank in the original principal amount of $2,600,000.00 (as the same may from time to time be amended, modified, extended or renewed, the "Term Loan Note"), an unexecuted copy of which is attached hereto as Exhibit A. The Term Loan Note shall mature on July 15, 1999 (on which date all unpaid principal and all accrued and unpaid interest shall become due and payable). Principal on the Term Loan Note shall be payable in thirty-five (35) consecutive monthly installments as follows: two (2) equal consecutive monthly installments in the amount of Fifty Thousand Dollars ($50,000.00) each, due and payable on September 15, 1996 and October 15, 1996; two (2) equal consecutive monthly installments in the amount of One Hundred Twenty-Five Thousand Dollars ($125,000.00) each, due and payable on November 15, 1996 and December 15, 1996; one (1) monthly installment in the amount of Seven Hundred Fifty Thousand Dollars ($750,000.00) due and payable on January 15, 1997; twenty-nine (29) equal consecutive monthly installments in the amount of Fifty Thousand Dollars ($50,000.00) each, due and payable commencing February 15, 1997 through June 15, 1999; and a final installment in the amount of the then outstanding and unpaid principal balance of the Term Loan Note due and payable on July 15, 1999. Interest on the outstanding principal balance of the Term Loan Note shall be payable monthly, on the date each installment of principal is due thereunder and at the maturity of the Term Loan Note, whether by reason of acceleration or otherwise. Interest on the Term Loan Note shall be calculated as provided for under Section 4.02. 4.02 Interest Rates. So long as no Event of Default has been declared by Bank and is continuing, the Term Loan Note shall bear interest at a rate per annum equal to Nine and Three-Fourths Percent (9.75%) per annum. From and after the declaration of an Event of Default by Bank, so long as such Event of Default has not been cured or waived in writing by Bank, and from and after the maturity of the Term Loan Note, whether by reason of acceleration or otherwise, the unpaid principal balance of the Term Loan Note shall bear interest until paid at a rate per annum equal to Eleven and Three-Fourths Percent (11.75%). Interest shall be computed with respect to the Term Loan Note on an actual day, 360-day year basis. 4.03 Prepayment. Borrower shall be privileged to prepay all at any time or any portion from time to time of the unpaid principal under the Term Loan Note prior to maturity, without penalty or premium, provided that: (i) partial prepayments shall be applied to installments of principal under the Term Loan Note in the inverse order of their stated maturities; (ii) on each prepayment date, Borrower shall pay to Bank all accrued and unpaid interest on the principal portion of the Note being prepaid to and including the date of such prepayment; and (iii) no Default or Event of Default under this Agreement shall have occurred and be continuing. 4.04 Payments not on a Business Day. In case any installment of principal or interest under the Term Loan Note shall become due on a day which is not a Business Day, such principal and interest shall be payable on the next succeeding Business Day. SECTION 5. PRECONDITIONS TO LOAN AND PARTICIPATION. Notwithstanding any provision contained herein to the contrary, Bank shall have no obligation to make the Term Loan hereunder or to purchase the participation in the Letter of Credit unless Bank shall have first received: 1. this Agreement and the Term Loan Note, each executed by a duly authorized officer of Borrower; 2. the duly executed Security Agreement, financing statements and such other documents as Bank may reasonably require under Section 6; 3. the Kansas Mortgage and the Missouri Deed of Trust, duly executed by Borrower; 4. an amendment to the Reimbursement Agreement in form and substance acceptable to Bank, duly executed by Borrower and Harris; 5. a Participation Agreement in form and substance acceptable to Bank duly executed by Harris and Bank; 6. a copy of resolutions of the Board of Directors of Borrower, duly adopted, which authorize the execution, delivery and performance of this Agreement, the Term Loan Note, the Security Agreement and the other Transaction Documents, certified by the President and Secretary of Borrower; 7. a copy of the Certificate or Articles of Incorporation of Borrower, including any amendments thereto, certified by the Secretary of State of the State of Missouri; 8. a copy of the By-Laws of Borrower, including any amendments thereto, certified by the Secretary of Borrower; 9. an incumbency certificate, executed by the Secretary of Borrower, which shall identify by name and title and bear the signatures of all of the officers of Borrower executing any of the Transaction Documents; 10. a certificate of corporate good standing of Borrower issued by the Secretary of State of the State of Missouri, the State of Kansas and the State of Washington; 11. an opinion of counsel of Gallop, Johnson & Neuman, L.C., independent counsel to Borrower, in form and substance acceptable to Bank; 12. a Security Agreement (Equipment) duly executed by LMI Finishing, Inc. (the "LMI Security Agreement"); and 13. such other agreements, documents, instruments and certificates as Bank may reasonably request. SECTION 6. SECURITY AGREEMENTS In order to secure the payment when due of Borrower's Obligations, Borrower shall convey to Bank a security interest in all of Borrower's machinery, equipment and fixtures and all proceeds and products thereof, which security interest shall be a first and prior interest in all such items except for those Uniform Commercial Code security interests securing Borrower's obligations to Harris under the Reimbursement Agreement. Said security interest shall be evidenced by a Security Agreement (Equipment) dated the date hereof and executed by Borrower in favor of Bank in the form attached hereto as Exhibit B and incorporated herein by reference (as the same may from time to time be amended, the "Security Agreement (Equipment)"). Borrower further covenants and agrees to execute and delivery to Bank any and all financing statements, continuation statements and such other documentation as may be requested by Bank in order to create, perfect and continue said security interest. Borrower's Obligations shall further be secured by the Mortgage dated the date hereof executed by Borrower in favor of Bank in the form attached hereto as Exhibit C and incorporated herein by reference (as the same may from time to time be amended, the "Kansas Mortgage") and by the Deed of Trust dated the date hereof executed by Borrower in favor of Bank in the form attached hereto as Exhibit D and incorporated herein by reference (as the same may from time to time be amended, the "Missouri Deed of Trust"). Upon demand, Borrower shall pay all legal and filing fees and expenses incurred by Bank in the preparation of the foregoing documents and perfection of the security interests and liens contemplated thereby. Bank shall have no obligation to make the Term Loan hereunder or to purchase the participation in the Letter of Credit unless and until Borrower has fully satisfied these requirements. SECTION 7. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Bank that: 7.01 Corporate Existence and Power. Borrower and each Subsidiary of Borrower: (a) is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate powers and all governmental and regulatory licenses, authorizations, consents and approvals required to carry on its business as now conducted; and (c) is duly qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure to so qualify would have a material adverse effect on its business, financial condition or operations. 7.02 Corporate Authorization. The execution, delivery and performance by Borrower of this Agreement, the Term Loan Note, the Security Agreements and the other Transaction Documents are within the corporate powers of Borrower and have been duly authorized by all necessary corporate action. 7.03 Binding Effect. This Agreement, the Term Loan Note, the Security Agreements and the other Transaction Documents have been duly executed and delivered by Borrower and constitute the legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors' rights in general. 7.04 Financial Statements. Borrower has furnished Bank with the following financial statements, identified by the principal financial officer of Borrower: (1) consolidated balance sheets and profit and loss statements of Borrower and its Consolidated Subsidiaries as of December 31, 1995, all certified by Borrower's independent certified public accountants, which financial statements have been prepared in accordance with generally accepted accounting principles consistently applied; and (2) unaudited consolidated balance sheets and profit and loss statements of Borrower and its Consolidated Subsidiaries as of May 31, 1996, certified by the principal financial officer of Borrower as being true and correct to the best of his knowledge and as being prepared in accordance with Borrower's normal accounting procedures. Borrower further represents that: (1) said balance sheets and their accompanying notes fairly present the condition of Borrower and its Consolidated Subsidiaries as of the dates thereof; (2) there has been no material adverse change in the condition or operation, financial or otherwise, of Borrower or any of its Consolidated Subsidiaries since May 31, 1996; and (3) neither Borrower nor any of its Consolidated Subsidiaries has any direct or contingent liabilities which are not disclosed on said financial statements. 7.05 Litigation. Except as disclosed in Schedule 7.05 attached hereto, there is no action or proceeding pending or, to the knowledge of Borrower, threatened against or affecting Borrower or any Subsidiary of Borrower before any court, arbitrator or any governmental, regulatory or administrative body, agency or official which could result in any material adverse change in the condition or operation, financial or otherwise, of Borrower or any Subsidiary of Borrower, and neither Borrower nor any Subsidiary of Borrower is in default with respect to any order, writ, injunction, decision or decree of any court, arbitrator or any governmental, regulatory or administrative body, agency or official, a default under which would have a material adverse effect on Borrower or any Subsidiary of Borrower. 7.06 Pension and Welfare Plans. Each Pension Plan complies with all applicable statutes and governmental rules and regulations; no Reportable Event has occurred and is continuing with respect to any Pension Plan; neither Borrower nor any ERISA Affiliate nor any Subsidiary of Borrower has withdrawn from any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 or 4205 of ERISA, respectively; no steps have been instituted by Borrower, any ERISA Affiliate or any Subsidiary of Borrower to terminate any Pension Plan; no condition exists or event or transaction has occurred in connection with any Pension Plan or Multiemployer Plan which could result in the incurrence by Borrower, any ERISA Affiliate or any Subsidiary of Borrower of any material liability, fine or penalty; and neither Borrower nor any ERISA Affiliate nor any Subsidiary of Borrower is a "contributing sponsor" as defined in Section 4001(a)(13) of ERISA of a "single-employer plan" as defined in Section 4001(a)(15) of ERISA which has two or more contributing sponsors at least two of whom are not under common control. Neither Borrower nor any Subsidiary of Borrower has any contingent liability with respect to any "employee welfare benefit plan", as such term is defined in Section 3(a) of ERISA, which covers retired employees and their beneficiaries. 7.07 Tax Returns and Payment. Borrower and each Subsidiary of Borrower has filed all Federal, state and local income tax returns and all other tax returns which are required to be filed and has paid all taxes due pursuant to such returns or pursuant to any assessment received by Borrower or any Subsidiary of Borrower, except for the filing of such returns, if any, in respect of which an extension of time for filing is in effect and except for such taxes, if any, as are being contested in good faith by appropriate proceedings being diligently conducted and as to which adequate reserves in accordance with generally accepted accounting principles consistently applied have been provided. The charges, accruals and reserves on the books of Borrower and each Subsidiary of Borrower in respect of any taxes or other governmental charges are, in the opinion of Borrower, adequate. 7.08 Subsidiaries. Borrower has the following Subsidiaries: LMI Finishing, Inc. and AERO Assembly, Inc. 7.09 Compliance With Other Instruments; None Burdensome. Neither Borrower nor any Subsidiary of Borrower is a party to any contract or agreement or subject to any charter or other corporate restriction which materially and adversely affects its business, Property or financial condition and which is not disclosed on Borrower's financial statements heretofore submitted to Bank; none of the execution and delivery by Borrower of the Transaction Documents, the consummation of the transactions therein contemplated or the compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Borrower, or any of the provisions of Borrower's Certificate or Articles of Incorporation or By-Laws or any of the provisions of any indenture, agreement, document, instrument or undertaking to which Borrower is a party or subject, or by which it or its Property is bound, or conflict with or constitute a default thereunder or result in the creation or imposition of any Lien pursuant to the terms of any such indenture, agreement, document, instrument or undertaking. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental, regulatory, administrative or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, the execution, delivery or performance of, or the legality, validity, binding effect or enforceability of, any of the Transaction Documents. 7.10 Other Loans and Guarantees. Except as disclosed on Schedule 7.10 attached hereto, neither Borrower nor any Subsidiary of Borrower is a party to any loan transaction or Guarantee. 7.11 Labor Matters. Except as disclosed on Schedule 7.11 attached hereto, (a) no labor contract to which Borrower or any Subsidiary of Borrower is subject is scheduled to expire during the Term of this Agreement and (b) on the date of this Agreement, (i) neither Borrower nor any Subsidiary of Borrower is a party to any labor dispute and (ii) there are no strikes or walkouts relating to any labor contract to which Borrower or any Subsidiary of Borrower is subject. 7.12 Title to Property. Borrower and each Subsidiary of Borrower is the sole and absolute owner of, or has the legal right to use and occupy, all Property it claims to own or which is necessary for Borrower or such Subsidiary of Borrower to conduct its business. Neither Borrower nor any Subsidiary of Borrower has signed any financing statements, security agreements or chattel mortgages with respect to any of its Property, has granted or permitted any Liens with respect to any of its Property or has any knowledge of any Liens with respect to any of its Property, except as disclosed on Schedule 7.12 attached hereto. 7.13 Regulation U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of The Board of Governors of the Federal Reserve System, as amended) and no part of the proceeds of any Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately (i) to purchase or carry margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock, or to refund or repay indebtedness originally incurred for such purpose or (ii) for any purpose which entails a violation of, or which is inconsistent with, the provisions of any of the Regulations of The Board of Governors of the Federal Reserve System, including, without limitation, Regulations G, U, T or X thereof, as amended. If requested by Bank, Borrower shall furnish to Bank a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U. 7.14 Multi-Employer Pension Plan Amendments Act of 1980. Borrower and each Subsidiary of Borrower is in compliance with the Multi-Employer Pension Plan Amendments Act of 1980, as amended ("MEPP"), and has no liability for pension contributions pursuant to MEPP. 7.15 Investment Company Act of 1940; Public Utility Holding Company Act of 1935. Borrower is not an "investment company" as that term is defined in, and is not otherwise subject to regulation under, the Investment Company Act of 1940, as amended. Borrower is not a "holding company" as that term is defined in, and is not otherwise subject to regulation under, the Public Utility Holding Company Act of 1935, as amended. 7.16 Patents, Licenses, Trademarks, Etc. Borrower and each Subsidiary of Borrower possesses all necessary patents, licenses, trademarks, trademark rights, trade names, trade name rights and copyrights to conduct its business without conflict with any patent, license, trademark, trade name or copyright of any other Person. 7.17 Environmental and Health and Safety Matters. Except as disclosed on Schedule 7.17 attached hereto or in reports listed on Schedule 7.17 and delivered to Bank: (i) the operations of Borrower and each Subsidiary of Borrower comply with (A) all applicable Environmental Laws and (B) all applicable Occupational Safety and Health Laws; (ii) none of the operations of Borrower or any Subsidiary of Borrower are subject to any judicial, governmental, regulatory or administrative proceeding alleging the violation of any Environmental Law or Occupational Safety and Health Law; (iii) none of the operations of Borrower or any Subsidiary of Borrower is the subject of any Federal or state investigation evaluating whether any remedial action is needed to respond to (A) any spillage, disposal or release into the environment of any Hazardous Material or any other hazardous, toxic or dangerous waste, substance or constituent or other substance, or (B) any unsafe or unhealthful condition at any premises of Borrower or such Subsidiary of Borrower; (iv) neither Borrower nor any Subsidiary of Borrower has filed any notice under any Environmental Law or Occupational Safety and Health Law indicating or reporting (A) any past or present spillage, disposal or release into the environment of, or treatment, storage or disposal of, any Hazardous Material or any other hazardous, toxic or dangerous waste, substance or constituent or other substance or (B) any unsafe or unhealthful condition at any premises of Borrower or such Subsidiary of Borrower; and (v) neither Borrower nor any Subsidiary of Borrower has any known contingent liability in connection with (A) any spillage, disposal or release into the environment of, or otherwise with respect to, any Hazardous Material or any other hazardous, toxic or dangerous waste, substance or constituent or other substance or (B) any unsafe or unhealthful condition at any premises of Borrower or such Subsidiary of Borrower. SECTION 8. COVENANTS. 8.01 Affirmative Covenants of Borrower. Borrower covenants and agrees that, so long as Bank has any obligation to make any Loan hereunder or any of Borrower's Obligations remain unpaid: (a) Information. Borrower will deliver to Bank: (i) As soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, consolidated balance sheets of Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, retained earnings and cash flow for such fiscal year, setting forth in each case, in comparative form, the figures for the previous fiscal year, all such financial statements to be prepared in accordance with generally accepted accounting principles consistently applied and reported on by and accompanied by the unqualified opinion of independent certified public accountants of nationally recognized standing selected by Borrower and reasonably acceptable to Bank together with (i) if requested by Bank, a certificate from such accountants to the effect that, in making the examination necessary for the signing of such annual audit report, such accountants have not become aware of any Default or Event of Default that has occurred and is continuing, or, if such accountants have become aware of any such event, describing it and the steps, if any, being taken to cure it and (ii) the computations of such accountants evidencing Borrower's compliance with the financial covenants contained in this Agreement; (ii) As soon as available and in any event within forty-five (45) days after the end of each month, consolidated and consolidating balance sheets of Borrower and its Consolidated Subsidiaries as of the end of such month and the related consolidated and consolidating statements of income, retained earnings and cash flow for such month and for the portion of Borrower's fiscal year ended at the end of such month, setting forth in each case in comparative form, the figures for the corresponding month and the corresponding portion of Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the principal financial officer of Borrower; (iii) Simultaneously with the delivery of each set of financial statements referred to in clauses (i) and (ii) above, a certificate of the principal financial officer of Borrower, in the form attached hereto as Exhibit E and incorporated herein by reference, accompanied by supporting financial work sheets where appropriate; (iv) Promptly upon receipt thereof, any reports submitted to Borrower or any Consolidated Subsidiary of Borrower (other than reports previously delivered pursuant to Sections 8.01(a)(i) and (ii) above) by independent accountants in connection with any annual, interim or special audit made by them of the books of Borrower or any Consolidated Subsidiary of Borrower; and (v) With reasonable promptness, such further information regarding the business, affairs and financial position of Borrower or any Subsidiary of Borrower as Bank may from time to time reasonably request. Bank is hereby authorized to deliver a copy of any financial statement or other information made available by Borrower to any regulatory authority having jurisdiction over Bank, pursuant to any request therefor. (b) Payment of Indebtedness. Borrower and each Subsidiary of Borrower will (i) pay any and all Indebtedness payable or Guaranteed by Borrower or such Subsidiary of Borrower, as the case may be, and any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) or prior to the expiration of any applicable cure periods, in accordance with the agreement or instrument relating to such Indebtedness or Guarantee and (ii) faithfully perform, observe and discharge all covenants, conditions and obligations which are imposed upon Borrower or such Subsidiary of Borrower, as the case may be, by any and all agreements, documents, instruments and indentures evidencing, securing or otherwise relating to such Indebtedness or Guarantee. (c) Consultations and Inspections. Borrower will permit, and will cause each Subsidiary of Borrower to permit, Bank (and any Person appointed by Bank to whom Borrower does not reasonably object) to discuss the affairs, finances and accounts of Borrower and each Subsidiary of Borrower with the officers of Borrower and each Subsidiary of Borrower, all at such reasonable times and as often as Bank may reasonably request. Borrower will also permit, and will cause each Subsidiary of Borrower to permit, inspection of its Properties, books and records by Bank during normal business hours or at other reasonable times. (d) Payment of Taxes; Corporate Existence; Maintenance of Properties; Insurance. Borrower and each Subsidiary of Borrower will: (i) Duly file all Federal, state and local income tax returns and all other tax returns and reports of Borrower and each Subsidiary of Borrower which are required to be filed and duly pay and discharge promptly all taxes, assessments and other governmental charges imposed upon it or any of its Property; provided, however, that neither Borrower nor any Subsidiary of Borrower shall be required to pay any such tax, assessment or other governmental charge the payment of which is being contested in good faith and by appropriate proceedings diligently conducted and for which adequate reserves in form and amount satisfactory to Bank have been provided, except that Borrower and each Subsidiary of Borrower shall pay or cause to be paid all such taxes, assessments and governmental charges forthwith upon the commencement of proceedings to foreclose any Lien which is attached as security therefor, unless such foreclosure is stayed by the filing of an appropriate bond; (ii) Do all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchise and to be duly qualified to do business in all jurisdictions where the nature of its business requires such qualification; (iii) Maintain and keep its Properties as a whole in good repair, working order and condition; provided, however, that nothing in this subsection (iii) shall prevent any abandonment of any Property which is not disadvantageous in any material respect to Bank and which, in the opinion of the management of Borrower, is in the best interests of Borrower or such Subsidiary of Borrower, as the case may be; and (iv) Insure with financially sound and reputable insurers acceptable to Bank, all Property of Borrower and each Subsidiary of Borrower of the character usually insured by corporations engaged in the same or similar businesses similarly situated, against loss or damage of the kind customarily insured against by such corporations, unless higher limits or coverage are reasonably required in writing by Bank, and carry adequate liability insurance and other insurance of a kind and in an amount generally carried by corporations engaged in the same or similar businesses similarly situated, unless higher limits or coverage are reasonably required in writing by Bank. All such insurance may be subject to reasonable deductible amounts. Promptly upon Bank's request therefor, Borrower shall provide Bank with evidence that Borrower maintains, and that each Subsidiary of Borrower maintains, the insurance required under this Section 8.01(d)(iv), and evidence of the payment of all premiums therefor. (e) Accountant. Borrower shall give Bank prompt notice of any change of Borrower's independent certified public accountants and a statement of the reasons for such change. Borrower shall at all times utilize independent certified public accountants reasonably acceptable to Bank. (f) ERISA Compliance. If Borrower or any Subsidiary of Borrower shall have any Pension Plan, Borrower and such Subsidiary or Subsidiaries of Borrower shall comply with all requirements of ERISA relating to such plan. Without limiting the generality of the foregoing, neither Borrower nor any Subsidiary of Borrower will: (i) permit any Pension Plan maintained by it to engage in any nonexempt "prohibited transaction," as such term is defined in Section 4975 of the Internal Revenue Code of 1986, as amended; (ii) permit any Pension Plan maintained by it to incur any "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, 29 U.S.C. ss. 1082, whether or not waived; (iii) terminate any such Pension Plan in a manner which could result in the imposition of a Lien on any Property of Borrower or any Subsidiary of Borrower pursuant to Section 4068 of ERISA, 29 U.S.C. ss.1368; or (iv) take any action which would constitute a complete or partial withdrawal from a Multiemployer Plan within the meaning of Sections 4203 and 4205 of Title IV of ERISA. Notwithstanding any provision contained in this Section 8.01(f) to the contrary, an act by Borrower or any Subsidiary of Borrower shall not be deemed to constitute a violation of subparagraphs (i) through (iv) hereof unless Bank determines in good faith that said action, individually or cumulatively with other acts of Borrower and the Subsidiaries of Borrower, does have or is likely to cause a significant adverse financial effect upon Borrower or any Subsidiary of Borrower. Borrower shall have the affirmative obligation hereunder to report to Bank any of those acts identified in subparagraphs (i) through (iv) hereof, regardless of whether said act does or is likely to cause a significant adverse financial effect upon Borrower or any Subsidiary of Borrower, and failure by Borrower to report such act promptly upon Borrower's becoming aware of the existence thereof shall constitute an Event of Default hereunder. (g) Maintenance of Books and Records. Borrower and each Subsidiary of Borrower will maintain its books and records in accordance with generally accepted accounting principles consistently applied and in which true, correct and complete entries will be made of all of its dealings and transactions. (h) Further Assurances. Borrower will execute any and all further agreements, documents and instruments, and take any and all further actions which may be required under applicable law, or which Bank may from time to time reasonably request, in order to effectuate the transactions contemplated by this Agreement, the Note, the Security Agreements and the other Transaction Documents. (i) Financial Covenants. Borrower will: (i) Maintain a ratio of Indebtedness (determined on a consolidated basis for Borrower and all of its Consolidated Subsidiaries and in accordance with generally accepted accounting principles consistently applied) to Consolidated Net Worth of not more than 2.1 to 1.0 as of September 30, 1996, 1.9 to 1.0 as of December 31, 1996, 1.7 to 1.0 as of March 31, 1997, and 1.6 to 1.0 as of the end of each subsequent calendar quarter. (ii) Maintain at all times a ratio of Current Assets to Current Liabilities, both determined on a consolidated basis for Borrower and all of its Consolidated Subsidiaries and in accordance with generally accepted accounting principles consistently applied, of at least 2.0 to 1.0; (iii) Maintain a Consolidated Tangible Net Worth of at least the following amounts as of the dates indicated: September 30, 1996 $10,000,000.00 December 31, 1996 $10,250,000.00 March 31, 1997 $10,500,000.00 June 30, 1997 $11,050,000.00 September 30, 1997 $11,750,000.00 December 31, 1997 $12,500,000.00 As of the end of each subsequent fiscal quarter, Borrower shall have a Consolidated Tangible Net Worth of at least the sum of $12,500,000.00 plus the greater of (A) $125,000.00 or (B) Seventy Percent (70%) of the after-tax net income shown on Borrower's consolidated financial statements for such fiscal quarter, such required increases to be cumulative for each fiscal quarter. (iv) Deliver a certificate of the principal financial officer of Borrower containing the financial ratio calculations required in clauses (i) through (iii) above simultaneously with the financial statements referred to in Sections 8.01(a)(i) and (ii). (j) Compliance with Law. Borrower will, and will cause each Subsidiary of Borrower to, comply in all material respects with any and all laws, ordinances and governmental and regulatory rules and regulations to which it is subject and obtain any and all licenses, permits, franchises and other governmental and regulatory authorizations necessary to the ownership of its Properties or to the conduct of its business, which violation or failure to obtain might materially adversely affect the condition or operation, financial or otherwise, of Borrower or any Subsidiary of Borrower. (k) Notices. Borrower will notify Bank in writing of any of the following promptly, but in no event more than five (5) days after an executive officer of Borrower learns of the occurrence thereof, describing the same and, if applicable, the steps being taken by the Person(s) affected with respect thereto: (i) Default. The occurrence of any Default or Event of Default under this Agreement or any default or event of default by Borrower, any other Obligor or any Subsidiary of Borrower under the Reimbursement Agreement, any note, indenture, loan agreement, mortgage, deed of trust, security agreement, lease or other similar agreement, document or instrument to which Borrower, any other Obligor or any Subsidiary of Borrower, as the case may be, is a party or by which it is bound or to which it is subject; (ii) Litigation. The institution of any litigation, arbitration proceeding or governmental or regulatory proceeding affecting Borrower, any other Obligor, any Subsidiary of Borrower, any Collateral or any Third Party Collateral, whether or not considered to be covered by insurance; (iii) Judgment. The entry of any judgment or decree against Borrower, any other Obligor or any Subsidiary of Borrower; (iv) Pension Plans. The occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower, any ERISA Affiliate or any Subsidiary of Borrower; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary of Borrower from any Multiemployer Plan; or the incurrence of any material increase in the contingent liability of Borrower or any Subsidiary of Borrower with respect to any "employee welfare benefit plan" as defined in Section 3(1) of ERISA which covers retired employees and their beneficiaries; (v) Change of Name. Any change in the name of Borrower, any other Obligor or any Subsidiary of Borrower; (vi) Change in Place(s) of Business. Any proposed opening, closing or other change of any place of business of Borrower or any Subsidiary of Borrower; (vii) Environmental Matters. Receipt of any notice that the operations of Borrower, any other Obligor or any Subsidiary of Borrower are not in full compliance with any of the requirements of any applicable Environmental Law or Occupational Safety and Health Law; receipt of notice that Borrower, any other Obligor or any Subsidiary of Borrower is subject to any Federal, state or local investigation evaluating whether any remedial action is needed to respond to the release of any Hazardous Materials or any other hazardous or toxic waste, substance or constituent or other substance into the environment; or receipt of notice that any of the Properties or assets of Borrower, any other Obligor or any Subsidiary of Borrower are subject to an "Environmental Lien." For purposes of this Section 8.01(k)(vii), "Environmental Lien" shall mean a Lien in favor of any governmental or regulatory agency, entity, authority or official for (1) any liability under Environmental Laws or (2) damages arising from or costs incurred by any such governmental or regulatory agency, entity, authority or official in response to a release of any Hazardous Materials or any other hazardous or toxic waste, substance or constituent or other substance into the environment; (viii) Material Adverse Change. The occurrence of any material adverse change in the business, operations or condition, financial or otherwise, of Borrower, any other Obligor or any Subsidiary of Borrower; (ix) Change in Management or Line(s) of Business. Any material change in the senior management of Borrower or any Subsidiary of Borrower or any change in Borrower's or any Subsidiary of Borrower's line(s) of business; and (x) Other Notices. Any notices required to be provided pursuant to other provisions of this Agreement and notice of the occurrence of such other events as Bank may from time to time reasonably specify. (l) Compliance with Reimbursement Agreement. Borrower will comply with the terms and provisions of the Reimbursement Agreement, will not agree or consent to any amendment or modification thereof without the express prior written consent of Bank, and will deliver a copy of any notices or other communications required thereunder to Bank as and when the same are furnished to Harris. 8.02 Negative Covenants of Borrower. Borrower covenants and agrees that, so long as Bank has any obligation to make any Loan hereunder or any of Borrower's Obligations remain unpaid, unless the prior written consent of Bank is obtained: (a) Limitation on Indebtedness. Neither Borrower nor any Subsidiary of Borrower will incur or be obligated on any Indebtedness, either directly or indirectly, by way of Guarantee, suretyship or otherwise, other than: (i) Indebtedness evidenced by the Note; (ii) Indebtedness evidenced by the Bond Documents and the Reimbursement Agreement; (iii) Indebtedness to Norwest Business Credit, Inc. in the principal amount not to exceed $8,500,000.00 at any given time; (iv) Indebtedness incurred to repurchase Borrower's outstanding capital stock pursuant to shareholder agreements in effect with employees from time to time in a principal amount not to exceed $200,000.00 outstanding at any given time; (v) Indebtedness in a principal amount not to exceed $1,000,000.00 outstanding at any given time which is subordinated in a manner acceptable to Bank, in its sole and absolute discretion, to Borrower's Obligations; provided, however, that Borrower may repay its subordinated indebtedness on or after the date occurring eighteen (18) months from the date hereof if (A) no Default has occurred, and (B) Bank shall have determined that, immediately after such repayment, Borrower shall have had average availability of no less than $500,000 during the ninety (90) day period preceding and including such repayment date under Borrower's credit facility with Norwest Business Credit, Inc.; (vi) Indebtedness incurred to finance the purchase of capital assets provided that (A) the principal amount of the indebtedness incurred in each instance does not exceed the purchase price of the asset(s) being acquired; and (B) the principal amount of such indebtedness incurred in each of the following periods shall not exceed the amount indicted on a non-cumulative basis, to wit: amounts not incurred in any given period may not be carried forward to subsequent periods: $200,000 8/15/96 to 12/31/96 $600,000 1/1/97 to 12/31/97 $200,000 1/1/98 to 12/31/98 $100,000 1/1/99 to 7/15/99 (vii) Indebtedness reflected on the most recent financial statements of Borrower furnished to Bank, exclusive of Indebtedness owing to Harris; (viii) Unsecured trade accounts payable incurred in the ordinary course of business; and (ix) Indebtedness representing loans against life insurance policies of Borrower or any Subsidiary of Borrower in an amount not to exceed the aggregate cash surrender value of such life insurance policies. (b) Limitations on Liens. Borrower will not create, incur, assume or suffer to exist, and will not cause or permit any Subsidiary of Borrower to create, incur, assume or suffer to exist, any Lien on any of its Property, assets or revenues other than: (i) Liens presently in existence which are described on Schedule 7.12 attached hereto; (ii) Purchase money liens or security interests covering the property acquired with the proceeds of Indebtedness permitted to be incurred under Section 8.02(a)(vi) above; (iii) Pledges or deposits in connection with or to secure workmen's compensation, unemployment insurance, pension or other employee benefits; (iv) Any Lien renewing, extending or refunding any Lien permitted hereunder, provided that the principal amount of Indebtedness secured by such Lien is not increased and such Lien is not extended to cover any other Property or assets of Borrower or any Subsidiary of Borrower; and (v) Subject to Section 8.01(d)(i), Liens for taxes, assessments or governmental charges or levies on Property of Borrower or any Subsidiary of Borrower if the same are being contested in good faith and by appropriate proceedings diligently conducted and for which adequate reserves in form and amount satisfactory to Bank are provided. (c) Sale of Property. Neither Borrower nor any Subsidiary of Borrower will sell, lease, transfer or otherwise dispose of any Property or assets of Borrower or such Subsidiary of Borrower, as the case may be, except in the ordinary course of business; provided, however, that the foregoing shall not preclude Borrower or any Subsidiary of Borrower from selling, leasing, transferring or otherwise disposing of less than substantially all of its Property or assets so long as (i) the aggregate book value of all such Property or assets sold, leased, transferred or otherwise disposed of in any given fiscal year does not exceed $100,000.00; and (ii) the purchase price for said Property or assets shall be equal to or greater than the depreciated book value of said Property or assets. (d) Mergers and Consolidations. Neither Borrower nor any Subsidiary of Borrower will merge or consolidate with any other Person or sell, transfer or convey all or a substantial part of its Property or assets to any Person, except that Subsidiaries of Borrower may merge with each other or into Borrower. (e) Acquisitions. Neither Borrower nor any Subsidiary of Borrower will acquire all or substantially all of the stock or assets of any Person. (f) Fiscal Year. Neither Borrower nor any Subsidiary of Borrower will change their respective fiscal years. (g) Stock Redemptions and Distributions. Borrower will not make or declare or incur any liability to make any Distribution in respect of the capital stock of Borrower. (h) Transactions with Related Parties. Neither Borrower nor any Subsidiary of Borrower will, directly or indirectly, engage in any material transaction, in the ordinary course of business or otherwise, with any Related Party unless such transaction is upon fair market terms, is not disadvantageous in any material respect to Bank and has been approved by a majority of the disinterested directors of Borrower or such Subsidiary of Borrower, as the case may be (or, if none of such directors are disinterested, by a majority of the directors), as being in the best interests of Borrower or such Subsidiary of Borrower, as the case may be. In addition, neither Borrower nor any Subsidiary of Borrower shall (i) transfer any Property or assets to any Related Party or (ii) purchase or sign any agreement to purchase any stock or other securities of any Related Party (whether debt, equity or otherwise), underwrite or Guarantee the same, or otherwise become obligated with respect thereto. (i) Capital Expenditures. Neither Borrower nor any Subsidiary of Borrower will make any capital expenditures or enter into any Capitalized Leases which in the aggregate (for Borrower and all Subsidiaries of Borrower) exceed the amount indicted during each of the following periods: $350,000 8/15/96 to 12/31/96 $1,200,000 1/1/97 to 12/31/97 $1,000,000 1/1/98 to 12/31/98 $500,000 1/1/99 to 7/15/99 (j) Loans and Investments. Neither Borrower nor any Subsidiary of Borrower will make any loans or advances or extensions of credit to (other than extensions of credit in the ordinary course of business), purchase any stocks, bonds, notes, debentures or other securities of, make any expenditures on behalf of, or in any manner assume liability (direct, contingent or otherwise) for the Indebtedness of any Person, except that Borrower and the Subsidiaries of Borrower may: (i) Make or permit to remain outstanding loans or advances to any Subsidiary of Borrower; (ii) Acquire and own stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to Borrower or any Subsidiary of Borrower; (iii) Own, purchase or acquire (A) prime commercial paper and certificates of deposit in United States commercial banks (having capital resources in excess of $100,000,000.00), in each case due within one (1) year from the date of purchase and payable in the United States in United States dollars, (B) obligations of the United States government or any agency thereof, (C) obligations guaranteed directly by the United States government or (D) repurchase agreements of United States commercial banks (having capital resources in excess of $100,000,000.00) for terms of less than one (1) year; and (iv) Make or permit to remain outstanding travel and other like advances to officers and employees of Borrower or any Subsidiary of Borrower in the ordinary course of business; and (v) Redeem or repurchase outstanding capital stock of Borrower in connection with Borrower's 401(k) plan or pursuant to shareholder agreements in effect with employees from time to time provided that the aggregate amounts expended with respect to such transactions in any given year shall not exceed $200,000 with respect to repurchases relating to Borrower's 401(k) plan and $200,000 with respect to all other repurchases. (k) Dissolution or Liquidation. Neither Borrower nor any Subsidiary of Borrower will seek or permit the dissolution or liquidation of Borrower in whole or in part. (l) Leases. Neither Borrower nor any Subsidiary of Borrower will enter into or permit to remain in effect any agreements to rent or lease (as lessee) any real or personal property for initial terms (including options to renew or extend any term, whether or not exercised) of more than one (1) year which in the aggregate (for Borrower and all Subsidiaries of Borrower) provide for payments in excess of $375,000 during any consecutive twelve-month (12-month) period. (m) Change in Nature or Ownership of Business. Neither Borrower nor any Subsidiary of Borrower will make or permit any material change in the nature or ownership of its business. (n) Pension Plans. Neither Borrower nor any Subsidiary of Borrower shall (a) permit any condition to exist in connection with any Pension Plan which might constitute grounds for the PBGC to institute proceedings to have such Pension Plan terminated or a trustee appointed to administer such Pension Plan or (b) engage in, or permit to exist or occur, any other condition, event or transaction with respect to any Pension Plan which could result in the incurrence by Borrower or any Subsidiary of Borrower of any material liability, fine or penalty. Neither Borrower nor any Subsidiary of Borrower shall become obligated to contribute to any Pension Plan or Multiemployer Plan other than any such plan or plans in existence on the date hereof. 8.03 Use of Proceeds. Borrower agrees that (i) the proceeds of the Term Loan will be used solely for repayment of existing Indebtedness of Borrower to Harris and for general working capital; (ii) none of such proceeds will be used in violation of any applicable law or regulation; and (iii) Borrower will not engage principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock" within the meaning of Regulation U of The Board of Governors of the Federal Reserve System, as amended. SECTION 9. EVENTS OF DEFAULT. If any of the following (each of the following herein sometimes called an "Event of Default") shall occur and be continuing: 9.01 Borrower shall fail to pay any of Borrower's Obligations as and when the same shall become due and payable, whether by reason of demand, acceleration or otherwise;, and such failure remains unremedied for ten (10) days after written notice thereof shall have been given to Borrower by Bank. 9.02 Any representation or warranty of Borrower made in this Agreement, in any other Transaction Document to which Borrower is a party or in any certificate, agreement, instrument or statement furnished or made or delivered pursuant hereto or thereto or in connection herewith or therewith, shall prove to have been untrue or incorrect in any material respect when made or effected; 9.03 Borrower shall fail to perform or observe any term, covenant or provision contained in Section 8.01(i), Section 8.02 or Section 8.03; 9.04 Borrower shall fail to perform or observe any other term, covenant or provision contained in this Agreement and any such failure remains unremedied for ten (10) days after written notice thereof shall have been given to Borrower by Bank; 9.05 This Agreement or any of the other Transaction Documents shall at any time for any reason cease to be in full force and effect or shall be declared to be null and void by a court of competent jurisdiction, or if the validity or enforceability thereof shall be contested or denied by Borrower, or if the transactions completed hereunder or thereunder shall be contested by Borrower or if Borrower shall deny that it has any or further liability or obligation hereunder or thereunder; 9.06 Borrower, any Subsidiary of Borrower or any other Obligor shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other Federal, state or foreign bankruptcy, insolvency, receivership, liquidation or similar law, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official of itself, himself or herself or of a substantial part of its, his or her Property or assets, (iv) file an answer admitting the material allegations of a petition filed against itself, himself or herself in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its, his or her inability or fail generally to pay its, his or her debts as they become due or (vii) take any corporate or other action for the purpose of effecting any of the foregoing; 9.07 An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Borrower, any Subsidiary of Borrower or any other Obligor, or of a substantial part of the Property or assets of Borrower, any Subsidiary of Borrower or any other Obligor, under Title 11 of the United States Code or any other Federal, state or foreign bankruptcy, insolvency, receivership, liquidation or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official of Borrower, any Subsidiary of Borrower or any other Obligor or of a substantial part of the Property or assets of Borrower, any Subsidiary of Borrower or any other Obligor or (iii) the winding-up or liquidation of Borrower, any Subsidiary of Borrower or any other Obligor, and such proceeding or petition shall continue undismissed for forty-five (45) consecutive days or an order or decree approving or ordering any of the foregoing shall continue unstayed and in effect for forty-five (45) consecutive days; 9.08 An "Event of Default" (as defined therein) shall occur under or within the meaning of the Security Agreement (Equipment); 9.09 An "Event of Default" (as defined therein) shall occur under or within the meaning of the Kansas Mortgage; 9.10 An "Event of Default" (as defined therein) shall occur under or within the meaning of the Missouri Deed of Trust; 9.11 An "Event of Default" (as defined therein) shall occur under or within the meaning of the Reimbursement Agreement; 9.12 An "Event of Default" (as defined therein) shall occur under or within the meaning of the LMI Security Agreement; 9.13 Borrower, any Subsidiary of Borrower, or any other Obligor shall be declared by Bank to be in default on, or pursuant to the terms of, (1) any other present or future obligation to Bank, including, without limitation, any other loan, line of credit, revolving credit, guaranty or letter of credit reimbursement obligation, or (2) any other present or future agreement purporting to convey to Bank a Lien upon any Property or assets of Borrower, such Subsidiary of Borrower or such other Obligor, as the case may be; 9.14 Borrower, any Subsidiary of Borrower or any other Obligor shall fail (and such failure shall not have been cured or waived) to perform or observe any term, provision or condition of, or any other default or event of default shall occur under, any agreement, document or instrument evidencing, securing or otherwise relating to any outstanding Indebtedness of Borrower, such Subsidiary of Borrower or such other Obligor, as the case may be, for borrowed money (other than Borrower's Obligations), if the effect of such failure or default (after taking into account all applicable cure periods and waivers) is to cause or permit such Indebtedness to be declared to be due and payable or otherwise accelerated, or to be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof; 9.15 Borrower, any Subsidiary of Borrower or any other Obligor shall have a judgment in excess of $50,000.00 entered against it, him or her by a court having jurisdiction in the premises and such judgment shall not be appealed in good faith or satisfied by Borrower, such Subsidiary of Borrower or such other Obligor, as the case may be, within thirty (30) days after the entry of such judgment; 9.16 The occurrence of a Reportable Event with respect to any Pension Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower, any ERISA Affiliate or any Subsidiary of Borrower; the institution of proceedings to terminate a Pension Plan by the PBGC or any other Person; the withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate or any Subsidiary of Borrower from any Multiemployer Plan; or the incurrence of any material increase in the contingent liability of Borrower or any Subsidiary of Borrower with respect to any "employee welfare benefit plan" as defined in Section 3(1) of ERISA which covers retired employees and their beneficiaries; 9.17 The institution by Borrower, any ERISA Affiliate or any Subsidiary of Borrower of steps to terminate any Pension Plan if, in order to effectuate such termination, Borrower, such ERISA Affiliate or such Subsidiary of Borrower, as the case may be, would be required to make a contribution to such Pension Plan, or would incur a liability or obligation to such Pension Plan, in excess of $50,000.00; or the institution by the PBGC of steps to terminate any Pension Plan; or 9.18 Harris at any time refuses or fails to extend the Stated Termination Date of the Letter of Credit pursuant to Section 2.15 of the Reimbursement Agreement; THEN, and in each such event (other than an event described in Sections 9.06 or 9.07), Bank may declare that its obligation to lend funds under this Agreement has terminated, whereupon such obligation of Bank shall be immediately and forthwith terminated, Bank may, by written notice to Borrower, require that Borrower immediately prepay to Bank in immediately available funds an amount equal to the Available Amount of the Letter of Credit, and Bank may further declare the entire outstanding principal balance of and all accrued and unpaid interest on the Note issued under this Agreement and all other amounts payable by Borrower hereunder to be forthwith due and payable, whereupon all of the unpaid principal balance, accrued and unpaid interest and all such other amounts shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, and Bank may exercise any and all other rights and remedies which it may have under any of the other Transaction Documents or under applicable law; provided, however, that upon the occurrence of any event described in Sections 9.06 or 9.07, Bank's obligation to lend funds under this Agreement shall automatically terminate and the entire outstanding principal balance of and all accrued and unpaid interest on the Note issued under this Agreement and all other amounts payable by Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower, and Bank may exercise any and all other rights and remedies which it may have under any of the other Transaction Documents or under applicable law. SECTION 10. GENERAL. 10.01 No Waiver. No failure or delay by Bank in exercising any right, remedy, power or privilege hereunder or under any other Transaction Document shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The remedies provided herein and in the other Transaction Documents are cumulative and not exclusive of any remedies provided by law. Nothing herein contained shall in any way affect the right of Bank to exercise any statutory or common law right of banker's lien or set-off. 10.02 Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default, Bank is hereby authorized at any time and from time to time, without notice to Borrower (any such notice being expressly waived by Borrower) and to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by Bank and any and all other indebtedness at any time owing by Bank to or for the credit or account of Borrower against any and all of Borrower's Obligations irrespective of whether or not Bank shall have made any demand hereunder or under any of the other Transaction Documents and although such obligations may be contingent or unmatured. Bank agrees to promptly notify Borrower after any such set-off and application made by Bank, provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Bank under this Section 10.02 are in addition to any other rights and remedies (including, without limitation, other rights of set-off) which Bank may have. Nothing contained in this Agreement or any other Transaction Document shall impair the right of Bank to exercise any right of set-off or counterclaim it may have against Borrower and to apply the amount subject to such exercise to the payment of indebtedness of Borrower unrelated to this Agreement or the other Transaction Documents. 10.03 Cost and Expenses. Borrower agrees, whether or not any Loan is made hereunder, to pay Bank upon demand (i) all out-of-pocket costs and expenses and all Attorneys' Fees of Bank in connection with the preparation, negotiation, execution and administration of this Agreement, the Note and the other Transaction Documents, (ii) all recording, filing, title insurance, surveying and appraisal fees incurred in connection with this Agreement and the other Transaction Documents, (iii) all out-of-pocket costs and expenses and all Attorneys' Fees of Bank in connection with the preparation of any waiver or consent hereunder or any amendment hereof or any Event of Default or alleged Event of Default hereunder, (iv) if an Event of Default occurs, all out-of-pocket costs and expenses and all Attorneys' Fees incurred by Bank in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom and (v) all other Attorneys' Fees incurred by Bank relating to or arising out of or in connection with this Agreement or any of the other Transaction Documents. Borrower further agrees to pay or reimburse Bank for any stamp or other taxes which may be payable with respect to the execution, delivery, recording and/or filing of this Agreement, the Note, the Security Agreements or any of the other Transaction Documents. All of the obligations of Borrower under this Section 10.03 shall survive the satisfaction and payment of Borrower's Obligations and the termination of this Agreement. 10.04 Environmental Indemnity. Borrower hereby agrees to indemnify Bank and hold Bank harmless from and against any and all losses, liabilities, damages, injuries, costs, expenses and claims of any and every kind whatsoever (including, without limitation, court costs and Attorneys' Fees) which at any time or from time to time may be paid, incurred or suffered by, or asserted against, Bank for, with respect to or as a direct or indirect result of the violation by Borrower or any Subsidiary of Borrower of any Environmental Laws; or 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, properties utilized by Borrower and/or any Subsidiary of Borrower in the conduct of their respective businesses into or upon any land, the atmosphere or any watercourse, body of water or wetland, of any Hazardous Materials or any other hazardous or toxic waste, substance or constituent or other substance (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under the Environmental Laws); and the provisions of and undertakings and indemnification set out in this Section 10.04 shall survive the satisfaction and payment of Borrower's Obligations and the termination of this Agreement. Notwithstanding the foregoing, Borrower shall have no obligation to the Bank under this Section 10.04 with respect to indemnified liabilities arising from the gross negligence or willful misconduct of Bank as determined by a court of competent jurisdiction. 10.05 General Indemnity. In addition to the payment of expenses pursuant to Section 10.03, whether or not the transactions contemplated hereby shall be consummated, Borrower hereby agrees to indemnify, pay and hold Bank and any holder(s) of the Note, and the officers, directors, employees, agents and affiliates of Bank and such holder(s) (collectively, the "Indemnitees") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnities in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnities shall be designated a party thereto), that may be imposed on, incurred by or asserted against the Indemnities, in any manner relating to or arising out of this Agreement, any of the other Transaction Documents or any other agreement, document or instrument executed and delivered by Borrower or any other Obligor in connection herewith or therewith, the statements contained in any commitment letters delivered by Bank, Bank's agreement to make the Loans hereunder or the use or intended use of the proceeds of any Loan hereunder (collectively, the "indemnified liabilities"); provided that Borrower shall have no obligation to an Indemnitee hereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a court of competent jurisdiction. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, Borrower shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all indemnified liabilities incurred by the Indemnities or any of them. The provisions of the undertakings and indemnification set out in this Section 10.05 shall survive satisfaction and payment of Borrower's Obligations and the termination of this Agreement. 10.06 Authority to Act. Bank shall be entitled to act on any notices and instructions (telephonic or written) believed by Bank to have been delivered by any person authorized to act on behalf of Borrower pursuant hereto, regardless of whether such notice or instruction was in fact delivered by a person authorized to act on behalf of Borrower, and Borrower hereby agrees to indemnify Bank and hold Bank harmless from and against any and all losses and expenses, if any, ensuing from any such action. 10.07 Notices. Any notice, request, demand, consent, confirmation or other communication hereunder shall be in writing and delivered in person or sent by telegram, telex, telecopy or registered or certified mail, return receipt requested and postage prepaid, if to Borrower at P.O. Box 678, St. Charles, Missouri 63302, Attention: Ronald S. Saks, or if to Bank at 1401 S. Brentwood Blvd., St. Louis, Missouri 63144, Attention: Patricia A. O'Herin, or at such other address as either party may designate as its address for communications hereunder by notice so given. Such notices shall be deemed effective on the day on which delivered or sent if delivered in person or sent by telegram, telex or telecopy, or on the third (3rd) Business Day after the day on which mailed, if sent by registered or certified mail. 10.08 Consent to Jurisdiction. BORROWER IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI STATE COURT OR ANY UNITED STATES OF AMERICA COURT SITTING IN THE EASTERN DISTRICT OF MISSOURI, AS BANK MAY ELECT, IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED IN ANY OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. BORROWER HEREBY EXPRESSLY WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT DOMICILES. BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY REGISTERED MAIL SENT TO BORROWER AT ITS ADDRESS SET FORTH IN SECTION 10.07. 10.09 Bank's Books and Records. Bank's books and records showing the account between Borrower and Bank shall be admissible in evidence in any action or proceeding and shall constitute prima facie proof thereof. 10.10 Governing Law; Amendments. This Agreement, the Note, the Security Agreements and all of the other Transaction Documents shall be governed by and construed in accordance with the internal laws of the State of Missouri, and this Agreement and the other Transaction Documents may not be changed, nor may any term, condition or Event of Default be waived, modified, or discharged orally but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought. To the extent of any inconsistencies between the terms and provisions of this Agreement and the other Transaction Documents, the terms and provisions of this Agreement shall govern and control. 10.11 References; Headings for Convenience. Unless otherwise specified herein, all references herein to Section numbers refer to Section numbers of this Agreement, and all references herein to Exhibits "A", "B", "C", "D" and "E" refer to annexed Exhibits "A", "B", "C", "D" and "E" which are hereby incorporated herein by reference. The Section headings are furnished for the convenience of the parties and are not to be considered in the construction or interpretation of this Agreement. 10.12 Subsidiary Reference. Any reference herein to a Subsidiary or Consolidated Subsidiary of Borrower, and any financial definition, ratio, restriction or other provision of this Agreement which is stated to be applicable to Borrower and its Subsidiaries or Consolidated Subsidiaries or which is to be determined on a "consolidated" or "consolidating" basis, shall apply only to the extent Borrower has any Subsidiaries or Consolidated Subsidiaries and, where applicable, to the extent any such Subsidiaries are consolidated with Borrower for financial reporting purposes. 10.13 Binding Agreement. This Agreement shall be binding upon and inure to the benefit of Borrower and its successors and Bank and its successors and assigns. Borrower may not assign or delegate any of its rights or obligations under this Agreement. 10.14 No Oral Agreements; Entire Agreement. Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew such debt, are not enforceable. To protect Borrower and Bank from misunderstanding or disappointment, any agreements reached by Borrower and Bank covering such matters are contained in this Agreement and the other Transaction Documents, which Agreement and other Transaction Documents are a complete and exclusive statement of the agreements between Borrower and Bank, except as Borrower and Bank may later agree in writing to modify them. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings (oral or written) relating to the subject matter hereof. 10.15 Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. 10.16 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.17 Resurrection of Borrower's Obligations. To the extent that Bank receives any payment on account of any of Borrower's Obligations, and any such payment(s) or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, subordinated and/or required to be repaid to a trustee, receiver or any other Person under any bankruptcy act, state or Federal law, common law or equitable cause, then, to the extent of such payment(s) received, Borrower's Obligations or part thereof intended to be satisfied and any and all Liens upon or pertaining to any Property or assets of Borrower and theretofore created and/or existing in favor of Bank as security for the payment of such Borrower's Obligations shall be revived and continue in full force and effect, as if such payment(s) had not been received by Bank and applied on account of Borrower's Obligations. ORAL AGREEMENTS OR COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT, WHICH AGREEMENT IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, the parties have executed this Loan Agreement this 15th day of August, 1996. LEONARD'S METAL, INC. By Title: MAGNA BANK, NATIONAL ASSOCIATION By Title: SCHEDULE 7.05 Litigation Leonard's Metal, Inc. v. W.L. Hutchins and Luella Hutchins, Cause No. CV193-0407-CC, Circuit Court of St. Charles County, Missouri. On or about January 3, 1992, Borrower entered into an agreement with William and Luella Hutchins (the "Hutchins") for the purchase of certain real estate located in St. Charles County, Missouri. The agreement contained a representation and warranty of the Hutchins that the property did not suffer from environmental contamination and did not contain underground storage tanks. Subsequent to the consummation of the purchase, in the course of excavation for construction of improvements on the property two underground tanks were located, and it was subsequently determined that the tanks contained environmental contaminants. Borrower notified Hutchins that they had breached the representation and warranty and subsequently filed suit to rescind the agreement based, inter alia, on the Hutchins' breach of the representation and warranty. The Hutchins have responded and are defending the suit. If Borrower is unsuccessful in obtaining a judicial determination that it is entitled to rescind the agreement, Borrower could face liability for cleanup costs associated with the environmental contamination. At this time Borrower is unable to predict the extent of those cleanup costs or what portion of the costs might be allocated to Borrower. Costs for testing, investigation, and remediation of the site, to the extent incurred, will be spread over a number of years. The case is set for trial in the winter of 1997. SCHEDULE 7.10 Other Loans and Guaranties Borrower is indebted to Norwest Business Credit, Inc. pursuant to a loan agreement between the parties, and the maximum principal amount which may be outstanding under such agreement at any time is $8,500,000.00. Borrower has guarantied the indebtedness of its wholly-owned subsidiary, LMI Finishing, Inc., to the Oklahoma Industrial Authority, which indebtedness is secured by a lien on certain real property located in Tulsa, Oklahoma owned by LMI Finishing, Inc. SCHEDULE 7.11 Labor Matters None. SCHEDULE 7.12 Permitted Liens All UCC-1 Financing Statements filed by Harris Trust and Savings Bank with the Kansas Secretary of State, the Recorder in Sedgwick County, Kansas, the Missouri Secretary of State, the Recorder in St. Charles County, Missouri, the Washington Secretary of State and the Clerk of King County, Washington, covering only Borrower's equipment and the products and proceeds thereof. All UCC-1 Financing Statements filed by Norwest Business Credit, Inc. with the Kansas Secretary of State, the Recorder in Sedgwick County, Kansas, the Missouri Secretary of State, the Recorder in St. Charles County, Missouri, the Washington Secretary of State and the Clerk of King County, Washington, covering only Borrower's accounts receivable, inventory and general intangibles and the products and proceeds thereof. UCC-1 Financing Statement filed by IBM Credit Corporation with the Missouri Secretary of State on January 12, 1996, file no. 2621317, covering only certain computer equipment leased to Borrower. UCC-1 Financing Statement filed by The CIT Group/Equipment Financing, Inc. with the Missouri Secretary of State on April 16, 1996, file no. 2653886, covering only a certain vertical machining center and related attached equipment and the proceeds thereof. UCC-1 Financing Statement filed by IBM Credit Corporation with the St. Charles County, Missouri Recorder on January 16, 1996, file no. 00215, covering only certain computer equipment leased to Borrower. UCC-1 Financing Statement filed by The CIT Group/Equipment Financing, Inc. with the St. Charles County, Missouri Recorder on April 16, 1996, file no. 01402, Book 1831, Page 1083, covering only a certain vertical machining center and related attached equipment and the proceeds thereof. Items 4-11 on Schedule B, Section 2 of the Title Commitment issued to Bank by Commonwealth Land Title Insurance Company, File No. J180871, relating to the real property owned by Borrower located in St. Charles County, Missouri. Items 4-10 on Schedule B of the Title Commitment issued to Bank by Commonwealth Land Title Insurance Company, File No. 96F06210, relating to the real property owned by Borrower located in Sedgwick County, Kansas. SCHEDULE 7.17 Environmental and Health and Safety Matters See Schedule 7.05 regarding Litigation and those certain environmental reports provided by Borrower to Bank dated October, 1995, prepared by [ATEC Environmental] regarding the real properties located in Sedgwick County, Kansas and St. Charles County, Missouri. EXHIBIT A TERM LOAN NOTE EXHIBIT B SECURITY AGREEMENT (Equipment) EXHIBIT C KANSAS MORTGAGE EXHIBIT D MISSOURI DEED OF TRUST EXHIBIT E , 19 Magna Bank, National Association One Magna Place 1401 South Brentwood Blvd. St. Louis, Missouri 63144 Attention: Patricia A. O'Herin Gentlemen: Reference is hereby made to that certain Revolving Credit and Term Loan Agreement dated August 15, 1996, by and between you and the undersigned (as from time to time amended, the "Agreement"). All capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Agreement. The undersigned hereby certifies to you that as of the date hereof: (a) all of the representations and warranties set forth in Section 7 of the Agreement are true and correct; (b) no violation or breach of any of the affirmative covenants set forth in Section 8.01 of the Agreement has occurred and is continuing; (c) no violation or breach of any of the negative covenants set forth in Section 8.02 of the Agreement has occurred and is continuing; (d) no Default or Event of Default under or within the meaning of the Agreement has occurred and is continuing; (e) the financial statements of Borrower and its Consolidated Subsidiaries delivered to you with this letter are true, correct and complete and have been prepared in accordance with generally accepted accounting principles consistently applied; and (f) the financial covenant information set forth in Schedule 1 to this letter is true and correct. Very truly yours, LEONARD'S METAL, INC. By Title: SCHEDULE 1 Financial Covenant Information as of , 19 Financial Covenant Actual Required FIRST AMENDMENT TO LOAN AGREEMENT THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered into effective as of the 15th day of January, 1997, by and between LEONARD'S METAL, INC., a Missouri corporation ("Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national banking association ("Lender"). W I T N E S S E T H: WHEREAS, Borrower and Lender have heretofore entered into that certain Loan Agreement dated August 15, 1996 (the "Loan Agreement"; all capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the Loan Agreement as amended by this Amendment) pursuant to which Lender, among other things, made a Term Loan to Borrower in the original principal amount of $2,600,000.00; and WHEREAS, the unpaid principal balance of the Term Loan is $2,250,000.00; and WHEREAS, Borrower and Lender desire to amend the Loan Agreement to modify the repayment schedule of the remaining principal balance of the Term Loan; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: A. The fourth sentence of Section 4.01 of the Loan Agreement is hereby amended to provide as follows: Principal on the Term Loan Note shall be payable in thirty-five (35) consecutive monthly installments as follows: Two (2) equal consecutive monthly installments in the amount of Fifty Thousand Dollars ($50,00.00) each, due and payable on September 15, 1996 and October 15, 1996; two (2) equal consecutive monthly installments in the amount of One Hundred Twenty-Five Thousand Dollars ($125,000.00) each, due and payable on November 15, 1996 and December 15, 1996; three (3) equal consecutive monthly installments in the amount of Fifty Thousand Dollars ($50,00.00) each, due and payable on January 15, 1997, February 15, 1997 and March 15, 1997; seven (7) equal consecutive monthly installments in the amount of One Hundred Fifty Thousand Dollars ($150,000.00) each, due and payable commencing April 15, 1997 through October 15, 1997; twenty (20) equal consecutive monthly installments in the amount of Fifty Thousand Dollars ($50,000.00) each, due and payable commencing November 15, 1997 through June 15, 1999; and a final installment in the amount of the then outstanding and unpaid principal balance of the Term Loan Note due and payable on July 15, 1999. 2. Borrower shall execute and deliver to Lender an Amended and Restated Term Loan Note in the form of Exhibit A attached hereto (the "Amended and Restated Term Loan Note"). 3. Borrower hereby agrees to reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Lender in the preparation, negotiation and execution of this Amendment and all other agreements, documents, instruments and certificates relating to the amendment of Borrower's existing credit facilities with Lender (collectively, the "Loan Documents"). 4. All references in the Loan Agreement and the other Transaction Documents to "the Agreement" and any other references of similar import shall henceforth mean the Loan Agreement as amended by this Amendment. All references in the Loan Agreement and the other Transaction Documents to the "Term Loan Note" and any other references of similar import shall henceforth mean the Term Loan Note as amended and restated by the Amended and Restated Term Loan Note. 5. Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Loan Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed. 6. This Amendment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations hereunder. 7. Borrower hereby represents and warrants to Lender that: (a) the execution, delivery and performance by Borrower of this Amendment are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, or filing with, any governmental or regulatory body, agency or official; (b) this Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (c) as of the date of this Amendment, all of the representations and warranties of Borrower set forth in the Loan Agreement and the other Transaction Documents are true and correct in all material respects and no Default or Event of Default under or within the meaning of the Loan Agreement has occurred and is continuing. 8. In the event of any inconsistency or conflict between this Amendment and the Loan Agreement, the terms, provisions and conditions contained in this Amendment shall govern and control. 9. This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Missouri (without reference to conflict of law principles). 10. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, Borrower and Lender have executed this First Amendment to Loan Agreement effective as of January 15, 1997. LEONARD'S METAL, INC. By Title: MAGNA BANK, NATIONAL ASSOCIATION By Title: CONSENT OF SUBORDINATE CREDITOR The undersigned hereby consents to the terms, provisions and conditions contained in the foregoing First Amendment to Loan Agreement dated January 15, 1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL ASSOCIATION ("Lender") (the "First Amendment to Loan Agreement"). The undersigned acknowledges and agrees that (i) the execution and delivery of the First Amendment to Loan Agreement by Borrower to Lender will not adversely affect or impair any of the subordination or other provisions contained in that certain Subordination Agreement dated August 15, 1996 and executed by the undersigned in favor of Lender with respect to the indebtedness of Borrower to the undersigned (the "Subordination Agreement"), (ii) all of the "Borrower's Obligations" (as defined in that certain Loan Agreement dated August 15, 1996, by and between Borrower and Lender, as amended by the First Amendment to Loan Agreement and as the same may from time to time be further amended, modified, extended or renewed) constitute "Lender Indebtedness" as defined in and within the meaning of the Subordination Agreement and (iii) the Subordination Agreement is in full force and effect on the date hereof and the same is hereby ratified and confirmed. Executed as of the 15th day of January, 1997. Lawrence J. LeGrand, Trustee of the Dennis M. McDaniel Trust dated 12/22/88 SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered into effective as of the 1st day of November, 1997, by and between LEONARD'S METAL, INC., a Missouri corporation ("Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national banking association ("Lender"). W I T N E S S E T H: WHEREAS, Borrower and Lender have heretofore entered into that certain Loan Agreement dated August 15, 1996, as amended by that certain First Amendment to Loan Agreement dated January 15, 1997 (the "Loan Agreement"; all capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the Loan Agreement as amended by this Amendment) pursuant to which Lender, among other things, made a Term Loan to Borrower in the original principal amount of $2,600,000.00; and WHEREAS, the unpaid principal balance of the Term Loan is $1,000,000.00; and Borrower has requested that Lender loan Borrower the additional amount of $2,500,000.00, which Lender has agreed to do; and WHEREAS, Borrower and Lender desire to amend the Loan Agreement to provide for the increase in the Term Loan and to modify the repayment schedule applicable thereto; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: 1. Section 4.01 of the Loan Agreement is hereby amended to provide in its entirety as follows: 4.01 Commitment of Bank. Bank has heretofore made Borrower a term loan in the original principal amount of $2,600,000.00 (the "Original Term Loan"). As of November 1, 1997, the outstanding principal balance of the Original Term Loan is $1,000,000.00. Bank agrees to make Borrower an additional term loan in the principal amount of $2,500,000.00, which loan shall be consolidated with the Original Term Loan and, as consolidated, shall be referred to as the "Term Loan". The Term Loan shall be evidenced by the Second Amended and Restated Promissory Note of Borrower dated November 1, 1997 and payable to the order of Bank in the principal amount of $3,500,000.00 (as the same may from time to time be amended, modified, extended or renewed, the "Term Loan Note"). Interest on the Term Loan Note shall be calculated as provided in Section 4.02. Principal and interest on the Term Loan Note shall be payable in thirty-six (36) consecutive monthly installments as follows: thirty-five (35) equal consecutive monthly installments of principal and interest in the amount of $44,585.52 each, due and payable on the first day of each month commencing December 1, 1997 through October 1, 2000; and a thirty-sixth (36th) and final installment in the amount of the then outstanding and unpaid principal balance of the Term Loan Note plus accrued and unpaid interest thereon due and payable on November 1, 2000. 2. Section 4.02 of the Loan Agreement is hereby amended to provide in its entirety as follows: 4.02 Interest Rates. So long as no Event of Default has been declared by Bank and is continuing, the Term Loan Note shall bear interest at a rate per annum equal to Nine Percent (9.00%) per annum. From and after the declaration of an Event of Default by Bank, so long as such Event of Default has not been cured or waived in writing by Bank, and from and after maturity of the Term Loan Note, whether by reason of acceleration or otherwise, the unpaid principal balance of the Term Loan Note shall bear interest until paid at a rate per annum equal to Eleven Percent (11.00%). Interest shall be computed with respect to the Term Loan Note on an actual day, 360-day year basis. 3. Notwithstanding any provision contained herein to the contrary, this Amendment shall not be deemed to be effective and Lender shall have no obligation hereunder unless and until Borrower shall have effected payment to Lender of an amount sufficient to reduce the outstanding principal balance of the Original Term Loan to $1,000,000.00 and shall have effected payment to Lender of all accrued and unpaid interest on the Original Term Loan through October 31, 1997. 4. Borrower shall execute and deliver to Lender the Second Amended and Restated Term Loan Note in the form of Exhibit A attached hereto. 5. Borrower hereby agrees to reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Lender in the preparation, negotiation and execution of this Amendment and all other agreements, documents, instruments and certificates relating to the amendment of Borrower's existing credit facilities with Lender (collectively, the "Loan Documents"). 6. All references in the Loan Agreement and the other Transaction Documents to "the Agreement" and any other references of similar import shall henceforth mean the Loan Agreement as amended by this Amendment. All references in the Loan Agreement and the other Transaction Documents to the "Term Loan Note" and any other references of similar import shall henceforth mean the Term Loan Note as amended and restated by the Second Amended and Restated Term Loan Note. 7. Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Loan Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed. 8. This Amendment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations hereunder. 9. Borrower hereby represents and warrants to Lender that: (a) the execution, delivery and performance by Borrower of this Amendment are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, or filing with, any governmental or regulatory body, agency or official; (b) this Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (c) as of the date of this Amendment, all of the representations and warranties of Borrower set forth in the Loan Agreement and the other Transaction Documents are true and correct in all material respects and no Default or Event of Default under or within the meaning of the Loan Agreement has occurred and is continuing. 10. In the event of any inconsistency or conflict between this Amendment and the Loan Agreement, the terms, provisions and conditions contained in this Amendment shall govern and control. 11. This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Missouri (without reference to conflict of law principles). 12. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, Borrower and Lender have executed this First Amendment to Loan Agreement effective as of November 1, 1997. LEONARD'S METAL, INC. By Title: MAGNA BANK, NATIONAL ASSOCIATION By Title: CONSENT OF SUBORDINATE CREDITOR The undersigned hereby consents to the terms, provisions and conditions contained in the foregoing Second Amendment to Loan Agreement dated November 1, 1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL ASSOCIATION ("Lender") (the "Second Amendment to Loan Agreement"). The undersigned acknowledges and agrees that (i) the execution and delivery of the First Amendment to Loan Agreement by Borrower to Lender will not adversely affect or impair any of the subordination or other provisions contained in that certain Subordination Agreement dated August 15, 1996 and executed by the undersigned in favor of Lender with respect to the indebtedness of Borrower to the undersigned (the "Subordination Agreement"), (ii) all of the "Borrower's Obligations" (as defined in that certain Loan Agreement dated August 15, 1996, by and between Borrower and Lender, as amended by the Second Amendment to Loan Agreement and as the same may from time to time be further amended, modified, extended or renewed) constitute "Lender Indebtedness" as defined in and within the meaning of the Subordination Agreement and (iii) the Subordination Agreement is in full force and effect on the date hereof and the same is hereby ratified and confirmed. Executed as of the 1st day of November, 1997. Lawrence J. LeGrand, Trustee of the Dennis M. McDaniel Trust dated 12/22/88 CONSENT OF LMI FINISHING, INC. The undersigned hereby consents to the terms, provisions and conditions contained in the foregoing Second Amendment to Loan Agreement dated November 1, 1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL ASSOCIATION ("Lender") (the "Second Amendment to Loan Agreement"). The undersigned acknowledges and agrees that (i) the execution and delivery of the Second Amendment to Loan Agreement by Borrower to Lender will not adversely affect or impair any of the provisions or obligations contained in that certain Security Agreement (Equipment) dated August 15, 1996 and executed by the undersigned in favor of Lender with respect to the indebtedness of Borrower to Lender (the "Security Agreement"), (ii) all of the "Borrower's Obligations" (as defined in that certain Loan Agreement dated August 15, 1996, by and between Borrower and Lender, as amended by the Second Amendment to Loan Agreement and as the same may from time to time be further amended, modified, extended or renewed) constitute "Obligations" as defined in and within the meaning of the Security Agreement and (iii) the Security Agreement is in full force and effect on the date hereof and the same is hereby ratified and confirmed. Executed as of the 1st day of November, 1997. LMI FINISHING, INC. By_____________________________________ Title:_________________________________ EXHIBIT A SECOND AMENDED AND RESTATED PROMISSORY NOTE Borrower: LEONARD'S METAL, INC., Lender: Magna Bank, N.A. a Missouri Corporation Brentwood Banking Center (TIN: 43-1309065) One Magna Place 3030 Highway 94 1401 South Brentwood Blvd St. Louis, MO 63302 St. Louis, MO 63144 Principal Amount: $3,500,000.00 Date of Original Note: August 15, 1996 Date of this Second Amended and Restated Note: November 1, 1997 RECITALS: LEONARD'S METAL, INC., a Missouri corporation ("Borrower") has previously executed and delivered to Magna Bank, N.A. ("Lender"), its Promissory Note dated August 15, 1996 in the original principal amount of $2,600,000.00, as amended by that certain Amended and Restated Promissory Note dated January 15, 1997 (the "Original Note"). The current balance of the Original Note is $1,000,000.00 and Borrower has requested, and Lender has extended, an additional loan to Borrower in the principal amount of $2,500,000.00. This Second Amended and Restated Promissory Note constitutes an amendment and restatement of the Original Note. PROMISE TO PAY: Borrower promises to pay to Lender, or order, in lawful money of the United States of America, the principal amount of Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00), together with interest on the unpaid principal balance from November 1, 1997, until paid in full, at an interest rate of 9.000 per annum. PAYMENT: Borrower will pay this loan in accordance with the following payment schedule: Thirty-five (35) consecutive monthly payments of principal and interest of $44,585.52 each, due on the first day of each month beginning December 1, 1997 through October 1, 2000 and a thirty-sixth (36th) and final payment due on November 1, 2000 in the amount of the unpaid principal balance plus accrued and unpaid interest. Interest on this Note is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. PREPAYMENT: Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, they will reduce the principal amount due and may result in Borrower making fewer payments. LATE CHARGE: If a payment (other than the final balloon payment) is sixteen (16) days or more late, Borrower will be charged 5.000% of the regularly scheduled payment. DEFAULT. To the extent any provision of this section is inconsistent with the provisions of the Loan Agreement dated August 15, 1996, between Borrower and Lender, as the same may be amended from time to time, the provisions of the Loan Agreement shall govern. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due; (b) Borrower breaks any promise Borrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant or condition contained in this Note or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender; (c) any representation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at the time made or furnished; (d) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for the benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws; (e) any creditor tries to take any of Borrower's property on or in which Lender has a lien or security interest (this includes a garnishment of any of Borrower's accounts with Lender); (f) a material adverse change occurs in Borrower's financial condition. LENDER'S RIGHTS: Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, without notice, and then Borrower will pay that amount. Upon default, including failure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the interest rate on this Note 2.000 percentage points. The interest rate will not exceed the maximum rate permitted by applicable law. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will also pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. This Note has been delivered to Lender and accepted by Lender in the State of Missouri. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of St. Louis County, the State of Missouri. This Note shall be governed by and construed in accordance with the laws of the State of Missouri. RIGHT OF SETOFF: Borrower grants to Lender a contractual possessory security interest in, and hereby assigns, conveys, delivers, pledges and transfers to Lender all Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including without limitation, all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however, all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such accounts. COLLATERAL: This Note is secured by a Deed of Trust executed on August 15, 1996, to a trustee in favor of Lender on real property located at 3600 Mueller Road and 3030 Highway 94 North in St. Charles County, State of Missouri, and a Mortgage to Lender executed on August 15, 1996, on real property located at 2629 Esthner Court in Sedgwick County, State of Kansas, all the terms and conditions of which are hereby incorporated and made a part of this Note. The Deed of Trust and Mortgage each secures future advances up to a maximum principal amount of $3,500,000.00. The Deed of Trust is governed by R.S.Mo. Section 443.055. GENERAL PROVISIONS: Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT. BORROWER: LEONARD'S METAL, INC., a Missouri Corporation By: Ronald S. Saks, President THIRD AMENDMENT TO LOAN AGREEMENT THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and entered into effective as of the 30th day of March, 1998, by LMI AEROSPACE, INC., formerly known as Leonard's Metal, Inc., a Missouri corporation, LMI FINISHING, INC., a Missouri corporation, LMI ACQUISITION, INC., a Missouri corporation, as co-obligors and co-borrowers and not as sureties or accommodation parties (said corporations being jointly and severally referred to herein as "Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national banking association ("Lender"). W I T N E S S E T H: WHEREAS, LMI Aerospace, Inc. and Lender have heretofore entered into that certain Loan Agreement dated August 15, 1996, as amended by that certain First Amendment to Loan Agreement dated January 15, 1997 and that certain Second Amendment to Loan Agreement dated November 1, 1997 (the "Loan Agreement"; all capitalized terms used and not otherwise defined in this Amendment shall have the respective meanings ascribed to them in the Loan Agreement as amended by this Amendment); and WHEREAS, Borrower has requested that Lender loan Borrower up to the additional amount of $15,000,000.00 in the form of a revolving credit facility which Lender has agreed to do; and WHEREAS, Borrower and Lender desire to amend the Loan Agreement to provide for such facility, to add LMI Finishing, Inc. and LMI Acquisition, Inc. as co-obligors with respect to the Reimbursement Agreement and the Term Loan, and to modify certain other provisions of the Loan Agreement; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree as follows: 1. All references in the Loan Agreement and the other Transaction Documents to the "Borrower" and any other references of similar import shall henceforth mean collectively LMI Aerospace, Inc., LMI Finishing, Inc. and LMI Acquisition, Inc., whose liability with respect to all of Borrower's Obligations shall be joint and several. 2. Section 2 of the Loan Agreement is hereby amended by adding the following new definitions: Applicable Percentage shall mean the applicable percentage amount indicated below based upon the Cash Flow Leverage Ratio of Borrower as of the end of any given fiscal quarter, with any change in the Applicable Percentage to be effective as of the first day of the next succeeding fiscal quarter: Applicable Applicable Cash Flow Percentage Percentage Leverage Ratio (Prime) (LIBOR) Less than 2.0:1.0 (0.50%) 1.40% Equal to or greater than 2.0:1.0 but less than or equal to 2.75:1.0 (0.25%) 1.65% Greater than 2.75:1.0 but less than or equal to 3.25:1.0 -0- 2.15% Greater than 3.25:1.0 0.25% 2.40% Cash Flow Leverage Ratio shall mean the ratio of Senior Funded Debt as of the last day of any fiscal quarter to Consolidated EBITDA for the period of four consecutive fiscal quarters then ended. Consolidated EBITDA shall mean for the period in question the sum of (a) the after-tax net income (or loss) of Borrower and its Consolidated Subsidiaries for the period in question (exclusive of extraordinary gains and/or losses and gains and/or losses from the sale or other disposition of assets other than in the ordinary course of business), plus (b) to the extent deducted in determining net income, the sum of (i) all gross interest expense of Borrower and its Consolidated Subsidiaries during each period, plus (ii) all provisions for any Federal, state, local and/or foreign income taxes made by Borrower and its Consolidated Subsidiaries during such period (whether paid or deferred), plus (iii) all depreciation and amortization expenses of Borrower and its Consolidated Subsidiaries during such period, all determined on a consolidated basis. Eligible Accounts shall mean all trade accounts receivable of Borrower which have been invoiced by Borrower or which constitute "unbilled shippers" except for those which remain unpaid for more than ninety (90) days after their invoice dates. Eligible Inventory shall mean all inventory of Borrower, valued at the lower of cost or market value. LIBOR shall mean, as of any date, the highest London Interbank Offered Rate reported for one (1) month in the Money Rates column or any successor column of The Wall Street Journal based on the British Banker's Association average of interbank offered rates for dollar deposits in the London market based on quotations at 16 major banks. Revolving Credit Period shall mean the period commencing on March 30, 1998 and ending March 30, 2000. Senior Funded Debt shall mean the aggregate outstanding principal balance of all indebtedness for borrowed money of Borrower and its Consolidated Subsidiaries. Triggering Event shall be deemed to have occurred as of the last day of any fiscal quarter of Borrower for which the Cash Flow Leverage Ratio equals or exceeds 3.0:1.0. 3. The Loan Agreement is hereby amended by adding the following new Section 4A: SECTION 4A. THE REVOLVING CREDIT LOANS. 4.01A. Revolving Credit Loans. (a) Subject to the terms and conditions of this Agreement, during the Revolving Credit Period of this Agreement, and so long as no Default or Event of Default under this Agreement has occurred and is continuing, Lender hereby agrees to make such loans (individually, a "Revolving Credit Loan" and collectively, the "Revolving Credit Loans") to Borrower as Borrower may from time to time request pursuant to Section 4.02A. Until such time as a Triggering Event occurs, the aggregate principal amount of Revolving Credit Loans which Lender shall be required to have outstanding under this Agreement at any one time shall not exceed $15,000,000.00. From and after the occurrence of a Triggering Event, the aggregate principal amount of Revolving Credit Loans which Lender shall be required to have outstanding under this Agreement at any one time shall not exceed the lesser of (A) $15,000,000.00 or (B) the Borrowing Base. Subject to the terms and conditions of this Agreement, Borrower may borrow, repay and reborrow such sums from Lender, provided, however, that in no event may the aggregate outstanding principal amount of Revolving Credit Loans on any given day exceed the applicable amount specified in the preceding sentence. All Revolving Credit Loans not paid prior to the last day of the Revolving Credit Period, together with all accrued and unpaid interest thereon, shall be due and payable on the last day of the Revolving Credit Period. (b) For purposes of this Agreement, the "Borrowing Base" shall mean the sum of: (i) Eighty-Five Percent (85%) of the face amount of all then existing Eligible Accounts; plus (ii) the sum of (A) Fifty Percent (50%) of the Eligible Inventory of Borrower consisting of finished goods, (B) Thirty Percent (30%) of the Eligible Inventory of Borrower consisting of work in process, and (C) Sixty-Five Percent (65%) of the Eligible Inventory of Borrower consisting of raw materials. (c) Borrower shall deliver to Lender monthly by the fifteenth (15th) day of each month (calculated as of the close of business of the prior month) a collateral report in the form of Exhibit F attached hereto and incorporated herein by reference (or in such other form as Lender shall require from time to time) (a "Collateral Report") setting forth: (i) the Borrowing Base and its components as of the end of the immediately preceding month; (ii) the aggregate principal amount of all Revolving Credit Loans outstanding as of the end of the immediately preceding month; and (iii) the difference, if any, between the Borrowing Base and the aggregate principal amount of all Revolving Credit Loans outstanding as of the end of the immediately preceding month. The Borrowing Base shown in such Collateral Report shall be and remain the Borrowing Base hereunder until the next Collateral Report is delivered to Lender, at which time the Borrowing Base shall be the amount shown in such subsequent Collateral Report. Each Collateral Report shall be certified as to truth and accuracy by the president or the chief financial officer of Borrower. (d) If at any time after the occurrence of a Triggering Event, the aggregate outstanding principal amount of the Revolving Credit Loans is greater than the Borrowing Base as shown on the most recent Collateral Report, Borrower shall be automatically required (without demand or notice of any kind by Lender, all of which are hereby expressly waived by Borrower) to immediately repay the Revolving Credit Loans in an amount sufficient to reduce the aggregate outstanding principal amount of the Revolving Credit Loans to the amount of the Borrowing Base. 4.02A. Procedure for Borrowing. (a) Borrower shall give oral or written notice (a "Borrowing Notice") to Lender by 2:00 p.m. (St. Louis time) on the Business Day of each Revolving Credit Loan, specifying: (i) the date of such Revolving Credit Loan, which shall be a Business Day, (ii) the aggregate principal amount of such Revolving Credit Loan, (iii) that on the date of, and after giving effect to, such Revolving Credit Loan, no Default or Event of Default under this Agreement has occurred and is continuing, and (iv) that on the date of, and after giving effect to, such Revolving Credit Loan, all of the representations and warranties of Borrower contained in this Agreement and in the other Transaction Documents are true and correct in all material respects on and as of such date of such Revolving Credit Loan as if made on and as of the date of such Revolving Credit Loan. (b) Lender shall make the proceeds of the applicable Revolving Credit Loan available to Borrower by transferring the amount of such Revolving Credit Loan to such account maintained with Lender as Borrower shall specify in the Borrowing Notice, not later than 2:30 p.m. (St. Louis time) on the Business Day specified in said Borrowing Notice. (c) Borrower hereby irrevocably authorizes Lender to rely on telephonic, telegraphic, telecopy, telex or written instructions of Ronald S. Saks or Lawrence E. Dickinson (or any other individual from time to time authorized to act on behalf of Borrower pursuant to a resolution adopted by the Board of Directors of Borrower and certified by the Secretary of Borrower and delivered to Lender) with respect to any request to make a Revolving Credit Loan or a repayment hereunder, and on any signature which Lender believes to be genuine, and Borrower shall be bound thereby in the same manner as if such person were actually authorized or such signature were genuine. Borrower also hereby agrees to indemnify Lender and hold Lender harmless from and against any and all claims, demands, damages, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) relating to or arising out of or in connection with the acceptance of instructions for making Revolving Credit Loans or repayments hereunder, except for such of the foregoing as result directly from Lender's gross negligence or willful misconduct. 4.03A. Revolving Credit Note. (a) The Revolving Credit Loans of Lender to Borrower shall be evidenced by a Promissory Note of Borrower dated the date hereof and payable to the order of Lender in the principal amount of $15,000,000.00, which Promissory Note shall be in substantially the form of Exhibit G attached hereto and incorporated herein by reference (as the same may from time to time be amended, modified extended or renewed, the "Revolving Credit Note"). (b) Lender shall record the date, amount, type and maturity of each Revolving Credit Loan made by it and the date and amount of each payment of principal made by Borrower with respect thereto in Lender's books and records. The books and records of Lender showing the account between Lender and Borrower shall be admissible in evidence in any action or proceeding and shall constitute prima facie proof of the items therein set forth. 4.04A. Interest Rates. (a) So long as no Event of Default under this Agreement has been declared by Lender and is continuing, all Revolving Credit Loans shall bear interest prior to maturity at a rate per annum equal to the Applicable Percentage over and above the Prime Rate or LIBOR, as elected by Borrower from time to time (fluctuating as and when the Prime Rate or LIBOR, as applicable, shall change). So long as any Event of Default under this Agreement has been declared by Lender and is continuing, each Revolving Credit Loan shall bear interest prior to maturity at a rate per annum equal to Two Percent (2.0%) over and above the rate applicable immediately preceding such Event of Default. Interest on Revolving Credit Loans shall be payable monthly in accordance with the terms of the Revolving Credit Note, and at the maturity of the Revolving Credit Note, whether by reason of acceleration or otherwise. From and after the maturity of the Revolving Credit Note, whether by reason of acceleration or otherwise, each Revolving Credit Loan shall bear interest payable on demand until paid at a rate per annum equal to Two Percent (2.0%) over and above the rate applicable immediately preceding maturity. (b) Lender shall calculate the interest accrued with respect to each Revolving Credit Loan hereunder and its determination thereof shall be conclusive in the absence of manifest error. 4.05A. Collateral for Revolving Credit Loans. Until such time as a Triggering Event occurs, the Revolving Credit Loans shall be unsecured. From and after the occurrence of a Triggering Event, the Revolving Credit Loans shall be secured by the Collateral, which shall include, but not be limited to, the accounts receivable and inventory of the Borrower, and the proceeds and products thereof, as more particularly described in the form of Security Agreement attached hereto as Exhibit H (the "Security Agreement (Receivables and Inventory)"). 3. Section 8.01(g) of the Loan Agreement is hereby amended to provide in its entirety as follows: (g) Maintenance of Books and Records. Borrower and each Subsidiary of Borrower will maintain its books and records in accordance with generally accepted accounting principals consistently applied and in which true, correct and complete entries will be made of all its dealings and transactions. Each Borrower shall maintain detailed and accurate records of proceeds of the Term Loan and the Revolving Credit Loans (i) received by it from Lender, (ii) transferred from it to any other Borrower, and (iii) received by it from another Borrower. Each Borrower acknowledges that its ability to obtain advances hereunder is made possible by the fact that it is a co-borrower under this Agreement and the other Transaction Documents and that each Borrower is engaged in a common enterprise. Each Borrower agrees that (i) the business operations of each Borrower are interrelated and complement one another, and such entities have a common business purpose, and (ii) the proceeds of the Term Loan, the Letter of Credit and each Revolving Credit Loan hereunder will benefit each Borrower, severally and jointly, regardless of which Borrower requests or receives part or all of any advance hereunder. 4. Section 8.01(i) of the Loan Agreement is hereby amended to provide in its entirety as follows: (i) Financial Covenants. Borrower will: (i) Maintain a Consolidated Tangible Net Worth of at least $15,000,000.00, which minimum Consolidated Tangible Net Worth shall increase as of the end of each fiscal year of Borrower, commencing with the fiscal year ending December 31, 1998, by an amount equal to Seventy-Five (75%) of the after-tax net income shown on Borrower's consolidated financial statements for such fiscal year, such required increases to be cumulative for each fiscal year; (ii) Have Consolidated EBITDA of at least $10,500,000.00 for each fiscal year of Borrower; (iii) Deliver a certificate of the principal financial officer of Borrower containing the financial calculations required in clauses (i) and (ii) above simultaneously with the financial statements referred to in Sections 8.01(a)(i) and (ii). 5. Section 8.02(a) of the Loan Agreement is hereby amended by deleting clause (iii) thereof referencing permitted indebtedness to Norwest Business Credit, Inc., in the principal amount not to exceed $8,500,000.00. 6. Section 8.02(m) of the Loan Agreement is hereby amended to provide in its entirety as follows: (m) Change in Nature or Ownership of Business. Neither Borrower nor any Subsidiary of Borrower will make or permit any material change in the nature or ownership of its business. In the case of Borrower, a material change in ownership shall mean a sale of more than Forty-Three Percent (43%) of the equity of Borrower. 7. Section 9 of the Loan Agreement is amended by adding the following new Section 9.19: 9.19. An "Event of Default" (as defined therein) shall occur under or within the meaning of the Security Agreement (Receivables and Inventory). 8. Schedule 7.10 to the Loan Agreement is amended by deleting the reference to Borrower's indebtedness to Norwest Business Credit, Inc. 9. Schedule 7.12 to the Loan Agreement is amended by deleting the reference to UCC-1 Financing Statements filed by Norwest Business Credit, Inc. Borrower acknowledges and agrees that it is not permitted to grant any Lien upon any of its Property, assets or revenues which secured its indebtedness to Norwest Business Credit, Inc., other than in favor of Lender. 10. Borrower shall execute and deliver to Lender the Revolving Credit Note, the Security Agreement (Receivables and Inventory) and such UCC-1 financing statements as Lender shall require. The UCC-1 financing statements shall be held in escrow, subject to an escrow agreement in form and substance acceptable to Lender pursuant to which such financing statements will not be filed unless and until a Triggering Event occurs. In addition, Borrower will execute any and all further agreements, documents and instruments, and take any and all further actions which may be required under applicable law, or which Lender may from time to time reasonably request, in order to effectuate the transactions herein contemplated, including, but not limited to, such amendments to the Term Loan Note and the Reimbursement Agreement as Lender may require. 11. Borrower will deliver to Lender as soon as available and in any event within forty-five (45) days after the end of each fiscal quarter, a calculation of its Cash Flow Leverage Ratio as of the end of such fiscal quarter, certified by the principal financial officer of Borrower. 12. Borrower hereby agrees to reimburse Lender upon demand for all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees and expenses) incurred by Lender in the preparation, negotiation and execution of this Amendment and all other agreements, documents, instruments and certificates relating to the amendment of Borrower's existing credit facilities with Lender (collectively, the "Loan Documents"). 13. All references in the Loan Agreement and the other Transaction Documents to "the Agreement" and any other references of similar import shall henceforth mean the Loan Agreement as amended by this Amendment. 14. Except to the extent specifically amended by this Amendment, all of the terms, provisions, conditions, covenants, representations and warranties contained in the Loan Agreement shall be and remain in full force and effect and the same are hereby ratified and confirmed. 15. This Amendment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign, transfer or delegate any of its rights or obligations hereunder. 16. Borrower hereby represents and warrants to Lender that: (a) the execution, delivery and performance by Borrower of this Amendment are within the corporate powers of Borrower, have been duly authorized by all necessary corporate action and require no action by or in respect of, or filing with, any governmental or regulatory body, agency or official; (b) this Amendment has been duly executed and delivered by Borrower and constitutes the legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (c) as of the date of this Amendment, all of the representations and warranties of Borrower set forth in the Loan Agreement and the other Transaction Documents are true and correct in all material respects and no Default or Event of Default under or within the meaning of the Loan Agreement has occurred and is continuing. 17. In the event of any inconsistency or conflict between this Amendment and the Loan Agreement, the terms, provisions and conditions contained in this Amendment shall govern and control. 18. This Amendment shall be governed by and construed in accordance with the substantive laws of the State of Missouri (without reference to conflict of law principles). 19. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, Borrower and Lender have executed this Third Amendment to Loan Agreement effective as of March 30, 1998. LMI AEROSPACE, INC. (formerly known as Leonard's Metal, Inc.) By Title: LMI FINISHING, INC. By Title: LMI ACQUISITION, INC. By Title: MAGNA BANK, NATIONAL ASSOCIATION By Title: EXHIBIT F BORROWING BASE CERTIFICATE Reference is hereby made to that certain Loan Agreement dated as of August 15, 1996, by and among LMI Aerospace, Inc., formerly known as Leonard's Metal, Inc., LMI Finishing, Inc. and LMI Acquisition, Inc. (collectively, the "Borrower") and Magna Bank, National Association ("Bank"), as amended (the "Loan Agreement"). All terms used herein which are defined in the Loan Agreement shall have the same meaning herein as in the Loan Agreement. Borrower hereby reaffirms all warranties made in the Loan Agreement and certifies and warrants that Borrower holds subject to the security interest of Bank granted pursuant to the Loan Agreement, as of , the following collateral (all inventory being shown at the lower cost or market value): A. Total finished goods Inventory $_______________ Eligible finished goods Inventory to be included in the Borrowing Base (50%) $____________ B. Total work in process Inventory $_______________ Eligible work in process Inventory to be included in the Borrowing Base (30%) $____________ C. Total raw materials Inventory $_______________ Eligible raw materials Inventory to be included in the Borrowing Base (65%) $_____________ Total Accounts $_______________ Less Accounts over 90 days ($______________) Eligible Accounts $_______________ Eligible Accounts to be included in the Borrowing Base (85%) $_____________ E. Total eligible collateral (A+B+C+D) $_____________ F. Current loan balance $_______________ G. Excess eligible collateral (E-F) $_____________ Borrower further certifies and warrants to Bank that no Default or Event of Default is existing at the date of this Certificate and, to the best of the knowledge and belief of the officer of the Borrower executing this Certificate, there has not been (except as may otherwise be indicated below) any change since the computation date specified above which will materially reduce the amount shown above if such amounts were computed as of the date of this Certificate. LMI AEROSPACE, INC. Dated: By: Title: LMI FINISHING, INC. By: Title: LMI ACQUISITION, INC. By: Title: EXHIBIT G REVOLVING CREDIT NOTE EXHIBIT H SECURITY AGREEMENT (ACCOUNTS RECEIVABLE AND INVENTORY) I. Grant of Security Interest. The undersigned, ("Borrower"), for value received, effective upon the occurrence of a Triggering Event (as hereinafter defined) sells, assigns, transfers, conveys and mortgages to MAGNA BANK, NATIONAL ASSOCIATION ("Secured Party") and grants Secured Party a continuing security interest in all of Borrower's right, title and interest in and to the following described property and any and all additions, accessions and substitutions thereto or therefor (hereinafter collectively referred to as the "Collateral"): (a) All accounts, contract rights, chattel paper, documents, instruments, general intangibles and other forms of obligation and other rights to the payment of money and all of Borrower's rights in, to and under all purchase orders received by Borrower, now owned or which may hereafter be created by Borrower (hereinafter collectively referred to as "Accounts"), (b) All of Borrower's inventory, including without limitation all goods, merchandise, materials, raw materials, components, work in progress, finished goods and other tangible personal property, now owned or hereafter acquired and held for sale or lease or furnished or to be furnished under contracts for services or used or consumed in Borrower's business, and all additions, accessions and substitutions thereto or therefor and any documents of title representing any thereof (hereinafter collectively referred to as "Inventory"), and (c) All proceeds, including without limitation proceeds which constitute property of the types described in (a) and (b) above and insurance proceeds, and all products, of (a) and (b) above, and any indemnities, warranties and guaranties payable by reason of loss or damage to or otherwise with respect to any of the foregoing items; to secure the payment of (i) any and all indebtedness, liabilities and obligations of Borrower to Secured Party under any note or notes of Borrower evidencing any loan or advance now or hereafter made by Secured Party to Borrower, (ii) any and all indebtedness, liabilities and obligations of Borrower under this Agreement, (iii) any and all other indebtedness, liabilities and obligations of Borrower to Secured Party of every kind and character, now existing or hereafter arising, absolute or contingent, joint or several or joint and several, otherwise secured or unsecured, due or not due, direct or indirect, expressed or implied in law, contractual or tortious, liquidated or unliquidated, at law or in equity, or otherwise, and whether heretofore or hereafter incurred or given by Borrower as principal, surety, endorser, guarantor or otherwise, and whether created directly or acquired by Secured Party by assignment or otherwise and (iv) any and all costs of collection, legal expenses and attorneys' fees and expenses incurred by Secured Party upon the occurrence of an Event of Default under this Agreement, in collecting or enforcing payment of any such indebtedness, liabilities or obligations or in preserving, protecting or realizing on the Collateral hereunder or in representing Secured Party in connection with bankruptcy or insolvency proceedings (hereinafter collectively referred to as the "Obligations"). The term "Triggering Event" shall have the meaning ascribed to it in that certain Loan Agreement dated August 15, 1996 by and between Borrower and Secured Party, as amended by that certain Third Amendment to Loan Agreement dated as of March 30, 1998, and as the same may be further modified or amended (the "Loan Agreement"). II. Covenants. Borrower hereby represents, warrants, covenants and agrees that: (a) Borrower is a corporation and (i) it is duly organized, validly existing and in good standing under the laws of the State of Missouri, (ii) it has full corporate power and authority to borrow money from Secured Party and to grant to Secured Party a security interest in the property hereby stated to be granted, (iii) the officer(s) of Borrower executing this Agreement have been duly elected and qualified and have been duly authorized and empowered to execute, deliver and perform the terms of this Agreement on behalf of Borrower and (iv) the execution, delivery and performance of this Agreement by Borrower do not and will not violate any of the terms or provisions of the Articles or Certificate of Incorporation or By-Laws of Borrower; (b) the execution, delivery and performance of this Agreement by Borrower do not and will not violate any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower or the terms of any indenture, agreement, document, instrument or undertaking to which Borrower is a party or by which it is bound; (c) no financing statement (other than any which may be filed on behalf of Secured Party) covering any of the Collateral is now or will be on file in any public office during the term of this Agreement; (d) all information furnished to Secured Party by Borrower concerning the Collateral or the financial condition of Borrower for the purposes of obtaining credit hereunder is, or will be, at the time furnished, true, correct and complete; (e) that except for the security interest granted hereby, Borrower is, or, as to Collateral acquired after the date hereof, will be, the sole and absolute owner of the Collateral, free and clear of any and all liens, claims, security interests and encumbrances, and Borrower will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein; (f) Borrower's principal place of business and the location of the office where it keeps its books and records respecting the Accounts is that given at the end of this Agreement and all other places of business of Borrower or locations of its Inventory are listed on Exhibit A attached hereto and incorporated herein by reference. If Borrower changes its principal place of business, or the location of any of the Inventory, or the location of the office where it keeps its books and records respecting the Accounts, or acquires any other places of business, it will immediately notify Secured Party in writing; and (g) none of the Accounts is evidenced by a promissory note or other instrument. III. Collection, Preservation and Disposition of Collateral. Until such time as Secured Party shall notify Borrower of the revocation of such power and authority (which right of revocation Secured Party may exercise only after the occurrence of an Event of Default hereunder), Borrower: (a) May, in the ordinary course of its business, at its own expense, sell, lease or furnish under contracts for service any of the Inventory normally held by Borrower for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by Borrower for such purpose; (b) Will, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any Accounts, and shall take such action with respect to collection of Accounts as Secured Party may reasonably request or, in the absence of such request, as Borrower may deem advisable; and (c) May grant, in the ordinary course of business, to any party obligated on any Account (an "Account Debtor"), any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to an Account. Secured Party may, however, at any time after the occurrence of an Event of Default hereunder, notify any Account Debtor to make payment to Secured Party of any amounts due or to become due thereunder and enforce collection of any of the Accounts by suit or otherwise and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon request of Secured Party (which request may be made only after the occurrence of an Event of Default hereunder), Borrower will, at its own expense, notify any Account Debtor to make payment to Secured Party of any amounts due or to become due thereunder. At all times after the occurrence of an Event of Default hereunder, unless Secured Party shall otherwise direct Borrower in writing, Borrower will: (a) Forthwith upon receipt transmit and deliver to Secured Party, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by Secured Party) which may be received by Borrower at any time in full or partial payment or otherwise as proceeds of any of the Collateral. Except as Secured Party may otherwise consent in writing, any such items which may be received by Borrower will not be commingled with any other of Borrower's funds or property, but will be held separate and apart from Borrower's own funds and property and upon express trust for Secured Party until delivery is made to Secured Party. Borrower will comply with the terms and conditions of any consent given by Secured Party pursuant to the provisions of this paragraph; and (b) Deposit to the credit of a deposit account (herein called the "Collateral Account") of Borrower with Secured Party as security for payment of the Obligations all items or amounts which are delivered by Borrower to Secured Party on account of partial or full payment or otherwise as proceeds of any of the Collateral. Borrower shall have no right to withdraw any funds deposited in the Collateral Account. Secured Party may, from time to time, in its discretion, apply all or any of the then balance, representing collected funds in the Collateral Account, toward payment of the Obligations whether or not then due, in such order of application as Secured Party may determine, and Secured Party may, from time to time, in its discretion (but without any obligation to do so), release all or any of such balance to Borrower. IV. Adjustments and Returned and Repossessed Goods. After the occurrence of an Event of Default hereunder, in the event Borrower obtains possession (by return, repossession or otherwise) of any goods, the sale or lease of which shall have given rise to any Account, Borrower will not later than ten (10) days thereafter, pay to Secured Party the greater of the unpaid purchase price of such goods or the amount of any rebate, refund or allowance granted by Borrower in connection with obtaining possession of such goods. After the occurrence of an Event of Default hereunder, in the event Borrower grants to any Account Debtor any other rebate, refund or allowance (other than any allowance which has been deducted in computing the net amount of such invoice), Borrower will not later than ten (10) days thereafter, pay to Secured Party the amount of such rebate, refund or allowance so granted. V. Certificates, Schedules and Reports. Borrower will from time to time, as Secured Party may request, prepare and deliver to Secured Party at Borrower's expense (i) schedules identifying each Account and (ii) such additional schedules, certificates, test verifications, and reports respecting the Collateral and the proceeds thereof as Secured Party may request. Any such schedule, certificate or report shall be executed by a duly authorized officer or partner, as the case may be, of Borrower and shall be in such form and detail as Secured Party may specify. Any such schedule identifying any Account shall be accompanied (if Secured Party so requests) by the originals or true and correct copies (as Secured Party requests) of the invoice and other documents evidencing such Account and evidence of shipment or performance. Borrower shall immediately notify Secured Party of the occurrence of any event causing loss or depreciation in value of any of the Inventory, and the amount of such loss or depreciation. VI. Additional Agreements of Borrower. Borrower covenants and agrees that: (a) It will, upon request of Secured Party, execute such financing statements and other documents (and pay the cost of filing or recording the same in all public offices deemed necessary by Secured Party) and do such other acts and things as Secured Party may from time to time request or deem necessary to establish and maintain a valid first priority security interest in the Collateral, this agreement of Borrower to include its execution of applications and certificates of title naming Secured Party as a secured party and the delivery of such to Secured Party; (b) It will keep all Inventory at the locations named in Article II(f) hereof unless Secured Party shall otherwise consent in writing; (c) It will keep its books and records concerning Accounts at the place stated in Article II(f) hereof, which books and records will be of such character as will enable Secured Party or its designees to determine at any time the status thereof, and Borrower will not, unless Secured Party shall otherwise consent in writing, duplicate any such books or records at any other address; (d) It will furnish Secured Party such information concerning Borrower, the Collateral and the Account Debtors as Secured Party may from time to time reasonably request; (e) It will permit Secured Party and its designees, from time to time, to inspect the Inventory and to inspect, audit and make copies of and extracts from all books and records and all other papers in the possession of Borrower, and will, upon request of Secured Party, deliver to Secured Party all of such books, records and papers which pertain to the Collateral and the Account Debtors; (f) It will, upon request of Secured Party, stamp on its books and records concerning the Collateral, a notation, in form and substance satisfactory to Secured Party, of the security interest of Secured Party hereunder; (g) Except for the sale or lease of Inventory in the ordinary course of its business, it will not sell, lease, assign or create or permit to exist any lien or encumbrance upon or security interest in any Collateral to or in favor of anyone other than Secured Party; (h) It will at all times keep all Collateral insured against loss, damage, theft and other risks, in such amounts and companies and under such policies and in such form, all as shall be satisfactory to Secured Party, which policies shall provide that loss thereunder shall be payable to Secured Party (and Secured Party may apply any proceeds of such insurance which may be received by it toward payment of Obligations, whether or not due, in such order of application as Secured Party may determine) and shall provide for thirty (30) days' minimum written notice of cancellation or amendment to Secured Party and that coverage in favor of Secured Party will not be impaired in any way by any act, omission or default of Borrower or any other person and, if Secured Party so requests, such policies and certificates thereof shall be deposited with Secured Party; (i) It will reimburse Secured Party for all expenses, including without limitation reasonable attorneys' fees and expenses, incurred by Secured Party in seeking to collect or enforce any rights under this Agreement or incurred by Secured Party in seeking to collect or enforce any of the Obligations; (j) To the extent, if any, it shall have advised Secured Party that any of the Collateral is being acquired with any advance made by Secured Party, such proceeds may be disbursed by Secured Party directly to the seller of such Collateral; (k) It will pay promptly when due all taxes and assessments on the Collateral, or for its use or operation, or upon this Agreement or any of the Obligations, or with respect to the perfection of any security interest or other lien hereunder (except as otherwise required by law); (l) It will keep, store and hold all Inventory strictly in accordance with the terms of any insurance policy covering the same; (m) It shall notify Secured Party in writing at least fifteen (15) days in advance of its new name and the effective date of its name change before changing its name; (n) It will at all times keep the Inventory in first class order and repair, excepting any loss, damage or destruction which is fully covered by proceeds of insurance, and will not use the Collateral in violation of any law, regulation or insurance policy; (o) Secured Party may from time to time at its option, perform any agreement of Borrower hereunder which Borrower shall fail to perform and take any other action which Secured Party deems necessary for the maintenance or preservation of any of the Collateral or the interest of Secured Party therein (including, without limitation, the discharge of taxes or liens of any kind against the Collateral or the procurement of insurance or the payment of warehousing charges, landlord's bills or other charges), and Borrower agrees to forthwith reimburse Secured Party, on demand, for all expenses of Secured Party in connection with the foregoing, together with interest thereon at a rate per annum equal to the highest rate then applicable to Borrower's Obligations under the Loan Agreement from the date incurred until reimbursed by Borrower. Any amounts not so reimbursed shall be added to and become a part of the Obligations. Secured Party may, for the foregoing purposes, act in its own name or that of Borrower and may also so act for the purpose of adjusting, settling or canceling any policy of insurance on the Collateral or endorsing any draft received in connection therewith in payment of a loss or otherwise for all of which purposes Borrower hereby grants to Secured Party its power of attorney, irrevocable during the term of this Agreement. This power of attorney shall not be affected by the subsequent disability or incapacity of Borrower and shall in all respects constitute a durable power of attorney. VII. Defaults. The occurrence of any one of the following events after a Triggering Event has occurred shall constitute a default ("Event of Default") by Borrower under this Agreement: (a) non-payment of any principal of or interest on any of the Obligations owed by Borrower to Secured Party as and when the same shall become due and payable, whether by reason of demand, acceleration or otherwise; (b) default by Borrower in the due performance or observance of any of the terms, provisions, covenants or agreements contained in this Agreement; (c) any representation or warranty made by Borrower in this Agreement shall prove to be untrue or incorrect in any material respect; (d) any Obligor (which term, as used herein, shall mean Borrower and each other party primarily or secondarily liable to Secured Party on any of the Obligations) shall become insolvent in either the equity or bankruptcy sense of the term; (e) any Obligor shall (i) apply for or consent to the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official of such Obligor or of all or a substantial part of its assets, (ii) be unable, or admit in writing its inability, to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy or seek an arrangement with creditors, or take advantage of any bankruptcy, reorganization or insolvency law or file an answer admitting the material allegations of a petition filed against such Obligor in any bankruptcy, reorganization or insolvency proceedings, or (vi) take any action to effectuate any of the foregoing; (f) loss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof or thereon; (g) death of any Obligor who is a natural person or of any partner of any Obligor which is a partnership; (h) dissolution, termination of existence or operations, merger, consolidation or transfer of a substantial part of the property of any Obligor which is a corporation or partnership; (i) any event which results in the acceleration of the maturity of any present or future indebtedness of Borrower to any other creditor under any note, indenture, agreement or undertaking; or (j) any Obligor shall be declared by Secured Party to be in default on, or pursuant to the terms of, (i) any other present or future obligation to Secured Party, including without limitation any loan, line of credit, revolving credit, guaranty or letter of credit reimbursement obligation, or (ii) any other present or future agreement purporting to convey to Secured Party a lien or encumbrance upon, or a security interest in, any of the property or assets of such Obligor. VIII. Remedies. Upon the occurrence of an Event of Default: (a) notwithstanding any provision contained in any agreement secured hereby to the contrary, Secured Party shall be under no further obligation to make any further advances required by such agreement; (b) Secured Party may, by written notice to Borrower effective upon mailing or delivery, declare the principal of and the interest on all of the Obligations of Borrower to Secured Party to be forthwith due and payable, whereupon all such indebtedness, liabilities and other obligations shall become forthwith due and payable, notwithstanding any other terms thereof or hereof; (c) whether or not such indebtedness, liabilities or other obligations are declared to be forthwith due and payable, Secured Party shall have the right to take immediate possession of the Collateral covered hereby, and, for that purpose may pursue the same wherever said Collateral may be found, and may enter upon any of the premises of Borrower with or without force or process of law, wherever said Collateral may be or may be supposed to be, and search for the same, and, if found, take possession of and remove and sell and dispose of said Collateral, or any part thereof; (d) Secured Party may notify any Account Debtor or all Account Debtors to make payments under the Accounts directly to Secured Party and demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose and realize on the Accounts as Secured Party may determine; (e) Secured Party may exercise any one or more of the rights and remedies accruing to a secured party under the Uniform Commercial Code of the relevant state or states and any other applicable law upon default by a debtor; and (f) Secured Party may enter, with or without process of law and without breach of the peace, any premises where the books and records of Borrower pertaining to the Accounts or the Inventory are or may be located, and without charge or liability on the part of Secured Party therefor seize and remove said books and records from said premises or remain upon said premises and use the same for the purpose of collecting, preparing and disposing of the Accounts and for the purpose of identifying and locating any of the Inventory. Borrower shall, upon Secured Party's request, assemble the Collateral and make the Collateral available to Secured Party at any place designated by Secured Party which is reasonably convenient to Borrower. IX. Foreclosure. Foreclosure on the Collateral covered hereby may be had at public or private sale or sales, disposing of such portion or portions of the Collateral at each such sale, for cash or on credit, on such terms, at such place or places and with or without the Collateral being present at such sale, all as Secured Party in its absolute discretion shall determine from time to time. In the case of public sale, notice thereof shall be deemed and held to be adequate and reasonable if such notice shall appear three (3) times in a newspaper published in the City or County wherein the sale is to be held, the first such publication being at least ten (10) days before such sale and the last such publication being not more than three (3) days before such sale. In the case of a private sale, notice thereof shall be deemed and held to be adequate and reasonable if such notice shall be mailed to Borrower at its last known address at least ten (10) days before such sale. The enumeration of these methods of notice shall not be deemed or construed to render unreasonable any other method of notice which would otherwise be reasonable under the circumstances. X. Application of Proceeds and Deficiency. Secured Party may apply the net proceeds of any sale, lease or other disposition of the Collateral, after deducting all costs and expenses of every kind incurred therein or incidental to the retaking, holding, preparing for sale, selling, leasing or the like of the Collateral on Borrower's premises, or elsewhere, or in any way related to Secured Party's rights thereunder (including, without limitation, attorneys' fees and expenses, court costs, bonds and other legal expenses, insurance, security guard and alarm expenses incurred in connection with the holding of the Collateral, advertisements of sale of the Collateral and rental and utilities expense on the premises or elsewhere in connection with storage and sale of the Collateral) to the payment, in whole or in part, of the Obligations of Borrower to the Secured Party, whether due or not due, absolute or contingent, and only after payment by Secured Party of any other amounts required by any existing or future provision of law (including Section 9-504(1)(c) of the Uniform Commercial Code or any comparable statutory provision of any jurisdiction in which any of the Collateral may at the time be located) need Secured Party account to Borrower for the surplus, if any. Borrower shall remain liable to Secured Party for the payment of any deficiency, with interest. XI. Secured Party's Care of Collateral. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as Borrower requests in writing, but failure of Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care and no failure of Secured Party to preserve or protect any rights with respect to such Collateral against prior parties or to do any act with respect to the preservation of such Collateral not so requested by Borrower shall be deemed a failure to exercise reasonable care in the custody or preservation of such Collateral. XII. Amendment and Waiver. Secured Party shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder and no waiver whatsoever shall be valid unless in writing signed by Secured Party, and then only to the extent therein set forth. A waiver by Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Secured Party would otherwise have had on any future occasion. This Agreement may not be amended except by a writing duly executed by Borrower and Secured Party. XIII. Durable Power of Attorney. Borrower hereby makes, constitutes and appoints Secured Party the true and lawful agent and attorney-in-fact of Borrower with full power of substitution (a) to receive, open and dispose of all mail addressed to Borrower relating to the Collateral, (b) if an Event of Default has occurred, to notify and direct the United States Post Office authorities by notice given in the name of Borrower and to sign on behalf of Borrower, to change the address for delivery of all mail addressed to Borrower relating to the Collateral to an address to be designated by Secured Party, and to cause such mail to be delivered to such designated address where Secured Party may open all such mail and remove therefrom any notes, checks, acceptances, drafts, money orders or other instruments included in the Collateral in which Secured Party has a security interest under the terms of this Agreement, with full power to endorse the name of Borrower upon any such notes, checks, acceptances, drafts, money orders, instruments or other documents relating to the Collateral or security of any kind and to effect the deposit and collection thereof, and Secured Party shall have the further right and power to endorse the name of Borrower on any documents relating to the Collateral, (c) to sign the name of Borrower to drafts against its debtors, to notices to such debtors, to assignments and notices of assignments, financing statements or other public records or notices and all other instruments and documents, (d) to do any and all things necessary and take such actions in the name and on behalf of Borrower to carry out the intent of this Agreement, including, without limitation, the grant of the security interest granted under this Agreement and to perfect and protect the security interest granted to Secured Party in respect to the Collateral and Secured Party's rights created under this Agreement. Borrower agrees that neither Secured Party nor any of its agents, designees or attorneys-in-fact will be liable for any acts of commission or omission, or for any error of judgment or mistake of fact or law in respect to the exercise of the power of attorney granted under this Section. The power of attorney granted under this Section shall be irrevocable during the term of this Agreement. This power of attorney shall not be affected by the subsequent disability or incapacity of the Borrower and shall in all respects constitute a durable power of attorney. XIV. Notices. All notices provided for herein shall be in writing and shall be deemed to have been given when delivered personally or when deposited in the United States mail, registered or certified mail, return receipt requested and postage prepaid, addressed as follows, or to such other address as may hereafter be designated in writing by the respective parties hereto: (a) if to Secured Party to 1401 S. Brentwood Blvd., St. Louis, Missouri 63144, Attention: Patricia A. O'Herin, and (b) if to Borrower, to the address of the principal place of business of Borrower listed at the end of this Agreement. XV. Remedies Cumulative. All rights, remedies and powers granted to Secured Party herein or in any other agreement given to Secured Party shall be cumulative and may be exercised singly or concurrently. XVI. Applicable Law and Severability. It is the intention of the parties hereto that this Agreement is entered into pursuant to the provisions of the Uniform Commercial Code as it is in force in the State of Missouri (the "Code"). Any applicable provisions of the Code, not specifically included herein, shall be deemed a part of this Agreement in the same manner as if set forth herein at length; and any provisions of this Agreement that might in any manner be in conflict with any provision of the Code shall be deemed to be modified so as not to be inconsistent with the Code. In all respects this Agreement and all transactions, assignments and transfers hereunder, and all the rights of the parties, shall be governed as to validity, construction, enforcement and in all other respects by the laws of the State of Missouri. To the extent any provision of this Agreement is not enforceable under applicable law, such provision shall be deemed null and void and shall have no effect on the remaining portions of this Agreement. The headings of the paragraphs hereof shall not be considered in the construction or interpretation of this Agreement. XVII. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower and Secured Party and their respective heirs, executors, administrators, personal representatives, successors and assigns, except that Borrower may not assign any of its rights or delegate any of its obligations under this Agreement. XVIII. Other Obligations. Nothing contained in this Agreement shall be deemed or held to impair or limit in any way the enforcement of the terms of any instrument evidencing any indebtedness, liability or other obligation of Borrower to Secured Party. Secured Party shall have no obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Borrower thereunder or to take any action to collect or enforce any claim for payment included in the Collateral. XIX. Duration of Security Interest. This Agreement shall continue in full force and effect and the security interest granted hereby and all of the representations, warranties, covenants and agreements of Borrower hereunder and all of the terms, conditions and provisions hereof relating thereto shall continue to be fully operative until such time as (a) Borrower shall have paid or caused to be paid, or otherwise discharged, all Obligations to Secured Party and (b) there shall be no remaining obligation of Secured Party to advance funds to Borrower under any loan agreement or credit agreement or otherwise. Borrower expressly agrees that to the extent a payment or payments to Secured Party, or any part thereof, are subsequently invalidated, declared to be void or voidable or set aside and are required to be repaid to a trustee, custodian, receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as if said payment had not been made. XX. Miscellaneous. If more than one party shall execute this Agreement, the term "Borrower" shall mean all parties signing this Agreement and each of them, and all such parties shall be jointly and severally obligated hereunder. The neuter pronoun, when used herein, shall include the masculine and feminine and also the plural. If this Agreement is not dated when executed by Borrower, Secured Party is authorized, without notice to Borrower, to date this Agreement. To the extent of any inconsistencies between the terms and provisions of this Agreement and the terms and provisions of the Loan Agreement, the terms and provisions of the Loan Agreement shall govern and control. IN WITNESS WHEREOF, Borrower has executed this Security Agreement at St. Louis, Missouri this 30th day of March, 1998. IN THE EVENT ANY OF THE OBLIGATIONS SECURED HEREBY IS PAYABLE ON DEMAND, NEITHER THIS AGREEMENT NOR ANYTHING CONTAINED HEREIN SHALL BE DEEMED TO ALTER OR IMPINGE UPON THE DEMAND CHARACTER OF SUCH OBLIGATION. -------------------------------- (Borrower) By Title: Address of Principal Place of Business of Borrower and Location of Books and Records: 3600 Mueller Road St. Charles, Missouri Exhibit A Additional Locations of Places of Business or Inventory 1. 3030 North Highway 94 St. Charles, Missouri 2. 2629-2635 Esthner Court Wichita, Kansas 3. 204 H. Street Auburn, Washington 2104 North 170th Street East Avenue Tulsa, Oklahoma 74116 EX-16 15 EXHIBIT 16.1 ACCOUNTANT'S LETTER EX-16 16 EXHIBIT 16.1 ACCOUNTANT'S LETTER Peat Marwick LLP 10 South Broadway Telephone 314 444 1400 Fax 314 444 1470 Suite 900 St. Louis, MO 63102-1761 Securities and Exchange Commission April 29, 1998 Washington, DC 20549 Ladies and Gentlemen: We were previously principal accountants for Leonard's Metal, Inc. (whose name has subsequently been changed to LMI Aerospace, Inc.) and subsidiaries. On March 3, 1998, we resigned and withdrew our previously issued audit reports as of and for the years ended December 31, 1996 and 1995. We have read LMI Aerospace, Inc.'s statements included in Form S-1 dated April 29, 1998, and we agree with such statements. /s/ KPMG Peat Marwick LLP EX-21 17 EXHIBIT 21.1 LIST OF SUBSIDIARIES Exhibit 21.1 List of Subsidiaries LMI Finishing, Inc. Leonard's Metal, Inc. EX-23 18 EXHIBIT 23.2 - CONSENT OF ERNST & YOUNG LLP We consent to the reference to our firm under the caption "Experts" and in the headnotes to "Selected Consolidated Financial Information" and to the use of our report dated April 20, 1998 (except Note 12, as to which the date is ________________, 1998), in the Registration Statement (Form S-1 No. 333-_________) and related Prospectus of LMI Aerospace, Inc. for the registration of 2,300,000 shares of its common stock. Ernst & Young LLP St. Louis, Missouri The foregoing consent is in the form that will be signed upon the completion of the restatement of capital accounts described in Note 12 to the financial statements. /s/Ernst & Young LLP St. Louis, Missouri April 27, 1998 EX-27 19 FDS -- WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1,000 US Dollars YEAR DEC-31-1997 JAN-1-1997 DEC-31-1997 244 0 8,058 0 8,701 758 27,666 12,014 33,629 6,505 0 0 0 118 16,633 33,629 55,080 55,080 38,932 38,932 6,549 0 1,010 8,589 3,306 5,283 0 0 0 5,283 .91 .89
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