As filed with the Securities and Exchange Commission on June 5, 1998
Registration No. 333-51357
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
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 (I.R.S. Employer
Jurisdiction of Industrial Classification Identification
Incorporation or Code Number Number)
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. |_|
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.
<PAGE>
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.
SUBJECT TO COMPLETION, DATED JUNE 5, 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 amended (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
<PAGE>
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."
2
<PAGE>
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 stock dividend
of 2.29 shares paid on each share held 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. Typically 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 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 March 31, 1998, the Company's backlog of customer orders scheduled
for delivery prior to December 31, 1998 increased to a record level of $34.3
million. See "SUMMARY CONSOLIDATED FINANCIAL INFORMATION."
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.
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.
3
<PAGE>
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 capacity) 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
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.
4
<PAGE>
The Offering
Common Stock offered by
the Company................... 2,300,000 shares (1)
Common Stock to be
outstanding after
the Offering.................. 8,290,721 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 June 1, 1998. Excludes 859,827 shares
of Common Stock reserved, as of the date of this Prospectus, for
issuance in connection with the Company's stock based compensation
plans and 98,700 shares for which Lawrence J. LeGrand, Chief Operating
Officer of the Company, through his individual retirement account has
subscribed but not yet purchased. 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.
5
<PAGE>
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
Three Months
Year Ended December 31, Ended March 31,
(in thousands, except share and per share data)
1993(1) 1994 1995 1996 1997 1997 1998
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................... $ 18,383 $ 20,710 $ 25,424 $35,016 $ 55,080 $ 12,690 $ 16,335
Cost of sales....................... 15,041 17,274 20,366 26,725 38,932 9,393 11,502
------ ------ ------ ------ ------ ----- ------
Gross profit..................... 3,342 3,437 5,058 8,291 16,148 3,297 4,833
Selling, general &
administrative expense 3,063 3,337 3,883 5,256 6,549 1,489 1,883
------ ----- ----- ----- ----- ----- -----
Income from operations........... 279 100 1,175 3,035 9,599 1,808 2,950
Interest expense................. (347) (522) (1,038) (1,123) (1,020) (283) (258)
Other (expense) income(2), net... 293 263 (48) 15 10 1 5
----- ------ ------- ------ ------ --- --
Income (loss) before income taxes 225 (159) 89 1,927 8,589 1,526 2,697
Provision for income taxes ...... 381 (62) 52 740 3,306 587 1,038
------ ------- ---- ------ ------ --- -----
Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283 $ 939 $ 1,659
======= ======= ===== ======= ======= ======= =======
Net income (loss) per common share(3):
Basic....................... $(0.03) $(0.02) $0.01 $0.21 $0.91 $0.16 $0.28
Diluted..................... $(0.03) $(0.02) $0.01 $0.20 $0.89 $0.16 $0.28
Weighted average shares
outstanding 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 5,822,839 5,908,471
Other Financial Data:
EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 $2,308 $3,599
Capital expenditures............. 1,732 4,746 1,736 1,316 3,856 335 1,405
Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3% 26.0% 29.6%
EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4% 18.2% 22.0%
March 31, 1998
(in thousands)
Actual As Adjusted(5)
Balance Sheet Data:
Cash and equivalents........................ $ 604 $ 24,031
Working capital............................. 11,710 35,394
Total assets................................ 36,883 60,310
Total long-term debt, excluding
current portion .......................... 8,829 5,256
Stockholders' equity........................ 18,410 45,667
<FN>
(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 significant. Pro forma net income of $5,398 and $1,712 for the year
ended December 31, 1997 and the three months ended March 31, 1998,
respectively, (versus historical net income of $5,283 and $1,659 for
the year ended December 31, 1997 and the three months ended March 31,
1998, respectively, shown above) is the amount net income would have
been if the $3.8 million of 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 for the year ended December 31, 1997
of $0.88 and $0.87, basic and diluted, respectively, and for the three
months ended March 31, 1998, of $0.28 and $0.27, basic and diluted,
respectively, and for the three months ended March 31, 1998, of $0.28
and $0.27, basic and diluted, respectively, reflects the incremental
increase in the number of shares of Common Stock which are required to
generate funds necessary to retire the debt, and the increase in net
income, net of tax, due to the debt retirement.
(4) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBITDA is a widely accepted, supplemental financial
measurement used by many investors and analysts to analyze and compare
companies' 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 should only be read in conjunction with all
of the Company's financial data summarized above and its Consolidated
Financial Statements prepared in accordance with generally accepted
accounting principles ("GAAP"), appearing elsewhere herein. EBITDA is
not intended to represent cash flows (as determined in accordance with
GAAP) or funds available for management's discretionary use for the
periods listed, nor has it been presented as an alternative to
operating income (as determined in accordance with GAAP) and should not
be considered in isolation or as a substitute for indicators of
performance prepared in accordance with GAAP. EBITDA is presented as
additional information because management believes it to be a useful
indicator of the Company's ability to meet debt service and capital
expenditure requirements and because certain debt covenants of the
Company utilize EBITDA to measure compliance with such covenants. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
(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."
</FN>
</TABLE>
6
<PAGE>
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. To strengthen the relationship between the Company and Boeing, the
Company has located its facilities in close geographic proximity to the
principal production facilities of Boeing. The Wichita facility is close to
Boeing Wichita; the Auburn facility is close to Boeing Seattle; and the Tulsa
facility is close to Boeing North American. 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. The unemployment rate is currently very
low in all of the Company's locations, and competition for personnel,
particularly skilled and unskilled manufacturing operators, is intense. Through
innovative recruiting and training programs, the Company has been successful at
increasing its work force in all locations. However, continued restriction of
the labor market could impair the Company's ability to adequately staff its
operations. If the Company is unable to attract, hire, train, integrate and
retain qualified personnel, the Company's business, financial condition or
results of operations could be materially and adversely affected.
7
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
may have (i) the ability to adapt more quickly to changes in customer
requirements and industry conditions or trends, (ii) 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, extending until the end of the year
2000, 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."
8
<PAGE>
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
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 $23.5 million of the
net proceeds of this Offering after retirement of $3.8 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 complementary
businesses. Consequently, the board of directors of the Company (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 53.1% of the then outstanding shares of Common
Stock (51.1% 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."
9
<PAGE>
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 Chapter 351 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, 948,783 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 of $7.45 per share (or 57.3%) 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 reviewed publicly reported
information made by its principal customers and suppliers, including Boeing, and
based on such review believes that such customers and suppliers 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."
10
<PAGE>
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 $3.8 million of the
proceeds to retire $3.4 million of term debt, which accrues interest at an
annual rate of 9% and matures in November 2000, 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. Of the $1.5 million
drawn on the Credit Facility, the Company used $0.8 million to retire certain
outstanding subordinated debt, $0.3 million to retire certain shareholder debt
and the balance to reduce certain senior secured indebtedness. 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 growth strategies through, among
other things, the funding of acquisitions of complementary businesses. 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.
11
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of March
31, 1998, was approximately $18.3 million or $3.10 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 March 31, 1998, would have been approximately $45.6 million or $5.55 per
share. This represents an immediate increase in net tangible book value of $2.45
per share to existing shareholders and an immediate dilution in net tangible
book value of $7.45 per share to investors in the Offering. The following table
illustrates the per share dilution as of March 31, 1998.
Assumed initial public offering price per share ..... $ 13.00
Net tangible book value per share as of
March 31, 1998 .................................. $3.10
Increase per share attributable to
investors in the Offering ....................... 2.45
----
Pro forma net tangible book value per share
after the Offering ................................ 5.55
----
Dilution in net tangible book value per share
to investors in the Offering ..................... $ 7.45
====
The following table sets forth on a pro forma basis as of March 31,
1998 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:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
Average
Price Paid
Number Percent Amount Percent Per Share
------ ------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders 5,908,471 72.0% $ 3,246,224 9.8% $ 0.55
Investors in the Offering 2,300,000 28.0% 29,900,000 90.2% $13.00
--------- ---- ---------- ------
Total 8,208,471 100.0% $33,146,224 100.0%
</TABLE>
The foregoing table (i) excludes 131,600 new shares of Common Stock
issued as compensation, to or subscribed for by, Lawrence J. LeGrand, Chief
Operating Officer of the Company, personally or through his individual
retirement account on April 27, 1998, and 32,900 shares contributed by the
Company to the LMI Aerospace, Inc. Profit Sharing and Savings Plan and Trust
("Profit Sharing Plan") on April 27, 1998 and 16,450 shares issued on the
exercise of an option on June 1, 1998, and (ii) assumes an initial public
offering price of $13.00 and assumes 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.
12
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998, 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.
<TABLE>
<CAPTION>
March 31, 1998
(in thousands, except share data)
Actual As Adjusted(1)
<S> <C> <C>
Cash and cash equivalents......................................... $ 604 $ 24,034
========= ==========
Short-term debt, including current portion of long-term
debt . . . . ................................................... $ 640 $ 383
========== ==========
Long-term debt, less current portion.............................. $ 8,829 $ 5,256
--------- ----------
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 ............................................ 16,749 16,749
--------- --------
Total stockholders' equity............................... 18,410 45,667
-------- --------
Total capitalization.................................. $ 27,239 $50,923
========== =======
<FN>
(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 estimat d
offering expenses and the application of the estimated net proceeds
therefrom. See "USE OF PROCEEDS."
(2) Reflects shares of Common Stock outstanding as of March 31, 1998.
Excludes 859,827 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 plans. Also excludes (i) 131,600 new
shares of Common Stock issued as compensation to, or subscribed for by,
Lawrence J. LeGrand, Chief Operating Officer of the Company, personally
or through his individual retirement account on April 27, 1998, (ii)
32,900 shares contributed by the Company to the Profit Sharing Plan on
April 27, 1998, and (iii) 16,450 shares issued upon the exercise of an
option on June 1, 1998. See "MANAGEMENT -- Benefit Plans."
</FN>
</TABLE>
13
<PAGE>
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 statements of operations and balance sheet data, as
of and for the three months ended March 31, 1997 and 1998 are derived from
unaudited financial statements. The unaudited financial statements have been
prepared by the Company on a basis consistent with the Company's audited
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the Company's results of operations for the period. The results
of operations for the three months ended March 31, 1998 are not necessarily
indicative of results to be expected for any future period. The selected
statements of operations and balance sheet data as of and for the years ended
December 31, 1993, 1994, 1995, 1996 and 1997 are derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements for the years ended December 31, 1993 and 1994, have been audited by
KPMG Peat Marwick LLP, independent auditors. 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 statements of
the Company, including the notes, thereto, and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" included elsewhere
herein.
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
(in thousands, except share and per share data)
1993(1) 1994 1995 1996 1997 1997 1998
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................... $ 18,383 $ 20,710 $ 25,424 $35,016 $ 55,080 $ 12,690 $ 16,335
Cost of sales....................... 15,041 17,274 20,366 26,725 38,932 9,393 11,502
------ ------ ------ ------ ------ ----- ------
Gross profit..................... 3,342 3,437 5,058 8,291 16,148 3,297 4,833
Selling, general &
administrative e expense........ 3,063 3,337 3,883 5,256 6,549 1,489 1,883
------ ----- ----- ----- ----- ----- -----
Income from operations........... 279 100 1,175 3,035 9,599 1,808 2,950
Interest expense................. (347) (522) (1,038) (1,123) (1,020) (283) (258)
Other (expense) income(2), net... 293 263 (48) 15 10 1 5
----- ------ ------- ------ ------ --- --
Income (loss) before income taxes 225 (159) 89 1,927 8,589 1,526 2,697
Provision for income taxes ...... 381 (62) 52 740 3,306 587 1,038
------ ------- ---- ------ ------ --- -----
Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283 $ 939 $ 1,659
======= ======= ===== ======= ======= ======= =======
Net income (loss) per common share(3):
Basic....................... $(0.03) $(0.02) $0.01 $0.21 $0.91 $0.16 $0.28
Diluted..................... $(0.03) $(0.02) $0.01 $0.20 $0.89 $0.16 $0.28
Weighted average shares
outstanding.................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 5,822,839 5,908,471
Other Financial Data:
EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 $2,308 $3,599
Capital expenditures............. 1,732 4,746 1,736 1,316 3,856 335 1,405
Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3% 26.0% 29.6%
EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4% 18.2% 22.0%
<PAGE>
Three Months
December 31, Ended March 31, 1998
------------------------------------------------------------------------------------
(in thousands)
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
Actual As Adjusted(5)
Balance Sheet Data: ------ --------------
Cash and equivalents............ $ 483 $ 151 $ 181 $ 205 $ 244 $ 604 $ 24,031
Working capital................. 6,111 6,933 8,919 8,626 11,256 11,710 35,394
Total assets.................... 18,724 25,454 27,370 29,046 33,269 36,883 60,310
Total long-term debt,
excluding current portion..... 7,000 11,620 12,674 10,735 9,274 8,829 5,256
Stockholders' equity............ 9,220 9,147 9,966 11,161 16,751 18,410 45,667
<FN>
(1) On December 31, 1993, the Company elected to change from 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.
14
<PAGE>
(3) Complete pro forma presentation is not shown above as adjustments are
not significant. Pro forma net income of $5,398 and $1,712 for the year
ended December 31, 1997 and the three months ended March 31, 1998,
respectively, (versus historical net income of $5,283 and $1,659 for
the year ended December 31, 1997 and the three months ended March 31,
1998, respectively, shown above) is the amount net income would have
been if the $3.8 million of 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 for the year ended December 31, 1997
of $0.88 and $0.87, basic and diluted, respectively, and for the three
months ended March 31, 1998, of $0.28 and $0.27, basic and diluted,
respectively, reflects the incremental increase in the number of shares
of Common Stock which are required to generate funds necessary to
retire the debt, and the increase in net income, net of tax, due to the
debt retirement.
(4) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBITDA is a widely accepted, supplemental financial
measurement used by many investors and analysts to analyze and compare
companies' 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 should only be read in conjunction with all
of the Company's financial data summarized above and its Consolidated
Financial Statements prepared in accordance with generally accepted
accounting principles ("GAAP"), appearing elsewhere herein. EBITDA is
not intended to represent cash flows (as determined in accordance with
GAAP) or funds available for management's discretionary use for the
periods listed nor has it been presented as an alternative to operating
income (as determined in accordance with GAAP) and should not be
considered in isolation or as a substitute for indicators of
performance prepared in accordance with GAAP. EBITDA is presented as
additional information because management believes it to be a useful
indicator of the Company's ability to meet debt service and capital
expenditure requirements and because certain debt covenants of the
Company utilize EBITDA to measure compliance with such covenants. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
(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."
</FN>
</TABLE>
15
<PAGE>
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.
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 typically
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 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 March 31, 1997, the Company's backlog of customer orders scheduled
for delivery prior to December 31, 1998 increased to a record level of $34.3
million. December 31, 1996.
16
<PAGE>
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 Three Months
December 31, Ended March 31
1995 1996 1997 1997 1998
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 80.1 76.3 70.7 74.0 70.4
----- ----- ----- ---- ----
Gross profit 19.9 23.7 29.3 26.0 29.6
Selling, general and
administrative expense 15.3 15.0 11.9 11.8 11.5
----- ----- ----- ---- ----
Income from operations 4.6 8.7 17.4 14.2 18.1
Interest expense (4.1) (3.2) (1.8) (2.2) (1.6)
Other expense, net (0.2) - - - -
Income before income tax 0.3 5.5 15.6 12.0 16.5
Provision for income taxes 0.2 2.1 6.0 4.6 6.3
----- ----- ----- ----- -----
Net income 0.1% 3.4% 9.6% 7.4% 10.2%
===== ==== ===== ===== =====
Quarter Ended March 31, 1998 compared to Quarter Ended March 31, 1997
Net Sales. Net Sales for the first quarter of 1998 increased 28.7% to
$16.3 million from $12.7 million for 1997. The largest portion of this increase
resulted from an additional $1.6 million of revenue from deliveries of leading
edge skins and related parts for Boeing's 737NG. 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. 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.
Gross Profit. Gross profit in the first quarter of 1998 increased 46.6%
to $4.8 million (or 29.6% of net sales) from $3.3 million (or 26.0% of net
sales) in 1997. This increase in attributable direct manufacturing cost of
components sold which increased to $5.1 million (31.2% of sales) in the first
quarter of 1998 from $4.3 million (34.3% of sales) in 1997. Additionally,
indirect labor and fringe benefits included in cost of sales increased by $1.0
million to $4.3 million in 1998 (26.7% of net sales) from $3.3 million (26.2% of
net sales) in 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.4 million to $1.9 million (11.5% of net
sales) in 1998 from $1.5 million (11.8% of net sales) in 1997. Costs for wages,
salaries and related fringe benefits included in selling, general and
administrative expenses accounted for $0.2 million of this increase, rising to
$1.1 million (6.7% of net sales) in 1998 from $0.9 million (7.2% of net sales)
in 1997.
Interest Expense. Interest expense was basically unchanged at $0.3
million in the first quarter of 1998 and 1997. Additionally, on March 31, 1998,
the Company negotiated a new lending agreement which replaced its outstanding
revolving credit agreement, subordinated debt, and demand note to a shareholder,
which will reduce the Company's cost of borrowing in future periods.
17
<PAGE>
Provision for Income Taxes. The effective income tax rate for 1998 and
1997 was 38.5% resulting in total tax expense of $1.0 million in 1998 and $0.6
million in 1997.
Net Income. As a result of the foregoing the net income of the Company
increased 76.7% to $1.7 million (or 10.2% of net sales) in 1998 from $0.9
million (or 7.4% of net sales) in 1997.
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 to the
overall upturn in the commercial aerospace market, with each quarter of 1997
showing gains over 1996. Net sales of aircraft components for all Boeing
7-series models the Company supports were increased in 1997. In total, these
sales increases on all Boeing 7-series aircraft components were $19.1 million.
Included in this increase was the Company's participation on Boeing's new 737
New Generation aircraft ("737NG") which created an increase in net sales of $5.0
million from $0.9 million in 1996 to $5.9 in 1997. Recent announcements by
Boeing regarding potential decreases in the 747 production rate caused by the
Asian financial crisis could dilute the Company's ability to continue this
upward trend in net sales. The Company derived $14.6 million of its net sales
from the 747 in 1997 compared to $10.0 million in 1996.
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 (11.8% 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.
18
<PAGE>
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. The Company's sales increased rapidly in the third and
fourth quarters of 1996. This increase was due to the overall improvement in the
commercial aircraft market. Additionally, net sales to a new customer in the
corporate/regional market accounted for $1.3 million of the increase.
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. The
Company's Tulsa facility implemented a process improvement plan that reduced the
amount of labor and material required to generate sales, resulting in a $1.0
million increase in gross margin. The remaining improvement was due to better
absorption of fixed expenses generated by the increase in net sales.
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.
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. In the first quarter of 1998, the Company generated cash of $2.4 million
from operations compared to $1.7 million in the first quarter of 1997 which was
used to fund investment in property, plant and equipment of $1.4 million in 1998
and $0.3 million in 1997. 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 reviewed publicly reported information made by its
principal customers and suppliers, including Boeing, and based on such review
believes that such customers and suppliers are, or have taken certain actions
with respect to becoming, Year 2000 Compliant.
Quarterly Financial Information
In the last two years, the Company has experienced significant growth.
Set forth below is certain financial information regarding the Company for the
last eight fiscal quarters.
<TABLE>
<CAPTION>
First Second Third Fourth
------------------ ----------------- ------------------ -----------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
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 $ 0.03 $ 0.06 $ 0.07 $ 0.04
Net income per common share -
assuming dilution 0.03 0.06 0.07 0.04
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 $ 0.16 $ 0.23 $ 0.27 $ 0.24
Net income per common share -
assuming dilution 0.16 0.23 0.27 0.24
<FN>
(1) Includes a charge of $250 for environmental remediation - see Note 10 to
the Consolidated Financial Statements.
</FN>
</TABLE>
19
<PAGE>
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, typically 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 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 March 31, 1998, the Company's backlog of customer orders scheduled
for delivery prior to December 31, 1998 increased to a record level of $34.3
million. See "SELECTED CONSOLIDATED FINANCIAL INFORMATION."
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.
20
<PAGE>
The Company believes the following trends are affecting the aerospace
components industry:
Increased Demand for New Aircraft. Aircraft manufacturers are currently
experiencing record new levels of 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 capacity) 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.
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.
21
<PAGE>
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, typically 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
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.
22
<PAGE>
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
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 typically
designate the Company as the sole supplier of the aerospace components sold
under the contracts. Customers include the following leading OEMs and Primes:
Commercial Models
Boeing 737 Classic, 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
23
<PAGE>
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 aircraft 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 all 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. Such belief is based on, among other things, discussions
with Boeing personnel, the longevity and growth of the relationship, and the
Company's experience with Boeing during occasional periods without an effective
contract.
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:
Product Models
Wing leading edge skins, flapskins 737 NG
Detail interior components 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 737 NG, 747, 767, 777, Citation
light lens assembly III, 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
24
<PAGE>
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.
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.
25
<PAGE>
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.
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.
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<PAGE>
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
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 March 31, 1998, the Company had outstanding purchase orders
representing an aggregate invoice price of approximately $48.9 million, of which
$34.3 million is scheduled for delivery prior to the end of 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.
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<PAGE>
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.
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
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 typically 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.
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<PAGE>
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, 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.
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 March 31, 1998, the Company had 756 employees, of whom seven
were engaged in executive positions, 167 were engaged in administrative
positions and 582 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.
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<PAGE>
Facilities
The following table provides certain information with respect to the
Company's headquarters and distribution centers:
<TABLE>
<CAPTION>
Square
Location Principal Use(s) Footage Interest
<S> <C> <C> <C>
3600 Mueller Road Executive and Administrative Offices 56,943 Owned
St. Charles, MO 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 Storage 19,545 Leased(4)
Wichita, KS
2104 N. 170th St. E. Ave. Finishing Facility 75,000 Owned
Tulsa, OK
<FN>
(1) Subject to a yearly rental amount of $52,186 expiring on February 28,
2004.
(2) Subject to a yearly rental amount of $160,200 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.
</FN>
</TABLE>
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 has received a letter dated May 26, 1998 alleging certain
claims against the Company on behalf of two former employees based on
discrimination, retaliation and harassment. The Company is presently
investigating the factual basis for such allegations. Based on the preliminary
results of such investigation, the Company believes that the allegations are
substantially without merit and intends to vigorously defend this matter.
The Company is also a party to other legal proceedings which are
routine claims and lawsuits arising in the ordinary course of its business. The
Company does not believe that any of such claims and lawsuits, individually or
in the aggregate, will have a material adverse effect on the Company's business.
30
<PAGE>
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
Thomas M. Gunn 54 Director
Alfred H. Kerth, III 48 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.
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<PAGE>
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 Transports, 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.
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 Transports, 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.
Thomas M. Gunn is a recently elected director of the Company. Mr. Gunn
is a retired executive who previously served as Senior Vice President of
Business Development for the former McDonnell Douglas until its merger with
Boeing in 1997. Since 1975, Mr. Gunn held several positions, including numerous
vice presidents positions with McDonnell Douglas. Prior to joining McDonnell
Douglas, Mr. Gunn served as counsel to the U.S. Senate Committee on
Appropriations, the U.S. Senate Committee on Government Operations and the U.S.
Senate Judiciary Subcommittee on Criminal Law and Procedures and was an attorney
with the Federal Trade Commission. Mr. Gunn graduated from St. Louis University
with a Bachelor's degree in Political Science in 1965 and a Doctorate in Law in
1967.
Alfred H. Kerth, III is a recently elected director of the Company. As
of June 1, 1998, Mr. Kerth became the President and Chief Operating Officer of
the Eads Center, which functions as a pro bono consultancy in public and civic
affairs to certain groups such as not-for-profit organizations. Previously, Mr.
Kerth was a Senior Vice President and Senior Partner at Fleishman-Hillard in St.
Louis. Prior to joining Fleishman-Hillard in 1987, Mr. Kerth was Vice President,
Marketing for Centerre Bank. Mr. Kerth holds a Bachelor of Arts degree in
Economics from the University of Missouri, St. Louis and a Master's Degree in
Urban Studies from Occidental College in Los Angeles.
The Bylaws currently provide for a Board consisting of seven 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
32
<PAGE>
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 Messrs. Neuman and Hahn will continue until the 1999
annual meeting of shareholders, the term of office of Messrs. Gunn and Kerth
will continue until the 2000 annual meeting of shareholders and the term of
office of Messrs. Saks, Burstein and LeGrand 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.
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.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Principal Position Annual Compensation
Year Salary Bonus Other Compensation
---- ------ ----- ------------------
<S> <C> <C> <C> <C>
Ronald S. Saks.................................. 1997 $150,000 $246,266 1,795
President and CEO
Duane E. Hahn................................... 1997 105,000 209,748 1,795
Vice President
Phillip A. Lajeunesse........................... 1997 92,500 102,300 1,795
General Manager (Wichita, KS)
Robert T. Grah.................................. 1997 69,999 81,736 1,732
General Manager (Tulsa, OK)
Bradley L. Nelson............................... 1997 69,999 76,636 1,716
General Manager (Auburn, WA)
</TABLE>
33
<PAGE>
Option Grants. The following table sets forth certain information with
respect to grants of stock options pursuant to the Company's 1989 Employee
Incentive Stock Option Plan (the "Option Plan") to each of the Named Officers
during the year ended December 31, 1997. No stock appreciation rights were
granted to the Named Officers during such year.
<TABLE>
<CAPTION>
Options/SAR Grants in Last Fiscal Year
Individual Grants
Percent Of
Total Total
Number Of Options/ Potential Realizable
Securities SARs Value At Assumed Rates
Underlying Granted To Of Stock Price
Options/ Employees Exercise Appreciation For
SARs In Fiscal Or Base Expiration Option Term (1)
---------------
Name Granted Year Price ($/Sh) Date 5% 10%
- ---- ------- ---- ------------ ---- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Bradley L. Nelson................ 4,935 8.30% $3.67 12/31/99 $2,327 $4,938
- ---------------------------
<FN>
(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.
</FN>
</TABLE>
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.
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
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
<FN>
(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.
</FN>
</TABLE>
34
<PAGE>
Employment Arrangements with Named Officers
On January 1, 1997, the Company entered into an employment agreement with
Ronald S. 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 for each year subsequent to 1997.
As of May 1, 1998, the Company entered into an employment agreement with
Lawrence J. 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, 2002.
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
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
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
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, 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
dissolution 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 terms of the agreement.
35
<PAGE>
Benefit Plans
Profit Sharing and Savings Plan. The LMI Aerospace, 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% 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 "1989 Option Plan") for key
employees and officers of the Company or any wholly-owned subsidiary. The
purpose of the 1989 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 1989
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 1989 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 1989
Option Plan further provides that upon the occurrence of certain events, the
1989 Option Plan will automatically terminate and all outstanding options
granted under the 1989 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 259,827 shares of common
stock for issuance under the 1989 Option Plan. The Company has granted options
to the following executive officers under the 1989 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 9,870
Ernest R. Bailey 4,935
36
<PAGE>
1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the "1998
Option Plan") is designed to provide additional incentives for employees of the
Company and its subsidiaries to promote the success of the business and to
enhance the Company's ability to attract and retain the services of qualified
persons. The plan is administered by a committee, or if one is not appointed, by
the Board. The committee (or the Board in its absence) is authorized to grant to
employees (including officers) selected by it incentive stock options and
non-qualified stock options. The maximum number of shares available for issuance
under the 1998 Option Plan is 600,000 shares of Common Stock. The 1998 Option
Plan will expire on, and no options may be granted thereunder, after the tenth
anniversary of the 1998 Option Plan, subject to the right of the Board to
terminate the 1998 Option Plan at any time prior thereto. The Board may amend
the 1998 Option Plan at any time.
An option enables the optionee to purchase shares of Common Stock at
the exercise price. The per share exercise price of any options granted under
the 1998 Option Plan may not be less than the fair market value of the Common
Stock at the time the option is granted, provided that with respect to an
incentive stock option granted to an optionee who is or will be the beneficial
owner of more than 10% of the combined voting power of all classes of Company's
stock, the exercise price may not be less than 110% of the fair market value of
the Common Stock on the date of grant. In order to obtain the shares, a
participant must pay the exercise price to the Company at the time of exercise
of the option. The exercise price may be paid in cash or, with the consent of
the committee, stock of the Company, including stock acquired under the same
option. Incentive stock options are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended.
Incentive stock options and non-qualified stock options may be granted
with terms of no more than 10 years from the date of grant, provided that in the
event the grant of an incentive stock option to an optionee who is or will be
the beneficial owner of more than 10% of the combined voting power of all
classes of the Company's stock, the term of such option may not exceed five
years. Options will survive for a limited period of time after the optionee's
death, disability or normal retirement from the Company. Any shares as to which
an option expires, lapses unexercised, or is terminated or canceled may be
subject to a new option.
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 must be approved by a
majority of the independent and disinterested outside directors.
37
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as of June 1, 1998
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.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Name of Beneficially Owned Beneficially Owned
Beneficial Owner Prior to the Offering Percent After the Offering Percent
---------------- --------------------- ------- ------------------ -------
<S> <C> <C> <C> <C>
Ronald S. Saks(1) 4,632,951 77.3% 2,840,559 34.3%
The Guaranty Trust Company of
Missouri, as trustee for the 964,259 16.1 964,259 11.6
Profit Sharing Plan(2)
Sanford S. Neuman(4) 660,000 11.0 282,940 3.4
Joseph and Geraldine Burstein(3) 599,296 10.0 599,296 7.2
Gary R. Saks(5) 367,519 6.1 367,519 4.4
Duane E. Hahn(6) 354,543 5.9 354,543 4.2
Lawrence J. LeGrand(7) 230,300 3.8 230,300 2.7
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 *
Thomas M. Gunn
Alfred H. Kerth, III - - - -
All directors & executive officers
as a group (12 in group) 5,383,022 86.6 4,526,796 53.1
<FN>
* 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 (131,600); (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.
(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.
38
<PAGE>
(7) Includes 131,600 shares of Common Stock held of record by Voting Trust
No. 1 for the benefit of Mr. LeGrand. Also includes 98,700 shares for
which Mr. LeGrand, through his individual retirement account, has
subscribed, which shares are issuable immediately upon payment of the
subscription amount.
(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 shares. 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 includes 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. Lajeunesse'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.
</FN>
</TABLE>
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 June 1, 1998, upon the
consummation of the Offering, 8,290,721 shares of Common Stock and no shares of
Preferred Stock will be outstanding. The following is a summary description of
material terms of the capital stock of the Company, which 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 shareholders 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 18,488,002 shares of
Common Stock, excluding the 876,277 shares of Common Stock reserved for issuance
upon exercise of options granted under the 1989 Option Plan and the 1998 Option
Plan and 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 shareholder 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 1989 Option Plan, 1998 Option Plan,
Profit Sharing Plan and Mr. LeGrand's subscription agreement covering 98,700
shares, the Company does not currently have any plans to issue additional shares
of Common Stock or Preferred Stock. See "MANAGEMENT--Benefit Plans."
39
<PAGE>
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.
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, the President of the Company or at the
request in writing of shareholders holding at least 10% of the outstanding
shares entitled to vote at such meeting. 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.
40
<PAGE>
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.
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
8,290,721 shares of Common Stock. Of these shares, only those offered for sale
in the Offering and approximately 948,783 currently held by existing
non-affiliate shareholders will be tradable without restriction under the
Securities Act. The remaining 5,041,938 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.
41
<PAGE>
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 such 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 876,277 shares of Common Stock reserved
for issuance under the 1989 Option Plan and 1998 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.
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.
42
<PAGE>
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.
43
<PAGE>
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).
44
<PAGE>
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
Condensed Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1998 (unaudited)..................... F-18
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1997
and 1998 (unaudited)................................................. F-19
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1997
and 1998 (unaudited)................................................. F-20
Notes to Condensed Consolidated Financial
Statements (unaudited)............................................... F-21
F-1
<PAGE>
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.
St. Louis, Missouri /s/ ERNST & YOUNG LLP
April 20, 1998, except
Note 12, as to which
the date is April 27, 1998
F-2
<PAGE>
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
<PAGE>
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
<PAGE>
<TABLE>
<CAPTION>
LMI Aerospace, Inc.
Consolidated Statements of Stockholders' Equity
(Amounts in thousands, except share and per share data)
Additional Total
Paid-In Retained Treasury Stockholders'
Common Stock Capital Earnings Stock Equity
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
stock - 2 - 3 5
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
========================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
<CAPTION>
LMI Aerospace, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year ended December 31,
1995 1996 1997
-------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 37 $ 1,187 $ 5,283
Adjustments to reconcile net income to
net 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
operating activities
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
=======================================================
</TABLE>
See accompanying notes.
F-6
<PAGE>
================================================================================
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
Direct sales to the Company's largest customer accounted for 45 percent, 46
percent, and 59 percent of the Company's total revenues in 1995, 1996, and 1997
and represented 52 percent and 62 percent of the accounts receivable balance at
December 31, 1996 and 1997, respectively. Indirect sales to the Company's
largest customer accounted for 19 percent, 20 percent, and 17 percent of the
Company's total revenues in 1995, 1996, and 1997, respectively.
Direct sales to the Company's second largest customer accounted for 18 percent,
19 percent, and 13 percent of the Company's total revenues in 1995, 1996, and
1997 and represented 17 percent and 14 percent of the accounts receivable
balance at December 31, 1996 and 1997, respectively.
Direct sales to the Company's third largest customer accounted for 11 percent, 8
percent, and 9 percent of the Company's total revenues in 1995, 1996, and 1997
and represented 8 percent and 7 percent of the accounts receivable balance at
December 31, 1996 and 1997, respectively.
1. Accounting Policies (continued)
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.
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.
F-7
<PAGE>
1. Accounting Policies (continued)
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.
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.
F-8
<PAGE>
1. Accounting Policies (continued)
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.
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
=================================
F-9
<PAGE>
3. Property, Plant, and Equipment (continued)
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.
<TABLE>
<CAPTION>
5. Long-Term Debt
Long-term debt consists of the following:
1996 1997
---------------------------------------
<S> <C> <C>
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
=======================================
</TABLE>
F-10
<PAGE>
5. Long-Term Debt (continued)
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.
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.
F-11
<PAGE>
5. Long-Term Debt (continued)
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.
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.
F-12
<PAGE>
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.
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, $74, 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, $52, and
$78 for 1995, 1996, and 1997, respectively.
F-13
<PAGE>
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:
<TABLE>
<CAPTION>
1995 1996 1997
---------------------------- ---------------------------- -----------------------------
Number of Option Number of Option Number of Option
Shares Prices Shares Prices Shares Prices
------------ --------------- ------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
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 -
============ =============== ============= ============== ============= ===============
</TABLE>
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 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 date of grant under SFAS. No.
123, net income and earnings per share amounts would have been as follows:
F-14
<PAGE>
1995 1996 1997
--------------- ---------------- -------------
Net income:
As reported $37 $1,187 $5,283
Pro forma 10 1,155 5,256
Net income per common share:
As reported $.01 $.21 $.91
Pro forma - .20 .90
Net income per common share
assuming dilution:
As reported .01 .20 .89
Pro forma - .20 .89
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
F-15
<PAGE>
9. Income Taxes (continued)
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
======================================================
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 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.
F-16
<PAGE>
10. Commitments and Contingencies
The Company is involved in various claims and legal actions. 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.
<TABLE>
<CAPTION>
11. Quarterly Financial Data (Unaudited)
First Second Third Fourth
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
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
<FN>
(1) Includes a charge of $250 for environmental remediation - see Note 10.
</FN>
</TABLE>
F-17
<PAGE>
12. Subsequent Event - Initial Public Offering
On April 27, 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-1 stock dividend of the Company's common stock to shareholders of
record on May 1, 1998. 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-18
<PAGE>
LMI Aerospace, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
December 31, March 31,
1997 1998
--------------------------------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 244 $ 604
Trade accounts receivable 8,058 9,745
Inventories 8,701 9,128
Prepaid expenses 147 167
Other current assets 109 109
Deferred income taxes 502 502
--------------------------------------
Total current assets 17,761 20,255
Property, plant, and equipment, net 15,652 16,448
Deferred financing cost, net 130 94
Other assets 86 86
--------------------------------------
$ 33,629 $ 36,883
======================================
Liabilities and stockholders' equity Current liabilities:
Accounts payable $ 3,318 $ 3,908
Accrued expenses 1,940 2,781
Income taxes payable 430 1,216
Demand note payable to stockholder 250 --
Current installments of long-term debt 567 640
---------------------------------
Total current liabilities 6,505 8,545
Long-term debt, less current installments 9,274 8,829
Deferred income taxes 1,099 1,099
---------------------------------
Total noncurrent liabilities 10,373 9,928
Stockholders' equity:
Common stock of $.02 par value;
authorized 15,000,000
shares; issued 5,908,471 at
December 31, 1997 and at 118 118
March 31, 1998, respectively
Additional paid-in capital 1,543 1,543
Retained earnings 15,090 16,749
----------------------------------
Total stockholders' equity 16,751 18,410
==================================
$ 33,629 $ 36,883
==================================
See accompanying notes.
F-19
<PAGE>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1997 1998
-----------------------------------
Net sales $ 12,690 $ 16,335
Cost of sales 9,393 11,502
-----------------------------------
Gross profit 3,297 4,833
Selling, general, and
administrative expenses
1,489 1,883
-----------------------------------
Income from operations 1,808 2,950
Other income (expense):
Interest expense (283) (258)
Other, net 1 5
-----------------------------------
Income before income taxes 1,526 2,697
Provision for income taxes 587 1,038
===================================
Net income $ 939 $ 1,659
===================================
Net income per common share $ 0.16 $ 0.28
===================================
Net income per common share
- assuming dilution $ 0.16 $ 0.28
===================================
See accompanying notes.
F-20
<PAGE>
<TABLE>
<CAPTION>
LMI Aerospace, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31,
1997 1998
-------------------------------------
<S> <C> <C>
Operating activities
Net income $ 939 $ 1,659
Adjustments to reconcile net income to
netnet cash provided by operating activities:
net cash provided by operating activities:
Depreciation and amortization 499 644
Changes in operating assets and liabilities:
Trade accounts receivable (448) (1,686)
Inventories (149) (427)
Prepaid expenses 7 (20)
Other current assets (16) (43)
Other assets 2 33
Income taxes payable 97 786
Accounts payable 468 590
Accrued expenses 347 841
-------------------
-------------------
Net cash provided by operating activities 1,746 2,377
Investing activities
Additions to property, plant, and equipment (335) (1,405)
Proceeds from sale of property, plant, and equipment - 9
equipment
-------------------------------------
Net cash used in investing activities (335) (1,396)
Financing activities
Proceeds from issuance of long-term debt - 1,292
Principal payments on long-term debt (901) (1,913)
-------------------------------------
Net cash used in financing activities (901) (621)
activities
-------------------------------------
Net change in cash and cash equivalents 510 360
Cash and cash equivalents, beginning of period 205 244
=====================================
Cash and cash equivalents, end of period $ 715 $ 604
=====================================
</TABLE>
See accompanying notes.
F-21
<PAGE>
================================================================================
LMI Aerospace, Inc.
================================================================================
LMI Aerospace, Inc.
Notes to Condensed Consolidated Financial Statements
(Dollar amounts in thousands, except share and per share data))
(Unaudited)
March 31, 1998
1. Accounting Policies
Basis of Presentation
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 unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair representation
have been included. Operating results for the three months ended March 31, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. These financial statements should be read in
conjunction with the consolidated financial statements and accompanying
footnotes for the year ended December 31, 1997.
The Company's income per share and share data in the financial statements have
been retroactively restated to reflect the effect of the 2.29-for-one stock
dividend declared on April 27, 1998 to shareholders of record on May 1, 1998 in
connection with the filing of a Form S-1 Registration Statement.
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 by the weighted average
number of common shares outstanding during the applicable periods. The weighted
average number of common shares outstanding was 5,908,471 and 5,822,839 at March
31, 1998 and 1997, respectively. In order to compute diluted earnings per common
share, the Company included weighted average dilutive stock options outstanding
which totaled 116,614 and 49,551 at March 31, 1998 and 1997, respectively.
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.
2. Inventories
Inventories consist of the following:
December 31, March 31,
1997 1998
------------------------------------
Raw materials $2,990 $3,588
Work in process 3,875 3,470
Finished goods 1,836 2,070
====================================
$8,701 $9,128
====================================
3. Property, Plant, and Equipment
Property, plant, and equipment
consist of the following:
December 31, March 31,
1997 1998
------------------------------------
Land $ 638 $ 638
Buildings 7,405 7,464
Machinery and equipment 18,376 19,018
Software costs 523 571
Leasehold improvements 426 426
Construction in progress 298 897
------------------------------------
27,666 29,014
Less accumulated depreciation (12,014) (12,566)
====================================
$ 15,652 $ 16,448
====================================
Depreciation expense (including amortization expense on capital leases) recorded
by the Company totaled $477, and $597, for the three months ended March 31, 1997
and 1998, respectively.
F-22
<PAGE>
<TABLE>
<CAPTION>
4. Long-Term Debt
Long-term debt consists of the following:
December 31, March 31,
1997 1998
---------------------------------------
<S> <C> <C>
Revolving line of credit, interest payable monthly, at a
variable rate $ 1,281 $ 1,527
Industrial Development Revenue Bond, interest payable
monthly, at a variable rate 2,500 2,500
Term loan note payable, principal and interest payable
monthly, at a fixed rate of 9.0% 3,482 3,408
Real estate note payable, principal and interest payable
monthly, at a variable rate 428 422
Notes payable, principal and interest payable monthly, at
fixed rates, ranging from 8.25% to 9.56% 1,233 1,508
Subordinated debentures, interest payable monthly, at a fixed
rate of 11% 800 ----
Capital lease obligations 117 104
---------------------------------------
9,841 9,469
Less current installments 567 640
=======================================
$9,274 $ 8,829
=======================================
</TABLE>
On March 31, 1998, the Company secured a $15,000 unsecured line of credit with
Magna Bank to fund various corporate needs. Interest is payable monthly based on
a quarterly cash flow leverage calculation and the LIBOR rate (7.09% at March
31, 1998). This facility matures on March 30, 2000 and requires compliance with
certain non-financial and financial covenants including minimum tangible net
worth and EBITDA requirements. The credit facility prohibits the payment of cash
dividends on common stock without Magna's prior written consent. The Company
drew upon the line in March 1998 to retire certain outstanding debt balances,
including the previous 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 Industrial Revenue Bond (IRB) bears interest at a variable rate, which is
based on the existing market rates for comparable outstanding tax-exempt bonds
(4.1 percent and 3.85 percent at December 31, 1997 and March 31, 1998,
respectively), not to exceed 12 percent. The IRB is secured by a letter of
credit, and Magna Bank NA (Magna), which holds 100 percent participation in the
letter of credit, has a security interest in certain equipment. The bond matures
in November 2000.
During 1997, the Company executed a new 9.0 percent term note payable for $3,500
with Magna secured by certain Company-owned real estate. 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. All of the Company's property,
plant and equipment is pledged under the above agreement.
The real estate note payable is with the Oklahoma Industrial Finance Authority
requires monthly principal and interest payments through May 2009 and bears
interest at the prime rate adjusted quarterly based on the last day of the
previous quarter (8.5 percent at December 31, 1997 and March 31, 1998). 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.
5. Commitments and Contingencies
The Company is involved in various claims and legal actions. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position.
6. Subsequent Event - Initial Public Offering
On April 27, 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 will
effect a 2.29-for-one stock dividend of the Company's common stock payable June
1, 1998 to shareholders of record on May 1, 1998. 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.
Pursuant to the employment of one of the Company's officers, in the second
quarter of 1998, the Company will record unearned compensation expense related
to its stock transactions with the officer. The stock transactions involve the
issuance of 32,900 shares as a bonus, the purchase of 98,700 shares from the
Company, and the purchase of 98,700 shares from a principal shareholder. The
unearned compensation expense will be determined based on a formula, which
applies a discount related to the restricted nature of the shares, as determined
by an independent appraiser, to the prevailing stock price in the initial public
offering. The Company estimates this unearned compensation expense will be
approximately $600, to be recognized over 48 months.
F-23
<PAGE>
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
<PAGE>
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
<PAGE>
Item 15. Recent Sales of Unregistered Securities
On August 10, 1995, the Company issued 26,320 shares to the Ronald S.
Saks Revocable Trust U/T/A dated June 21, 1991 for $50,240, 52,640 to Sanford
Neuman for $100,480 and 86,856 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 188,763
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 80,976 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, the Company issued 3,290 shares to Ronald S. Saks
as Voting Trustee under Voting Trust No. 1 as a result of an exercise of part of
an option granted to a shareholder for an aggregate exercise price of $5,810,
1,392 shares to Ronald S. Saks as Voting Trustee under Voting Trust No. 1 for
$21,228 and 324,420 shares in the aggregate to Sanford S. Neuman as Voting
Trustee under Voting Trust No. 2 for an aggregate purchase price of $1,503,772,
under Section 4(2) of the Securities Act.
On April 27, 1998, the Company issued 32,900 shares to the Guaranty
Trust Company of Missouri as trustee for The Profit Sharing Plan for $384,900
(based on 90% of an initial public offering value of $13 per share) under Rule
701 of the Securities Act and 32,900 shares as compensation to Ronald S. Saks as
Voting Trustee under Voting Trust No. 1 under Section 4(2) of the Securities Act
pursuant to a restricted stock agreement between the Company and Lawrence J.
LeGrand.
On June 1, 1998, as a result of an exercise of an option granted to a
shareholder, the Company issued 16,450 shares to Ronald S. Saks as Voting
Trustee under Voting Trust No. 1 for an aggregate exercise price $29,050 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
<PAGE>
(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
<PAGE>
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 5th day of June, 1998.
LMI AEROSPACE, INC.
(Registrant)
/s/ Lawrence R. Dickinson
By
Lawrence E. Dickinson
Chief Financial 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, June 5, 1998
- ------------------------------- President, and Director
Ronald S. Saks
/s/ Joseph Burstein* Chairman of the Board, June 5, 1998
- ------------------------------- Secretary and Director
Joseph Burstein
/s/ Lawrence J. LeGrand* Chief Operating Officer June 5, 1998
- ------------------------------- and Director
Lawrence J. LeGrand
/s/ Lawrence E. Dickinson Chief Financial Officer June 5, 1998
- -------------------------------
Lawrence E. Dickinson
/s/ Duane Hahn Vice President, Regional June 5, 1998
- ------------------------------- Manager and Director
Duane Hahn
/s/ Sanford S. Neuman* Assistant Secretary and June 5, 1998
- ------------------------------- Director
Sanford S. Neuman
/s/ Thomas M. Gunn Director June 4, 1998
- -------------------------------
Thomas M. Gunn
/s/ Alfred H. Kerth, III Director June 4, 1998
- -------------------------------
Alfred H. Kerth, III
*By: /s/ Lawrence E. Dickinson
---------------------------
Lawrence E. Dickinson,
as attorney in fact
<PAGE>
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. .............
10.1* 1989 Stock Option Plan, including amendments
nos. 1 through 4....................................
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
amendments nos. 1 through 6..........................
10.13* Loan Agreement between the Registrant and Magna Bank,
N.A., dated August 15, 1996, including all
amendments ..........................................
E-1
<PAGE>
10.14 Loan Agreement with the Industrial Development
Authority of St. Charles County, Missouri, dated
as of September 1, 1990...............................
10.15 General Terms Agreement and Special Business Provisions
between the Registrant and Boeing Seattle.............
10.16 Form of Master Purchase Order Agreement covering Boeing
777 and 747 Programs and Master Order Agreement covering
Boeing 737 Leading Edge Programs, both between the
Registrant and Boeing North American..................
10.17 Form of Contract between the Registrant and Boeing
Wichita...............................................
10.18 General Conditions (Fixed Price - Non-Governmental) for
the G-14/F100 Program, General Conditions for the Wing
Stub/Lower 45 Program Boeing Model 767 Aircraft and
Form of Master Agreement, between the Registrant and
Northrop Grumman......................................
10.19 1998 Stock Option Plan..................................
10.20 Amendment No. 5 to 1989 Stock Option Plan...............
10.21 Restricted Stock Agreement with Lawrence J. LeGrand,
dated as of April 27, 1998
10.22 Subscription Agreement with Lawrence J. LeGrand,
dated as of April 27, 1998
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 .....
23.3 Consent of KPMG Peat Marwick LLP, independent auditors..
24 Power of Attorney (on signature page of initial
filing of Form S-1)...................................
27.1 Financial Data Schedule ................................
- --------------------
* Previously filed with initial filing (333-51357) dated April 23, 1998.
E-2
AMENDED AND RESTATED
BY-LAWS
OF
LMI AEROSPACE, INC.
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be
in the County 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 of May if not a legal holiday, and if
a legal holiday, then on the next business day following, at 10:00 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.
<PAGE>
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) otherwise 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 share- holder'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
ByLaws 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 the chairman should
so determine and declare to the meeting, any such business not properly brought
before the meeting shall not be transacted.
- 2 -
<PAGE>
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, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
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.
- 3 -
<PAGE>
Section 5. Special meetings of the shareholders entitled to vote, for
any purpose or purposes, may be called only by the chief executive officer 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, 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.
- 4 -
<PAGE>
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.
- 5 -
<PAGE>
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 at the meeting with respect to the subject matter thereof, and is
delivered to the Corporation to its registered office in the state of
Incorporation, its principal place of business, or to an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
shareholders are recorded. Delivery shall be made by hand or by certified or
registered mail, return receipt requested.
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 three (3) until otherwise fixed by a
majority of the entire Board.
(b) The Board of Directors shall be divided into three
classes. Directors shall be elected and/or appointed to one of the
following classes:
- 6 -
<PAGE>
CLASS EXPIRATION OF TERM
I Annual meeting date of the
shareholders in 1999 and every
3 years thereafter
II Annual meeting date of the
shareholders in 2000 and every
3 years thereafter
III Annual meeting date of the
shareholders in 2001 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.
- 7 -
<PAGE>
(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.
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.
- 8 -
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 3. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Missouri.
Section 4. 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 5. 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 6. 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 7. 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.
- 9 -
<PAGE>
Section 8. 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 vote, 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 9. 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.
COMMITTEES OF DIRECTORS
Section 10. 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 two 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.
- 10 -
<PAGE>
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 180(1) of the General Corporation 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.
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Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 12. 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.
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.
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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, chief operating officer, 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.
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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 Board of Directors. Any
vacancy occurring in any office of the Corporation may be filled by the Board of
Directors.
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 such
office and are properly required of the president. The president shall preside
at all meetings of the shareholders and the Board of Directors. Except where by
law the signature of a different officer 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 the president deems appropriate.
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THE CHIEF OPERATING OFFICER
Section 6. The chief operating officer shall be the chief operating and
administrative officer of the Corporation and shall have general supervision
over the day-to-day operating affairs of the Corporation. The chief operating
officer shall keep the Board of Directors fully informed, shall freely consult
with the Board of Directors concerning the business of the Corporation and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe. In the absence of the president or in the event
of the president's inability or refusal to act, the chief operating officer
shall perform all 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
chief executive officer may sign all certificates, deeds, mortgages, bonds,
contracts, documents and other instruments on behalf of the Corporation, except
where by law the signature of another officer or agent of the Corporation is
required, and except as otherwise provided by the Board of Directors.
THE VICE-PRESIDENTS
Section 7. In the absence of the chief operating officer or in the
event of the chief operating officer'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 chief operating officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the chief operating officer.
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<PAGE>
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 8. 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 or president. 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 9. 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 the secretary's
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.
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THE TREASURER AND ASSISTANT TREASURERS
Section 10. 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 11. 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 president and the Board of
Directors, an account of all transactions as treasurer and of the financial
condition of the Corporation.
Section 12. 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 the death of the treasurer,
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 13. 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.
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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 and the secretary or an assistant secretary or the treasurer or
an assistant treasurer of the Corporation.
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.
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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.
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<PAGE>
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.
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 WITH RESPECT TO
THIRD PARTY ACTIONS
Section 1. 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 this Corporation) by
reason of the fact that (i) such person is or was a director, officer, employee
or agent of this Corporation, or (ii) is or was serving at the request of this
Corporation as a director, officer, employee, partner, trustee or agent of
another Corporation, partnership, joint venture, trust or other enterprise, or
(iii) is or was at the request of the Corporation a guarantor of any debts of
the Corporation, against expenses (including attorneys' fees), judgments, fines,
taxes 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 this 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 this Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
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<PAGE>
INDEMNIFICATION WITH RESPECT TO ACTIONS BY
OR IN THE RIGHT OF THE CORPORATION
Section 2. This 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 this Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of this Corporation, or is or was serving
at the request of this Corporation as a director, officer, employee, partner,
trustee or agent of another Corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) and amounts paid
in settlement 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 this 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 for negligence or misconduct in the performance
of such person's duty to this 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. Any indemnification under this
Section 2 (unless ordered by a court) shall be made by this Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, partner, trustee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
this Section 2. Such determination shall be made (1) 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 (2) 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 (3) by the shareholders.
INDEMNIFICATION - HOW AUTHORIZED
Section 3. To the extent that a director, officer, employee or agent of
this Corporation has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to in Subsections 1 or 2 of this
Section, or in defense of any claim, issue or matter therein, the director,
officer, employee or agent shall be indemnified against expenses, including
attorneys' fees actually and reasonably incurred by such director, officer,
employee or agent in connection with the action, suit or proceeding.
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PAYMENT OF EXPENSES IN ADVANCE OF
DISPOSITION OF ACTION
Section 4. Expenses incurred in defending any actual or threatened
civil or criminal action, suit or proceeding may be paid by this Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee, partner, trustee
or agent to repay such amount unless it shall ultimately be determined that the
director, officer, employee, partner, trustee or agent is entitled to be
indemnified by this Corporation as authorized in this Article VIII.
INDEMNIFICATION PROVIDED IN THIS ARTICLE
NON-EXCLUSIVE
Section 5. The indemnification provided by this Article VIII shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity while holding such office and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, partner, trustee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
DEFINITION OF "CORPORATION"
Section 6. For the purposes of this Article VIII, references to this
"Corporation" include all constituent Corporations absorbed in a consolidation
or merger as well as the resulting or surviving Corporation, so that any person
who is or was a director, officer, employee, partner, trustee or agent of such a
constituent Corporation or is or was serving at the request of such constituent
Corporation as a director, officer, employee, partner, trustee or agent of
another Corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VIII with
respect to the resulting or surviving Corporation in the same capacity.
INSURANCE
Section 7. The Corporation may 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 such
person's 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.
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CERTAIN DEFINITIONS
Section 8. For purposes of this Article VIII, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent 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 Article VIII.
EXTENT OF INDEMNIFICATION
Section 9. The Corporation shall, to the fullest extent permitted by
Section 351.355 of the General Corporation Law of the State of Missouri, as the
same may be amended and supplemented from time to time, indemnify any and all
persons 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.
SAVING CLAUSE
Section 10. In the event any provision of this Article VIII is held
invalid by any court of competent jurisdiction, such holding shall not
invalidate any other provision of this Article VIII and the other provisions of
this Article VIII shall be construed as if such invalid provision had not been
contained in this Article VIII.
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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 shareholders 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
shareholders to adopt, amend or repeal By-Laws.
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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 on April 19, 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) for the period May
1, 1998 through December 31, 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.
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.
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.
(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.
(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.
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.
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: /s/ Ronald S. Saks
---------------------------------
Ronald S. Saks, President
/s/ Lawrence J. LeGrand
---------------------------------
Lawrence J. LeGrand
("Employee")
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
DUANE E. HAHN ("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 Fifty Thousand
Dollars ($150,000.00), 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 and one-half percent (1
1/2%) 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 Seventy-Five Thousand Dollars ($75,000.00), 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-Five Thousand Dollars
($75,000.00).
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.
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 Regional
Manager of the Corporation's plants located in Auburn, Washington; Wichita,
Kansas; and at the location 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 (comparable to those normally performed by individuals who
serve as such 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 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.
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:
(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.
(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.
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. Duane E. Hahn
28210-188th Ave., S.E.
Kent, WA 98042
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, 1998.
LEONARD'S METAL, INC.
("Corporation")
By: /s/ Ronald S. Saks
----------------------------------
Ronald S. Saks, President
/s/ Duane E. Hahn
-------------------------------
Duane E. Hahn
("Employee")
COMMERCIAL LEASE
THIS LEASE, made and entered into, this 21st day of February, 1997,
by and between
Parties: Roy R. & Madonna J. Thoele
1703 North Fourth Street, St. Charles, MO 63301
(314) 724-1617
hereinafter called Lessor, and
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
(314) 946-6525
hereinafter called Lessee,
WITNESSETH, That the said Lessor for and in consideration of the rents,
covenants and agreements hereinafter mentioned and hereby agreed to be paid,
kept and performed by said Lessee, or Lessees, successors and assigns, has
leased and by these presents does lease to said Lessee the following described
premises, situated in the County of St. Charles, State of Missouri, to-wit:
Premises
Part of strip center located at 3010 Highway 94 North, St. Charles, MO.
Containing approximately 5,000 square feet.
Use of Premises
To have and to hold the same, subject to the conditions herein
contained, and for no other purpose or business than that of storage, light
manufacturing, office and other uses permitted under applicable zoning
regulations.
Term and Rental
For and during the term of seven (7) years commencing on the first day of March
1997 and ending on the last day of February 2004, at the yearly rental of Thirty
Thousand ($30,000.00) Dollars, payable in advance in equal monthly installments
of Two Thousand Five Hundred Dollars ($2,500.00).
Rent checks to be payable to:
Roy R. Thoele
P.O. Box 460
St. Charles, MO 63302
on the first day of each and every month during the said term.
Assignment or Sub-letting
This lease is not assignable, nor shall said premises or any part
thereof be sublet, used or permitted to be used for any purpose other than above
set forth without the written consent of the Lessor endorsed hereon; and if this
lease is assigned or the premises or any part thereof sublet without the written
consent of the Lessor, or if the Lessee shall become the subject of a court
proceeding in bankruptcy or liquidating receivership or shall make an assignment
for the benefit of creditors, this lease may by such fact or unauthorized act be
canceled at the option of the Lessor. Any assignment of this lease or subletting
of said premises or any part thereof with the written consent of the Lessor
shall not operate to release the Lessee from the fulfillment on Lessee's part of
the covenants and agreements herein contained to be by said Lessee performed,
nor authorize any subsequent assignment or subletting without the written
consent of the Lessor.
<PAGE>
Repairs and Alterations
All repairs and alterations deemed necessary by Lessee shall be made by
said Lessee at Lessee's cost and expense with the consent of Lessor; and all
repairs and alterations so made shall remain as a part of the realty; all plate
and other glass now in said demised premises is at the risk of said Lessee, and
if broken, is to be replaced by and at the expense of said Lessee.
The Lessor reserves the right to prescribe the form, size, character
and location of any and all awnings affixed to and all signs which may be placed
or painted upon any part of the demised premises, and the Lessee agrees not to
place any awning or sign on any part of the demised premises without the written
consent of the Lessor, or to bore or cut into any column, beam or any part of
the demised premises without the written consent of Lessor. The Lessee and all
holding under said Lessee agrees to use reasonable diligence in the care and
protection of said premises during the term of this lease, to keep the water
pipes, sewer drains, heating apparatus, elevator machinery and sprinkler system
in good order and repair and to surrender said premises at the termination of
this lease in substantially the same and in as good condition as received,
ordinary wear and tear excepted.
The Lessee shall pay according to the rules and regulations of the
water department for all water used in the demised premises. The Lessee will
erect fire escapes on said premises at said Lessee's own cost, according to law,
should the proper authorities demand same.
The Lessee agrees to keep said premises in good order and repair and
free from any nuisance or filth upon or adjacent thereto, and not to use or
permit the use of the same or any part thereof for any purpose forbidden by law
or ordinance now in force or hereafter enacted in respect to the use or
occupancy of said premises. The Lessor or legal representatives may, at all
reasonable hours, enter upon said premises for the purpose of examining the
condition thereof and making such repairs as Lessor may see fit to make.
If the cost of insurance to said Lessor on said premises shall be
increased by reason of the occupancy and use of said demised premises by said
Lessee or other person under said Lessee, all such increase over the existing
rate shall be paid by said Lessee to said Lessor on demand. The Lessee agrees to
pay double rent for each day the lessee, or any one holding under the Lessee,
shall retain the demised premises after the termination of this lease, whether
by limitation or forfeiture.
Damage to Tenants' Property
Lessor shall not be liable to said Lessee or any other person or
corporation, including employees, for any damage to their person or property
caused by water, rain, snow, frost, fire, storm and accidents, or by breakage,
stoppage or leakage of water, gas, heating and sewer pipes or plumbing, upon,
about or adjacent to said premises.
The destruction of said building or premises by fire, or the elements,
or such material injury thereto as to render said premises unquestionably
untenantable for 60 days, shall at the option of said Lessor or Lessee produce
and work a termination of this lease.
If the Lessor and Lessee cannot agree as to whether said building or
premises are unquestionably untenantable for 60 days, the fact shall be
determined by arbitration; the Lessor and the Lessee shall each choose an
arbitrator within five days after either has notified the other in writing of
such damage, the two so chosen, before entering on the discharge of their
duties, shall elect a third, and the decision of any two of such arbitrators
shall be conclusive and binding upon both parties hereto.
If it is determined by arbitration, or agreement between the Lessor and
the Lessee, that said building is not unquestionably untenantable for 60 days,
then said Lessor must restore said building at Lessor's own expense, with all
reasonable speed and promptness, and in such a just and proportionate part of
said rental shall be abated until said premises have been restored.
Failure on the part of the Lessee to pay any installment of rent or
increase in insurance rate promptly as above set out, as and when the same
becomes due and payable, or failure of the lessee promptly and faithfully to
keep and perform each and every covenant, agreement and stipulation herein on
the part of the Lessee to be kept and performed, shall at the option of the
Lessor cause the forfeiture of this lease.
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<PAGE>
Possession of the within demised premises and all additions and
permanent improvements thereof shall be delivered to Lessor upon ten days'
written notice that Lessor has exercised said option, and thereupon Lessor shall
be entitled to and may take immediate possession of the demised premises, any
other notice or demand being hereby waived. Any and all notices to be served by
the Lessor upon the Lessee for any rach of covenant of this lease, or otherwise,
shall be served upon the Lessee in person, or left with anyone in charge of the
premises, or posted upon some conspicuous part of said premises.
Re-Entry
Said Lessee will quit and deliver up the possession of said premises to
the Lessor or Lessor's heirs, successors, agents or assigns, when this lease
terminates by limitation or forfeiture, with all window glass replaced, if
broken, and with all keys, locks, bolts, plumbing fixtures, elevator, sprinkler,
boiler and heating appliances in as good order and condition as the same are
now, or may hereafter be made by repair in compliance with all the covenants of
this lease, save only the wear thereof from reasonable and careful use.
But it is hereby understood, and Lessee hereby covenants with the
Lessor, that such forfeiture, annullment or voidance shall not relieve the
Lessee from the obligation of the Lessee to make the monthly payments of rent
hereinbefore reserved, at the times and in the manner aforesaid; and in case of
any such default of the Lessee, the Lessor may re-let the said premises as the
agent for and in the name of the Lessee at any rental readily obtainable,
applying the proceeds and avails thereof, first, to the payment of such expense
as the Lessor may be put to in re-entering, and then to the payment of said rent
as the same may from time to time become due, and toward the fulfillment of the
other covenants and agreements of the Lessee herein contained, and the balance,
if any, shall be paid to the Lessee; and the Lessee hereby covenants and agrees
that if the Lessor shall recover or take possession of said premises as
aforesaid, and be unable to re-let and rent the same so as to realize a sum
equal to the rent hereby reserved, the Lessee shall and will pay to the Lessor
any and all loss of difference of rent for the residue of the term. The Lessee
hereby gives to the Lessor the right to place and maintain its usual "for rent"
signs upon the demised premises, in the place that the same are usually
displayed on property similar to that herein demised, for the last thirty days
of this lease.
1. Lessee is responsible for all utilities.
2. Lessee must furnish Lessor with a certificate of insurance annually
covering the company's liability, contents and glass breakage and
naming Roy R. Thoele as additional insured. Any increase in the cost of
insurance due to the nature of the operation of the Lessee will be an
expense of the Lessee.
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<PAGE>
3. Lessee is responsible for formal maintenance and repairs. The exterior
walls and roof will be the responsibility of the Lessor.
4. Lessor will provide snow removal and bill lessee on a per job basis.
Cost not to exceed $100.00 for each removal and covers work for the
warehouse docks and parking area of both buildings.
5. Rental rate during any option period of this lease will be adjusted to
reflect the change that occurred in the CPI Index during the prior
lease period of this lease. The CPI-U Index for St. Louis at the
commencement of this lease is ________________.
6. Lessor and Lessee agree to pay all reasonable attorney's fees, court
costs and all other reasonable cost, expenses, and charges incurred by
the prevailing party in connection with the recovery of sums due under
this lease, or in any litigation or negotiation in which either party
shall, without its fault, become involved through or on account of this
lease or any act or omission of either party, their agents, employees
or contractors.
7. Lessor will provide fifty (50) parking spaces as being available for
Lessee.
8. Lessor will perform remodeling and refurbishing as listed on Schedule
A; attached to this lease.
9. At the completion of a proposed warehouse addition of approximately
5,000 square feet, Lessor and Lessee agree to combine the existing
lease on 19,400 square feet, expiring December 31, 1998, this new lease
expiring February 28, 2004; covering 5,000 square feet at 3010 Highway
94 North and the new 5,000 square feet warehouse addition into one
lease for a seven year period with an option to renew for three
additional one year periods, subject to a CPI Index adjustment. Lease
rate on the new warehouse addition to be $4.25 per square foot.
10. As used in this Lease, the term "casualty" shall mean any loss as a
result of those risks covered by an "all risk" property insurance
policy including, without limitation, fire, wind storm, earthquake,
vandalism, acts of God, and damage by the element.
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<PAGE>
No Constructive Waiver
No waiver of any forfeiture, by acceptance of rent or otherwise, shall
waive any subsequent cause of forfeiture, or breach of any condition of this
lease; nor shall any consent by the Lessor to any assignment or subletting of
said premises, or any part thereof, be held to waive or release any assignee or
sub-lessee from any of the foregoing conditions or covenants as against him or
them; but every such assignee and sub-lessee shall be expressly subject thereto.
Whenever the word "Lessor" is used herein it shall be construed to
include the heirs, executors, administrators, successors, assigns or legal
representatives of the Lessor; and the word "Lessee" shall include the heirs,
executors, administrators, successors, assigns or legal representatives of the
Lessee and the words Lessor and Lessee shall include single and plural,
individual or corporation, subject always to the restrictions herein contained,
as to subletting or assignment of this lease.
IN WITNESS WHEREOF, the said parties aforesaid have duly executed the
foregoing instrument or caused the same to be executed the day and year first
above written.
/s/ Roy R. Thoele
Roy R. Thoele
/s/ Madonna J. Thoele
Madonna J. Thoele Lessor
Leonard's Metal Inc.
/s/ Lawrence E. Dickinson
By:
Lessee
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<PAGE>
SCHEDULE A
LEASE ATTACHMENT:
Commercial lease date February 21, 1997
LESSOR: Roy R. and Madonna J. Thoele
LESSEE: Leonard's Metal, Inc.
Remodeling and refurbishing for
3010 Highway 94 North
1) Remove brick dividers in center of area and walls along exterior walls
as designated on attached drawing. Any walls to remain are so
designated on the attached drawing.
2) Remove three (3) air handlers in the ceiling and repair roof.
3) After removing dryers, repair vent holes in the exterior wall with
blocks mortared in place to provide a normal wall finish.
4) Remove tile from floor, leaving concrete floor exposed.
5) Remove glass in front of building and replace with masonry wall with
some windows at the top of the wall to provide ventilation and provide
two (2) entry ways for access to the area. One entry way to be a single
service door and the second entry way to be a double width door.
6) Replace ceiling tile where walls have been removed and install
additional ceiling tiles in the area where the dryers have been
removed.
7) Remodel existing bathroom to include a vanity and construct a new bath
to provide two normal size baths with standard fixtures and a hot water
heater.
8) Replace the existing furnace with a new HVAC unit and install an
additional new HVAC unit to provide adequate heating and cooling.
9) Remove all electrical and plumbing for the washers, leaving the drain
troughs exposed for the Lessee to cover with metal plates.
<PAGE>
SCHEDULE B
Thoele Lease Notes
1 - Change the narrow existing man door to a wider door (3' door would be
acceptable).
2 - Finish the back side of this existing wall.
3 - Move this "furnace room" wall out far enough to leave a 4' passage on
the back side. Also remove furnace from this room.
4 - Remove this wall section from the edge of the existing furnace room to
the front exterior wall. Create a header at the top of the wall so as
not to disturb the ceiling.
5 - Install a steel man door that is handicap accommodating, and steel
double doors in the center of the front exterior wall.
6 - Remove the glass front and replace it with block. The inside of the
block wall is to be painted. The only entrances on this wall should be
the single door, and the double doors referenced in "5" above.
7 - On the back wall all exhaust openings will be patched. The drop
ceiling that is in the main room will be carried on to this wall.
8 - Build rooms to enclose the furnaces.
9 - Add a basin in the existing restroom, and add an additional restroom in
the back corner. Also, cap off current basin for use of water fountain
in that area.
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease"), dated as of June 28, 1988, is made
and entered into by and between J & R Sales, a Washington general partnership,
whose address is: 1021 Mercer Street, Seattle, Washington 98109 ("Landlord") and
LEONARD'S METAL, INC., a Missouri corporation whose address is: 3030 North
Highway 94, St. Charles, Missouri 63301, Attn: Ronald S. Saks ("Tenant").
RECITALS
A. Landlord is the owner of the property located at 204 "H" Street
N.W., Auburn, Washington and the improvements, fixtures and mechanical systems
located thereon (the "Building").
B. Landlord desires to lease to Tenant and Tenant desires to lease from
Landlord the southerly 18,364 square feet of the Building as more particularly
outlined and described on Exhibit A attached hereto (the "Premises"), on the
terms and subject to the conditions below.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the above recitals, the covenants
and agreements herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the Premises on the terms and subject to the conditions herein.
All personal property of Tenant located or to be located on the Premises,
including, without limitation, Tenant owned trade fixtures, shall remain the
property of Tenant.
2. Term. The term of this Lease shall be for two years (the "Initial
Term") commencing August 1, 1988 (the "Commencement Date") and expiring on
midnight, July 31, 1990. Tenant shall be allowed to enter into possession of the
Premises prior to the Commencement Date, without being obligated to pay rent, in
order to install Tenant's equipment and fixtures.
3. Renewal Option. Tenant is hereby granted one option to extend the
term of this Lease for two years. To exercise such option, Tenant shall give
written notice to Landlord of its intention to extend the term of this Lease at
least ninety (90) days prior to the expiration of the Initial Term. All of the
terms and conditions of this Lease shall remain in full force and effect during
any such extended term except as the expiration date may change by the
expiration of such option and the rent which shall be adjusted in accordance
with Section 5 below.
4. Rent During Initial Term. Tenant agrees to pay to Landlord as fixed
annual rent during the Initial Term, the sum of Forty-Four Thousand One Hundred
Dollars ($44,100.00) in equal monthly installments of Three Thousand Six Hundred
Seventy-Five Dollars ($3,675.00).
<PAGE>
5. Rent During Extension. The fixed annual rent payable by Tenant
during the extended term of this Lease shall be Forty-Eight Thousand Nine
Hundred Sixty Dollars ($48,960.00) payable in equal monthly installments of Four
Thousand Eighty Dollars ($4,080.00).
6. Additional Rent. In addition to the fixed annual rent, Tenant shall
pay to Landlord additional rent with respect to each lease year in accordance
with the following provisions:
(a) Definitions.
(i) "Common Areas" means all areas provided for the common or
joint use and benefit of the occupants of the Building and their employees,
agents, customers and invitees including, without limitation, parking areas,
landscaped areas and common walkways. The term Common Area does not include
structural portions of the Building including the walls, roof and foundation.
(ii) "Expenses" shall mean real estate taxes and those expenses
paid or incurred by or in behalf of Landlord for operating and maintaining the
Common Areas of the Building and the personal property used in the operation
thereof, including the cost of utilities servicing the Building (except for
those utilities which are separately metered to the Premises or to other
occupants of the Building), insurance, janitorial service and security service.
Expenses shall not include the cost of finish work for other tenants of the
Building, painting of the Building, repairs or replacements to the fence and
gate around the Building, parking lot repairs, new landscape work, alterations
of the Building, demolition of or alterations to the old brick building adjacent
to the Building, depreciation charges, interest and principal payments on
mortgages, real estate brokerage or leasing commissions.
(b) Computation and Payment. Tenant shall pay to Landlord, as
additional rent for each lease year, an amount equal to Tenant's pro rata share
of Expenses. Tenant's pro rata share of Expenses shall be equal to a fraction,
the numerator of which is the number of square feet comprising the Premises and
the denominator of which is the number of square feet comprising the Building.
It is agreed that such fraction is equal to Thirty-Eight and 3/10 percent
(38.3). With respect to any Expense for which Landlord desires to be reimbursed
by Tenant for Tenant's pro rata share thereof, Landlord shall deliver to Tenant
a statement of the amount to be paid by Tenant together with copies of invoices
received by Landlord relative to such Expense. Tenant shall pay to Landlord its
pro rata share of any such Expense within fifteen (15) days after the receipt of
the statement therefor.
7. Utilities. Tenant shall pay when due all charges for utilities
services which are separately metered to the Premises. Landlord shall not be
liable for any interruption in the supply of any utility to the Premises not
caused or reasonably preventable by Landlord.
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<PAGE>
8. Use of Premises. Tenant may use the Premises for any lawful purpose,
including, without limitation, the manufacturing of aircraft parts and airframe
subassemblies. Landlord represents that use of the Premises for the
manufacturing of aircraft parts and airframe subassemblies is permitted under
all applicable zoning and land use laws and regulations and by all private deed
restrictions affecting the Premises.
9. Signs. Tenant may erect, install and maintain such sign or signs
upon and within the area of the Premises as Tenant shall from time to time deem
necessary in the operation of its business. All such signs shall comply with all
applicable laws, rules and ordinances.
10. Authorization and Repairs. Throughout the term of this Lease,
Tenant shall have the right, at its cost, to make such alterations, additions,
changes and improvements to the interior of the Premises as Tenant shall from
time to time deem reasonably necessary or desirable for the operation of its
business subject to the prior written approval of Landlord which approval shall
be not be unreasonably withheld or delayed. In addition, Landlord shall
reimburse Tenant for one-half of Tenant's cost of making improvements to the
Premises (including expanding the office area and electrical supply); provided,
however, that Landlord's portion of such costs shall not exceed Fifteen Thousand
Dollars ($15,000.00). Landlord shall reimburse Tenant for such costs by means of
a credit against the fixed rent due hereunder in the amount of Six Hundred
Twenty-Five Dollars ($625.00) per month until Tenant has been fully reimbursed
as provided herein. In the event Landlord sells, conveys or otherwise transfers
the Building, Landlord shall pay to Tenant, in cash, the balance, if any, owed
by Landlord to Tenant as a result of Tenant's improvements to the Premises.
Prior to the Commencement Date, Landlord shall, at Landlord's expense, repair
the damaged truck delivery doors, roof leaks, fences and gates, paint and clean
the existing office area and provide a fully operational Premises.
11. Repairs and Maintenance. Throughout the term hereof, Tenant shall,
at its expense, maintain the Premises in as good as condition as received. Upon
the expiration or earlier termination of this Lease, Tenant shall surrender to
Landlord the Premises in as good as condition as received, ordinary wear and
tear and casualty losses excepted. Landlord shall be responsible for repairing,
replacing as needed and maintaining the roof, the exterior walls and the
structural portions of the Premises. In addition, Landlord, at Landlord's cost,
shall repair the floor area where the footing wall has been removed along the
northern column line. Such floor area should be leveled out to provide good
access to the smaller rectangular portion of the Premises (Northeast corner).
Any alterations to the Premises required to be made as a result of changes in
applicable building codes, shall be made by Landlord, at Landlord's cost.
12. Insurance. Tenant shall maintain, at its cost, liability insurance
insuring against any and all liability of the Tenant with respect to the
Premises arising out of the maintenance, use or occupancy thereof with limits of
coverage not less than One Million Dollars ($1,000,000.00) for personal injury
and not less than Five Hundred Thousand Dollars ($500,000.00) for property
damage. All such policies of insurance shall name Landlord as an additional
insured. Tenant, upon the request of Landlord, shall furnish to Landlord a
current certificate of such insurance. Such certificate shall contain a
provision indicating that the insurance company will use its best efforts to
provide Landlord with fifteen (15) days notice prior to the termination or
modification of such insurance.
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<PAGE>
13. Attornment, Subordination and Nondisturbance.
(a) Tenant shall, in the event any proceedings are brought for
the foreclosure of any mortgage made by Landlord covering the Building or the
Premises, attorn to the purchaser or the foreclosing mortgage holder upon any
such foreclosure or sale and recognize such party as the landlord under this
Lease.
(b) This Lease and all rights of Tenant hereunder are and shall
be subject and subordinate to all mortgages which may now or hereafter affect
all or any portion of the Premises; provided that so long as Tenant is not in
default under this Lease, Tenant's possession of the Premises will not be
disturbed and Tenant shall have the right to continue to occupy the Premises
upon the same terms and conditions as are contained in this Lease and any such
mortgage or other instrument subordinating this Lease to a mortgage shall so
provide.
14. Assignment and Subletting. Tenant shall not assign this Lease or
sublet the Premises without obtaining the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Notwithstanding
anything to the contrary in the foregoing, Tenant may merge with or into another
entity without the necessity of obtaining Landlord's consent thereto.
15. Damage or Destruction.
(a) Partial Damage. In the event the Premises are damaged or
destroyed by fire or other casualty, Landlord shall repair and restore those
portions of the Premises so damaged or destroyed substantially to the condition
thereof immediately prior to such damage or destruction. Landlord shall not be
obligated to repair or restore Tenant's trade fixtures, equipment, inventory or
other installations or improvements of Tenant.
(b) Substantial Damage. Notwithstanding anything to the contrary
in the foregoing, in the event the Premises are damaged or destroyed by fire or
other casualty and Landlord and Tenant determine that the Premises cannot be
restored within 90 days after the date of such damage or destruction, either
party may, at its option, terminate this Lease upon twenty (20) days notice to
the other party given within thirty (30) days after the occurrence of any damage
or destruction.
(c) Restoration. If the Premises are damaged or destroyed and can
be repaired or restored within ninety (90) days after the date thereof, Landlord
shall commence its obligation to repair and restore the Premises promptly and
shall prosecute the same to completion diligently and in good faith. The rent
payable by Tenant under this Lease shall be equitably abated during any period
during which all or any portion of the Premises are unable to be used by Tenant
based upon the portion of the Premises which cannot be used by Tenant.
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<PAGE>
16. Condemnation. In the event that the entire Premises are taken under
the power of eminent domain, this Lease will terminate as of the date possession
is taken by the condemning authority. In the event that more than ten percent
(10%) of the square feet of the Premises is taken under the power of eminent
domain, Tenant shall have the option to terminate this Lease as of the date
possession is taken by the condemning authority by the delivery of notice
thereof to Landlord not less than thirty (30) days prior to the date that such
portion of the Premises is to be taken. In the event that this Lease is
terminated as aforesaid, neither party shall have any further rights or
obligations hereunder thereafter and the rent and any other amounts payable by
either of the parties hereunder shall be prorated as of the date of termination.
In the event that this Lease is not terminated as aforesaid, the rent payable by
Tenant hereunder shall be proportionately reduced by the number of square feet
taken. All damages awarded for any such taking under the power of eminent
domain, whether for the whole or any part of the Premises, shall belong to and
be the property of Landlord; provided, however, Tenant may make a separate claim
for loss or damage to Tenant's trade fixtures and removable personal property
and for the cost of relocation.
17. Default and Remedies.
(a) Default. Each of the following events shall constitute a
default by Tenant in the performance of its obligations under this lease:
(i) the failure of Tenant to make any payment of rent
when due and such failure is not cured within ten (10) days after the receipt of
written notice from Landlord thereof;
(ii) the failure of Tenant to perform or observe any of
the other terms or conditions of this Lease to be observed or performed by
Tenant and such failure is not cured within thirty (30) days after the receipt
of written notice thereof from Landlord; or
(iii) Tenants abandons the Premises.
(b) Remedies. If Tenant shall default in the performance of its
obligations under this Lease, Landlord may exercise any one or more of the
following remedies, to the extent permitted by law, or any other remedy
permitted under applicable law:
(i) Landlord may terminate this Lease upon the delivery
of notice thereof to Tenant and Landlord shall have the right to immediate
possession of the Premises and Tenant shall peacefully surrender the Premises to
Landlord; or
(ii) Landlord, without terminating this Lease, shall have
the right to recover possession of the Premises and Tenant shall peacefully
surrender the Premises to Landlord. Landlord shall relet the Premises as agent
of Tenant, for a term to expire prior to, at the same time as, or subsequent to
the expiration of the term of this Lease. In the event of such reletting,
Landlord shall receive the rents therefor, applying the same first, to the
repayment of reasonable expenses as Landlord may have incurred in connection
with said resumption of possession, preparing for reletting and reletting
(including, without limitation, reasonable attorneys' fees), and, second, to the
payment of damages in amounts equal to the rent and additional rent due
hereunder and to the cost of performing the obligations of Tenant as provided in
this Lease. Tenant, regardless of whether Landlord has relet the Premises, shall
pay to Landlord damages equal to the rent and additional rent herein agreed to
be paid by Tenant less the proceeds of the reletting, if any, and such rent
shall be due and payable by Tenant on the date on which rent is due hereunder.
5
<PAGE>
18. Tenant's Equipment. Tenant may install such items of equipment and
trade fixtures in or about the Premises as are required for the conduct of
Tenant's business and such shall remain Tenant's property and, at Tenant's
election, may be removed upon the termination or expiration of the term of this
lease; provided, however, that Tenant shall repair any physical damages to the
Premises caused by the removal thereof.
19. Quiet Enjoyment. During the term of this Lease, so long as Tenant
observes and performs all of the terms and conditions of this Lease to be
observed and performed by Tenant, Landlord covenants that the peaceful
possession and quiet enjoyment by the Tenant of the Premises will not be
disturbed.
20. Miscellaneous.
(a) This Lease shall be binding upon and inure to the benefit of
Landlord and Tenant and their respective successors and assigns.
(b) Each party represents and warrants to the other that it has
not directly or indirectly dealt with any broker or agent relative to this Lease
or had its attention called to the Premises by any broker or agent except for
Kidder, Matthews & Segner, Inc. whose commission shall be paid for by Landlord.
Each party to this Lease agrees to indemnify, defend and hold the other parties
harmless from and against any and all claims for commissions arising out of the
execution and delivery of this Lease.
(c) Any notice, demand or other document to be given under this
Lease shall be in writing and shall be delivered personally or sent by United
States registered or certified mail, return receipt requested, postage prepaid,
and addressed to the party at their address as indicated on the first page of
this Lease and the same shall be deemed delivered upon receipt if personally
delivered or two business days after deposit in the mails, if mailed. A party
may change its address for receipt of notices by service of a notice of such
change in accordance herewith.
(d) Any controversy which shall arise between Landlord and Tenant
regarding the rights, duties or liabilities hereunder of either party shall be
settled by arbitration in accordance with the rules of the American Arbitration
Association in King County, Washington. The award of the arbitrator shall be
binding, final and conclusive on the parties and judgment may be entered thereon
in any court. The non-prevailing party shall reimburse the prevailing party for
its reasonable attorneys' fees and costs incurred in connection with any
litigation or arbitration proceeding commenced under this Lease.
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<PAGE>
(e) Landlord hereby agrees to indemnify, defend and hold Tenant
harmless from and against any and all actions, claims, causes of action,
damages, penalties, losses and expenses of any kind (including, without
limitation, attorneys' fees and costs) which may be brought against or incurred
by Tenant as a result of the underground fuel storage tanks located at the
Premises and/or the Building including, without limitation, any costs associated
with the cleanup or removal of such storage tanks or the restoration of the
Premises relative thereto.
(f) The dual gas space heating unit ("Gas Heater") split by the
demising wall of the Premises shall be repaired and maintained by Landlord. In
the event Tenant desires to use the Gas Heater, Tenant shall notify Landlord
thereof and, upon such notice, Tenant shall have the right to use the Gas Heater
to heat the Premises. In the event Tenant uses the Gas Heater to heat the
Premises, Tenant shall proportionately share the cost of the use and maintenance
thereof with the other party or parties using the Gas Heater based upon the
amount of use of the Gas Heater by each of the parties.
(g) This Lease 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.
IN WITNESS WHEREOF, Landlord and Tenant have signed and sealed this
lease as of the day and year first above written.
"LANDLORD"
J & R SALES
/s/ Russell L. Smith
By:
Russell L. Smith, General Partner
"TENANT"
LEONARD'S METAL, INC.
/s/ Ronald S. Saks
By:
Ronald S. Saks, President
7
<PAGE>
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement (this "Amendment"), dated as of
August 1, 1989 is made and entered into by and between J & R Sales, a Washington
general partnership ("Landlord") and Leonard's Metal, Inc., a Missouri
corporation ("Tenant").
RECITALS
A. Landlord and tenant, entered into that certain Lease Agreement (the
"Lease") dated as of June 28, 1988, relative to the lease of space at the
property located at 204 "H" Street, N.W. Auburn, Washington.
B. Landlord and Tenant desire to amend the Lease on the terms and
subject to the conditions below.
C. Unless indicated to the contrary, all capitalized terms in this
Amendment shall have the meaning given to them in the Lease.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the above recitals, the covenants
and agreements herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Premises. The description of the Premises contained on Exhibit A to
the Lease is hereby deleted and the description of the Premises contained on
Exhibit A-1 attached hereto is substituted in place therefor. The Premises, as
redefined, consists of 26,964 square feet of space in the Building.
2. Term. The first sentence of Paragraph 2 of the Lease is hereby
deleted and the following substituted in place therefor.
"The term of this Lease shall be for three years and five months (the
"Initial Term") commencing August 1, 1988 (the "Commencement Date") and
expiring on midnight, December 31, 1991."
3. Renewal Option. The first sentence of paragraph 3 of the Lease is
hereby deleted and the following substituted in place therefor:
"Tenant is hereby granted two (2) successive options to extend the term
of this Lease each for a period of one (1) year."
<PAGE>
4. Rent During Initial Term. Paragraph 4 of the Lease is hereby deleted
in its entirety and the following substituted in place therefor:
"Rent During Initial Term. Tenant agrees to pay to Landlord as fixed
annual rent during the Initial Term, the following amounts in
accordance with the following schedule:
Monthly Installments
Lease Period Annual Rent Of Rent
------------ ----------- --------------------
08/1/88-07/31/89 $44,100.00 $3,675.00
08/1/89-07/31/90 $71,184.96 $5,932.08
08/1/90-12/31/91 $74,420.64 $6,201.72"
5. Rent During Extension. Paragraph 5 of the Lease is hereby deleted in
its entirety and the following substituted in place therefor:
"Rent During Extension. The fixed annual rent payable by Tenant during
any extended term of this Lease shall be Seventy-Four Thousand Four
Hundred Twenty and 64/100 Dollars ($74,420.64) payable in equal monthly
installments of Six Thousand Two Hundred One and 72/100 dollars
($6,201.72)."
Monthly Installments
Lease Period Annual Rent Of Rent
------------ ----------- --------------------
01/1/92-12/31/92 $76,523.88 $6,376.99
01/1/93-12/31/93 $78,627.00 $6,552.25
6. Additional Rent. The third sentence of subparagraph 6(b) of the
Lease is hereby deleted and the following substituted in place therefor:
"It is agreed that such fraction is equal to Fifty-Six and 2/10 percent
(56.2%)."
7. Demolition. Landlord shall, at its cost, demolish, clear, pave and
fence the area adjacent to the Building currently occupied by the approximately
4,000 square foot brick block building. Such work shall be performed as promptly
as possible by Landlord following the date of this Lease and shall be completed
no later than November 30, 1989.
8. Parking. Tenant, and its employees, agents and invitees shall have
the exclusive right to park in the areas in the parking lot adjacent to the
Building which are in front of the Premises and in the area formerly occupied by
the brick block building to be demolished pursuant to Section 7 of this
Amendment.
9. Office Remodeling. With respect to the additional space being added
to the Premises in this Amendment, Landlord shall, at its cost, clean, paint and
replace the carpeting in the approximately 360 square feet of office space
located in such new space. Tenant shall have the right to approve the paint and
carpeting. Such work shall be performed as promptly as possible after the date
of this Amendment.
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<PAGE>
10. Demising Walls. Tenant shall have the right, without the necessity
of obtaining Landlord's consent, to demolish, cut holes in or otherwise alter
the non-load bearing demising walls between the 18,364 square feet of space
previously occupied by Tenant and the additional 8,600 square feet of space
being added to the Premises by this Amendment.
11. Overhead Heater. Landlord shall install, at its expense, a new
overhead heater to replace the worn out overhead heater located in the
additional space being added to the Premises by this Amendment.
12. Miscellaneous.
(a) This Amendment shall be binding upon and inure to the
benefit of Landlord and Tenant and their respective successors and assigns.
(b) This Amendment 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.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as
of the day and year first above written.
"LANDLORD"
J & R SALES
/s/ Russell L. Smith
By:
Printed Name: Russell L. Smith
Title: Partner
"TENANT"
LEONARD'S METAL, INC.
/s/ Ronald S. Saks
By:
Printed Name: Ronald S. Saks
Title: President
3
<PAGE>
SECOND AMENDMENT TO LEASE AGREEMENT
This Second Amendment to Lease Agreement (this "Amendment"), dated as
of June 15, 1993 is made and entered into by and between J & R Sales, a
Washington general partnership ("Landlord"), and Leonard's Metal, Inc., a
Missouri corporation ("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Lease Agreement dated
as of June 28, 1988, and a First Amendment to Lease Agreement dated as of August
1, 1989 (the "First Amendment"), relative to the lease of space at the property
located at 204 "H" Street N.W., Auburn, Washington (together, the "Lease").
B. Landlord and Tenant desire to amend the Lease on the terms and
subject to the conditions below.
C. Unless indicated to the contrary, all capitalized terms in this
Amendment shall have the meaning given to them in the Lease.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the above recitals, the covenants
and agreements herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Term. The first sentence of Paragraph 2 of the Lease is hereby
deleted and the following substituted in place therefor:
"The term of this Lease shall be for ten years (the "Initial Term")
commencing August 1, 1988 (the "Commencement Date") and expiring on
midnight, December 31, 1998."
2. Renewal Option. The parties hereby reaffirm the renewal option
contained in paragraph 3 of the First Amendment.
3. Rent During Initial Term. Paragraph 4 of the Lease is hereby deleted
in its entirety and the following substituted in place therefor:
"Rent During Initial Term. Tenant agrees to pay to Landlord as fixed
annual rent during the Initial Term, the following amounts in
accordance with the following schedule:
<PAGE>
Monthly Installments
Lease Period Annual Rent Of Rent
------------ ----------- --------------------
08/1/88-07/31/89 $44,100.00 $3,675.00
08/1/89-07/31/90 $71,184.96 $5,932.08
08/1/90-12/31/91 $74,420.64 $6,201.72
01/1/92-12/31/92 $76,523.88 $6,376.99
01/1/93-12/31/93 $78,627.00 $6,552.25
01/1/94-12/31/98 $87,363.36 $7,280.28
4. Rent During Extension. Paragraph 5 of the Lease is hereby deleted in
its entirety and the following substituted in place therefor:
"Rent During Extension. The fixed rent payable by Tenant during any
extended term of this Lease shall be mutually negotiated."
5. Option to Purchase. During the term of this Lease Landlord hereby
grants Tenant an option to purchase the property of which the Premises are a
part (the "Property") pursuant to the terms of this paragraph. A description of
the Property is contained in Exhibit A attached hereto. Landlord hereby agrees
that if, during the Lease Term, Landlord lists the Property for sale, within
five (5) days of the date the Property is so listed Landlord shall give a
written notice to Tenant advising Tenant that the Property is listed for sale.
If Tenant elects to exercise its option to purchase, Tenant shall so notify
Landlord in writing within thirty (30) days of the date on which Tenant received
the notice that the Property is listed for sale.
(a) If Tenant exercises its option, the purchase price will be
95% of the fair market value of the Property, as may be agreed upon by Tenant
and Landlord in writing. If no agreement is reached regarding the purchase
price, the price shall be determined by an appraiser selected by mutual
agreement of Landlord and Tenant, or if no agreement is reached regarding an
appraiser, each party may select a qualified appraiser and if the appraised
values are within ten percent (10%) of each other, the appraised values shall be
averaged and the amount so determined shall be the purchase price for the
Property. If the appraised values are not within ten percent of each other, the
two appraisers shall select a third appraiser and the value determined by such
third appraiser shall be the purchase price for the Property. If Landlord and
Tenant agree on an appraiser (or if it is necessary to use a third appraiser)
the appraisal fees shall be shared equally by Landlord and Tenant. If Landlord
and Tenant each select a separate appraiser, Landlord and Tenant shall each pay
the fees charged by their respective appraisers. In the event the purchase price
is determined by appraisal, Landlord and Tenant agree that the following
criteria shall be applied by each appraiser in determining the fair market value
of the Property:
2
<PAGE>
(i) The appraiser shall take into account the fact that the
Property is used as a manufacturing facility.
(ii) The appraiser may take into account the highest and best use
of the Property.
(iii) If the appraiser takes into account the capitalization of
rents for the Property, the rental rate used by the appraiser shall be the fair
rental value of the Property based on its use as a manufacturing facility. The
rentals paid by Tenant hereunder shall not be considered by the appraiser as the
fair rental value of the Property unless the appraiser independently determines
that the rent paid by Tenant is in fact the fair rental value.
6. Right of First Refusal to Purchase. During the term of this Lease
Landlord hereby grants Tenant a right of first refusal to purchase the Property
as provided in this paragraph 6. If Landlord receives a bona fide, executed
written offer to purchase the Property which Landlord desires to accept, then
Landlord shall deliver notice thereof to Tenant along with a copy of such offer.
For a period of fifteen (15) days from the date of delivery of such notice,
Tenant shall have the right, exercisable by written notice to Landlord, to
purchase the Property for the price and on the terms and conditions contained in
such offer, provided that Tenant may substitute equivalent cash for any form of
payment proposed in such offer. If Tenant does not exercise this right of first
refusal within said fifteen (15) day period, the offer may be accepted by
Landlord; provided, however, if the sale of the Property pursuant to the offer
is not closed within six months of the date of said offer, Tenant shall again
have the right of first refusal herein described.
7. Surfacing of Parking Strip. Landlord hereby agrees to
surface the parking strip described in Exhibit B hereto, in the
manner specified in Exhibit C hereto, before June 1, 1994.
8. Miscellaneous.
(a) This Amendment shall be binding upon and inure to the benefit
of Landlord and Tenant and their respective successors and assigns.
(b) This Amendment may be executed in two counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as
of the day and year first above written.
"LANDLORD"
J & R SALES
/s/ Russell L. Smith
By:
Printed Name: Russell L. Smith
Title: Managing Partner
"TENANT"
LEONARD'S METAL, INC.
/s/ Ronald S. Saks
By:
Printed Name: Ronald S. Saks
Title: President
3
<PAGE>
THIRD AMENDMENT TO LEASE AGREEMENT
This Third Amendment to Lease Agreement (this "Amendment"), dated as of
July 18, 1994, is made and entered into by and between J & R Sales, a Washington
general partnership ("Landlord"), and Leonard's Metal, Inc., a Missouri
corporation ("Tenant").
RECITALS
A. Landlord and Tenant entered into that certain Lease Agreement dated
as of June 28, 1988, as amended by a First Amendment to Lease Agreement dated as
of August 1, 1989 and a Second Amendment to Lease Agreement dated as of June 15,
1993, relative to the lease of space at the property located at 204 "H" Street
N.W., Auburn, Washington (together, the "Lease").
B. Landlord and Tenant desire to amend the Lease on the terms and
subject to the conditions below.
C. Unless indicated to the contrary, all capitalized terms in this
Amendment shall have the meaning given to them in the Lease.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the above recitals, the covenants
and agreements herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Expiration Date. The expiration date of the Initial Term is hereby
changed from December 31, 1998 to December 31, 1999.
2. Premises. Commencing January 1, 1995 and ending on the expiration
date of the Initial Term, Tenant agrees to lease from Landlord and Landlord
agrees to lease to Tenant the balance of the space in the building, constituting
an additional 17,536 square feet of space, (the "Additional Space") which shall
be added to and included in the Premises.
3. Rent During Initial Term. Notwithstanding any provision contained in
the Lease to the contrary, Tenant agrees that the fixed annual rent payable by
Tenant to Landlord from January 1, 1995 until the expiration of the Initial Term
shall be $160,200.00, payable in equal monthly installments in the amount of
$13,350.00.
<PAGE>
4. Delivery of Space. Unless the Additional Space has been subleased by
Tenant to Hugh McNiven & Co. ("McNiven") as contemplated pursuant to Section 5
hereof, Landlord shall deliver possession of the Additional Space to Tenant on
January 1, 1995 in "broom-clean" condition, with the office area repainted and
with all plumbing, electrical, HVAC and other equipment, fixtures and systems
serving the Additional Space in good working order. In the event that Landlord
is delayed in so delivering possession of the Additional Space to Tenant due to
any failure by McNiven to vacate the Additional Space at the end of the term of
its lease therefor, Landlord shall not be liable for any damages incurred by
Tenant as a result thereof provided that Landlord is making a diligent effort to
cause McNiven to vacate the Additional Space. In the event of any such delay,
the provisions of Section 2 hereof shall not take effect until Landlord has
delivered possession of the Additional Space to Tenant in accordance with the
requirements of this Section 4 and if Landlord has failed to so deliver
possession to Tenant by April 1, 1995, Tenant shall have the right at any time
thereafter (but prior to the delivery by Landlord to Tenant of possession of the
Additional Space, as aforesaid) to terminate this Third Amendment by delivery of
written notice thereof to Landlord. In the event of any such termination,
neither Landlord nor Tenant shall have any further rights, obligations or
liabilities under or pursuant to this Third Amendment, but the Lease shall,
nevertheless, be and remain in full force and effect.
5. Sublease to McNiven. Tenant hereby acknowledges that it has been
informed by Landlord that McNiven may desire to continue to occupy the
Additional Space during part or all of the first quarter of 1995, and Tenant
hereby agrees to offer to sublease the Additional Space to McNiven pursuant to
the terms and conditions of the sublease attached hereto as Exhibit A (the
"Sublease"). In the event that McNiven does not accept such offer by executing
the Sublease on or before November 1, 1994, Tenant shall have no further
obligation to sublease the Additional Space to McNiven.
6. Guarantee of Sublease.
(a) In the event that Tenant and McNiven enter into the Sublease,
Landlord hereby guarantees to Tenant the full and prompt payment of rent and any
and all other sums and charges payable by McNiven under the Sublease, and
further hereby guarantees the full and complete and timely performance and
observance of all the covenants, terms, conditions and agreements therein
provided to be performed and observed by McNiven. Landlord hereby covenants and
agrees that if default shall at any time be made by McNiven in the payment of
any such rent or any and all other sums and charges payable by McNiven under the
Sublease, of if McNiven should default in the full and complete performance and
observance of any of the terms, covenants provisions or conditions contained in
the Sublease, Landlord will forthwith pay such rent and other such sums and
charges to Tenant and will forthwith faithfully perform and fulfill all of such
terms, covenants, conditions and provisions, and will forthwith pay to Tenant
all damages that may arise in consequence of any default by McNiven under the
Sublease, including without limitation, all reasonable attorneys' fees incurred
by Tenant in connection with any such default and/or the enforcement of this
Section 6.
2
<PAGE>
(b) The foregoing guarantee is an absolute and unconditional guarantee
of payment and of performance. It shall be enforceable against Landlord without
the necessity for any suit or proceeding on the Tenant's part of any kind or
nature whatsoever against the Landlord and without the necessity of any notice
of nonpayment, nonperformance or nonobservance or of any other notice or demand,
all of which Landlord hereby expressly waives. Landlord hereby expressly agrees
that the obligations of Landlord hereunder shall in nowise be terminated,
affected, diminished or impaired by reason of the assertion or the failure to
assert by the Tenant against McNiven and/or Landlord of any of the rights or
remedies reserved to the Tenant pursuant to the provisions of the Sublease.
(c) Notwithstanding any provision to the contrary contained in the
Lease, Tenant shall have the right to offset against any installments of rent or
other sums or charges payable by Tenant to Landlord pursuant to the Lease, as
amended hereby, any amount or amounts that may be payable from time to time by
Landlord to Tenant pursuant to this Section 6.
7. Miscellaneous.
(a) This Amendment shall be binding upon and inure to the benefit of
Landlord and Tenant and their respective successors and assigns.
(b) This Amendment may be executed in two counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as
of the day and year first above written.
"LANDLORD"
J & R SALES
/s/ Russell L. Smith
By:
Printed Name: Russell L. Smith
Title: Partner
"TENANT"
LEONARD'S METAL, INC.
/s/ Duane E. Hahn
By:
Printed Name: Duane E. Hahn
Title: Vice President - General Manager
3
<PAGE>
EXHIBIT A
SUBLEASE
THIS SUBLEASE is made as of July 25, 1994, by and between LEONARD'S
METAL, INC., a Missouri corporation ("Sublandlord"), and HUGH McNIVEN & CO., a
Washington corporation ("Subtenant").
RECITALS:
A. Sublandlord leases approximately 26,964 square feet of space in the
building commonly known as 204-206 "H" Street, N.W., Auburn, Washington (the
"Building") pursuant to a Lease Agreement, dated as of June 28, 1988, as amended
by a First Amendment to Lease Agreement, dated as of August 1, 1989, and a
Second Amendment to Lease Agreement, dated as of June 15, 1993, between J & R
Sales, a Washington general partnership ("Prime Landlord"), as landlord, and
Sublandlord, as tenant.
B. Sublandlord and Prime Landlord have entered into a Third Amendment
to Lease Agreement, dated as of July 18, 1994, further amending the aforesaid
Lease Agreement, pursuant to which Sublandlord has leased the balance of the
space in the Building, constituting an additional approximately 17,536 square
feet of space (the "Additional Space"), effective as of January 1, 1995. A copy
of the aforesaid Lease Agreement, as amended by the aforesaid First Amendment to
Lease Agreement, Second Amendment to Lease Agreement and Third Amendment to
Lease Agreement, is attached hereto as Exhibit A and is hereinafter called the
"Prime Lease."
C. The Additional Space is currently occupied by Subtenant pursuant to
a lease between Subtenant and Prime Landlord that expires on December 31, 1994.
D. Subtenant desires to sublease the Additional Space from Sublandlord
on the terms and conditions set forth below.
STATEMENT OF AGREEMENT:
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Term/Termination. Sublandlord hereby leases to Subtenant and
Subtenant hereby leases from Sublandlord the Additional Space for a term
commencing on January 1, 1995 and ending on June 30, 1995; provided that either
party shall have the right to terminate this Sublease at any time by delivery of
written notice thereof to the other party not less than thirty (30) days prior
thereto.
2. Rent. The base annual rent for the Additional Space shall be
$63,129.60, payable in monthly installments in the amount of $5,260.80. Each
such monthly installment shall be payable in advance on or before the first day
of each month of the term hereof without set off, deduction, discount or
abatement in lawful money of the United States of America.
<PAGE>
3. Additional Rent. In addition to base rent, Subtenant shall pay to
Sublandlord 39.41% of all amounts which Sublandlord is obligated to pay to Prime
Landlord pursuant to Section 6 of the Prime Lease with respect to any Expenses
(as defined therein) paid or incurred by Prime Landlord during or with respect
to any period within the term of this Sublease. Any and all such payments shall
be made by Subtenant to Sublandlord within fifteen (15) days following the
delivery by Sublandlord to Subtenant of an invoice therefor.
4. Use/Condition. Subtenant shall use and occupy the Additional Space
for office and warehouse purposes and for no other purpose. Subtenant accepts
the Additional Space in its "as is" condition, and Subtenant acknowledges and
agrees that Sublandlord is not required to alter or modify the Additional Space
in any way for Subtenant.
5. Alterations. Subtenant shall not alter or modify the Additional
Space in any way without the prior written consent of Sublandlord.
6. Incorporation of Terms of Prime Lease. Except as herein otherwise
provided (expressly or by other provision made), all of the terms, covenants,
provisions, conditions and limitations of the Prime Lease, except Sections 3, 4,
5, 8, 10, 14 and 20 thereof, are hereby incorporated by reference in and are
hereby made and shall be deemed to be terms, covenants, provisions, conditions
and limitations applicable to the Sublease herein for and during the entire term
of this Sublease as fully and to the same extent as though each and every one of
said terms, covenants, provisions, conditions and limitations were set forth at
length herein, it being understood that all references in the Prime Lease to
"Tenant" shall be deemed to refer to Subtenant herein. Subtenant hereby agrees
to and hereby assumes the obligation to perform faithfully and to be bound by
all of such terms, covenants, provisions, conditions and limitations of the
Prime Lease for the periods covered by this Sublease.
7. Insurance. Subtenant shall provide the same insurance for the
Additional Space as that required of Sublandlord under the Prime Lease. Wherever
the Prime Lease requires Sublandlord to name the Prime Landlord as an additional
insured, then Subtenant shall be required by this Sublease to name the Prime
Landlord and the Sublandlord as additional insureds.
-2-
<PAGE>
8. Assignment/Subleasing. Subtenant shall have no right to assign or
sublet the Additional Space without the consent of the Sublandlord.
9. Brokerage. Each party warrants and represents to the other that it
has not dealt with any broker or finder in respect to this Sublease. Each party
hereby agrees to indemnify and hold the other harmless from and against any
liability that the other may sustain or incur by reason of its breach of the
foregoing representation and warranty.
10. Compliance with Prime Lease. Subtenant agrees that it will not do
or permit to be done any act or thing which will cause or constitute a breach of
the Prime Lease or which would give the Prime Landlord under the Prime Lease the
right to cancel or terminate the Prime Lease. Sublandlord shall not be liable to
the Subtenant for any default or failure on behalf of the Prime Landlord in the
performance of its covenants and obligations under the Prime Lease.
11. Quiet Enjoyment. Sublandlord covenants and agrees with Subtenant
that upon Subtenant's paying the rents and observing and performing all of the
terms, covenants, provisions, conditions and limitations of this Sublease
(including the terms of the Prime Lease to the extent that the same are the
obligations of Subtenant hereunder) on the Subtenant's part to be observed and
performed, Subtenant may peaceably and quietly enjoy the Additional Space
subject, nevertheless, to the terms, covenants, provisions, conditions,
limitations of this Sublease and the Prime Lease.
12. Representations and Warranties. Subtenant acknowledges that neither
Sublandlord, nor any party on its behalf, has made any statements, warranties or
representations with respect to the Additional Space or to the Building of which
the same are a part, except as expressly set forth in this Sublease.
13. Notices. All notices required or permitted to be given by either
party to the other under this Sublease shall be effective only if given in
writing and delivered personally by certified mail or registered mail, return
receipt requested, addressed to the party to whom the notice is directed at that
address noted below or to such other address as either party may, from time to
time, designate by notice given to the other party pursuant to this paragraph.
Notice shall be deemed to have been given upon receipt if delivered personally
or as of the date of mailing as shown on the post office receipt therefor.
If to Sublandlord: Leonard's Metal, Inc.
204 "H" Street, N.W.
Auburn, Washington 98002
Attn: Duane Hahn
-3-
<PAGE>
If to Subtenant: Hugh McNiven & Co.
c/o J & R Sales
1021 Mercer Street
Seattle, Washington 98109
Attn: J. Reynolds
14. Litigation Costs. In the event either party to this Sublease
institutes legal proceedings against the other, the prevailing party in such
proceeding shall be reimbursed for all of its costs and attorney's fees incurred
therein by the losing party.
15. Subrogation. Each party hereby waives subrogation against the other
party for any claims or actions based upon any loss or damage caused by fire,
explosion or other casualty (not limited to the foregoing) relating to the
Additional Space or property therein.
16. Entire Agreement, Amendments and Waivers. This Sublease contains
the entire agreement and understanding of the parties in respect to the subject
matter hereof, and the same may not be amended, modified or discharged nor may
any of its terms be waived except by an instrument in writing signed by the
party to be bound thereby.
17. Interpretation.
(a) The Exhibit(s) hereto are incorporated herein by reference
and made a part hereof.
(b) The headings and captions herein are inserted for
convenient reference only and the same shall not limit or construe the
paragraphs or sections to which they apply or otherwise affect the
interpretation hereof.
(c) This Sublease and any document or instrument executed
pursuant hereto 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.
(d) The provisions of Sections 3 and 9 and any other
provisions hereunder which by their nature are to be performed subsequent to the
termination or expiration of the term of this Sublease shall survive any such
termination or expiration.
IN WITNESS WHEREOF, this Sublease has been executed by the parties as
of the day and year first above written.
SUBLANDLORD:
LEONARD'S METAL, INC.
By:___________________________
Its ________________________
SUBTENANT:
HUGH McNIVEN & CO.
By:____________________________
Its ________________________
-4-
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
May 6, 1997, is made by and between Victor Enterprises, LLC, a Washington
corporation ("Lessor") and Leonard's Metal, Inc., a Missouri Corporation
("Lessee"), (collectively the "Parties," or individually a "Party").
1.2(a) Premises: That certain portion of the Building, including all
Improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 101 Western Ave. S., appr. 39,560 sf,
located in the City of Auburn, County of King, State of Washington; with ZIP
code 98001, as outlined on Exhibit A attached hereto ("Premises"). The
"Building" is that certain building containing the Premises and generally
described as (described briefly the nature of the Building): as shown on the
legal description Exhibit B attached hereto. In addition to Lessee's rights to
use and occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior walls
or utility raceways of the Building or to any other buildings in the Industrial
Center. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and Improvements thereon, and herein
collectively referred to as the "Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: Lessee shall have the parking at the south end of the
bldg. as shown on Exh. A, reserved vehicle parking spaces ("Reserved Parking
Spaces"). (Also see Paragraph 2.6.)
1.3 Term: Five years and zero months ("Original Term") commencing July
1, 1997 ("Commencement Date") and ending June 30, 2002 ("Expiration Date").
(Also see Paragraph 3.)
1.4 Early Possession: None ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3).
1.5 Base Rent: $_________________ per month ("Base Rent"), payable on
the first day of each month commencing _______________. (Also see Paragraph 4.)
_____ If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum A, Paragraph 1, attached hereto.
1.6(a) Base Rent Paid Upon Execution: $13,900 as Base Rent for the
period month 4 through month 36.
1.6(b) Lessee's Share of Common Area Operating Expenses: Fifty percent
(50%) ("Lessee's Share") as determined by ____ prorata square footage of the
Premises as compared to the total square footage of the Building or ___ other
criteria as described in Addendum _____.
<PAGE>
1.7 Security Deposit: $15,570.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 Permitted Use: Design, manufacture, assembly, storage and
distribution of subassemblies for aircraft and related activities. ("Permitted
Use"). (Also see Paragraph 6.)
1.9 Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
___ represents Lessor exclusively ("Lessor's Broker");
___ represents Lessee exclusively ("Lessor's Broker");
___ Kidder, Mathews & Segner, Inc. represents both Lessor and Lessee ("Dual
Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares
as they may mutually designate in writing, a fee as set forth in Addendum A,
Paragraph 15.
1.11 Guarantor. The obligations of the Lessee under this Lease are to
be guaranteed by none ("Grantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 1 through 16, and Exhibits A through B, all of which
constitute a part of this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Lessee agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
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2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any improvements (other than those constructed by Lessee or at
Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warrants shall not apply to any
Alterations or Utility installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises, Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) in satisfy itself with respect to the condition of
the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
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2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designed from time to time by
Lesser for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas - Definition. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Industrial Center and Interior utility raceways within the Premises
that are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other Lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 Common Areas - Lessee's Rights. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to
Lessees, which cost shall be immediately payable upon demand by Lessor.
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2.9 Common Areas - Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable Rules and Regulations with respect thereto
in accordance with Paragraph 40. Lessee agrees to abide by and conform to all
such Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.
2.10 Common Areas - Charges. Lessor shall have the right, in Lessor's
sole discretion, from time to time: (See Addendum A, Paragraph 6)
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common
Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, if one is
specified in Paragraph 4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the terms hereof, but in such case, Lessee shall
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not, except as otherwise provided herein, be obligated to pay rent or perform
any other obligation of Lessee under the terms of this Lease until Lessor
delivers possession of the Premises to Lessee. If possession of the Premises is
not delivered to Lessee within sixty (60) days after the Commencement Date,
Lessee may, at its option, by notice in writing to Lessor within ten (10) days
after the end of said sixty (60) day period, cancel this Lease, in which event
the parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect. Except as may be
otherwise provided, and regardless of when the Original Term actually commences,
if possession is not tendered to Lessee when required by this Lease and Lessee
does not terminate this Lease, as aforesaid, the period free of the obligation
to pay Base Rent, if any, that Lessee would otherwise have enjoyed shall run
from the date of delivery of possession and continue for a period equal to the
period during which the Lessee would have otherwise enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions of
Lessee.
4. Rent:
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other persons or at such other addresses as Lessor may from time to
time designate in writing to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all reasonable Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes
of this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) (See Addendum A, Paragraph 7):
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
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(ii) The cost of water, gas, electricity and telephone
to service the Common Areas.
(iii) Trash disposal, property management and security
services and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of
Common Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2)
to be paid by Lessor for the Building and the Common Areas under Paragraph 10
hereof.
(vi) The cost of the premiums for the Insurance
policies maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss
concerning the Building or the Common Areas.
(viii) Any other services to be provided by Lessor that
are stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes
that are specifically attributable to the Building or to any other building in
the Industrial Center or to the operation, repair and maintenance thereof, shall
be allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the Improvements, facilities and services
set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation
upon Lessor to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same. Lessor already
provides the services, or Lessor has agreed elsewhere in this Lease to provide
the same or some of them.
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(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within then (10) days after a reasonably detailed statement of
actual expenses is presented to Lessee by Lessor. At Lessor's option, however,
an amount may be estimated by Lessor from time to time of Lessee's Share of
Annual Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12-month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessor shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement.
Lessee shall pay to Lessor the amount of the delinquency within ten (10) days
after delivery by Lessor to Lessee of said statement. 5. Security Deposit:
Lessee shall deposit with Lessor upon Lessee's execution hereof the Security
Deposit set forth in Paragraph 1.7 as security for Lessee's faithful performance
of Lessee's obligations under this Lease. If Lessee fails to pay Base Rent or
other rent or charges due hereunder, or otherwise Defaults under this Lease (as
defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion
of said Security Deposit for the payment of any amount due Lessor or to
reimburse or compensate Lessor for any liability, cost, expense, loss or damage
(including attorneys' fees) which Lessor may suffer or incur by reason thereof.
If Lessor uses or applies all or any portion of said Security Deposit, Lessee
shall within ten (10) days after written request therefore deposit monies with
Lessor sufficient to restore said Security Deposit to the full amount required
by this Lease. Any tim the Base Rent increases during the term of this Lease,
Lessee shall, upon written request from Lessor, deposit additional monies with
Lessor as an addition to the Security Deposit so that the total amount of the
Security Deposit shall at all times bear the same proportion to the then current
Base Rent as the Initial Security Deposit bears to the Initial Base Rent set
forth in Paragraph 1.5. Lessor shall not be required to keep all or any part of
the Security Deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the Premises, return to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's Interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear Interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. Use:
6.1 Permitted Use. (a) Lessee shall use and occupy the Premises only
for the Permitted Use set forth in Paragraph 1.8, or any other legal use which
is reasonably comparable thereto, and for no other purpose. Lessee shall not use
or permit the use of the Premisses in a manner that is unlawful, creates waste
or a nuisance, or that disturbs owners and/or occupants of, or causes damage to
the Premises or neighboring premises or properties. (b) Lessor hereby agrees to
not unreasonably withhold or delay its consent to any written request by Lessee,
Lessee's assignees or subtenants, and by prospective assignees and subtenants of
Lessee, its assignees and subtenants, for a modification of said Permitted Use,
so long as the same will not impair the structural integrity of the improvements
on the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses by other lessees, is not significantly more
burdensome to the Premises or the Building and the improvements thereon, and is
otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold
such consent, Lessor shall within five (5) business days after such request give
a written notification of same, which notice shall include an explanation of
Lessor's reasonable objections of the change in use.
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6.2 Hazardous Substances.
(a) Reportable Uses Require Consent, The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity or
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by any
governmental authority; or (iii) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substance shall include, but not be limited to
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage in any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole, cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or
use of any above or below ground storage tank; (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority; and
(iii) the presence in, on or about the Premises of a Hazardous Substance with
respect to which any Applicable Laws require that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary and
customary materials reasonably required to be used by Lessee in the normal
course of the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may (but without any obligation to do so) condition its consent to any
Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor
such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefor, including but
not limited to the Installation (and, at Lessor's option, removal on or before
Lease expiration or earlier termination) of reasonably necessary protective
modifications to the Premises (such as concrete encasements) and/or the deposit
of an additional Security Deposit under Paragraph 5 hereof.
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(b) Duty to inform Lessor. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously consented
to by Lesser, Lessee shall immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such as Hazardous
Substance including but not limited to all such documents as may be involved in
any Reportable Use involving the Premises. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including, without limitation, through the plumbing or sanitary sewer
system).
(c) Indemnification. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under Lessee's
control. Lessee's obligations under this Paragraph 6.2(c) shall include, but not
be limited to, the effects of any contamination or injury to person, property or
the environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
(d) See Addendum A, Paragraph 8.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including
but not limited to matters pertaining to (i) industrial hygiene; (ii)
environmental conditions on, in, under or about the Premises, including soil and
groundwater conditions; and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill or release of
any Hazardous Substance), now in effect or which may hereafter come into effect.
Lessee shall, within five (5) days after receipt of Lessor's written request,
provide Lessor with copies of all documents and information, including but not
limited to permits, registrations, manifests, applications, reports and
certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
failure by Lessee or the Premises to comply with any Applicable Requirements.
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6.4 Inspection; Compliance with Law. Lessor, Lessor's agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee, is found to exist
or to be imminent, or unless the Inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations:
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition),
2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, or
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
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Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain a contract, with copies to Lessor, in customary form and substance
for and with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation system
for the Premises. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with Paragraph
13.2 below.
7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition, 2.3 (Compliance with Covenants, Restrictions and Building Code), 4.2
(Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage
or Destruction) and 14 (Condemnation), Lessor, shall keep in good order,
condition and repair the foundations, exterior walls, structural condition of
interior boaring walls, exterior roof, fire sprinkler and/or standpipe and hose
(if located in the Common Areas) or other automatic fire extinguishing system
including fire alarm and/or smoke detection systems and equipment, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which here is a Common Area Operating Expense
pursuant to paragraph 4.2, Lessor shall not be obligated to paint the interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors, or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate this
Lease because of Lessor's failure to keep the Building, Industrial Center or
Common Areas in good order, condition and repair. Subject to reimbursement
pursuant to Paragraph 4.2. *7.2(a) See Addendum A, Paragraph 12.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage in the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or trade
Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, so long as they
are not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed $2,500.00
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(b) Consent. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(c) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner, any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion band in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) Lien protection. Lessee shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work in, on, or about the Premises, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense, defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount
equal to one and one-half times the amount of such contested lien claim or
demand, indemnifying Lessor against liability for the same, as required by law
for the holding of the Premises free from the effect of such lien or claim. In
addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide it is to its best interest
to do so.
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7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter provided
in this Paragraph 7.4, all Alterations and Utility Installations made to the
Promises by Lessee shall be the property of and owned by Lessee, but considered
a part of the Premises. Lessor may, at any time and at its option, elect in
writing to Lessee to be the owner of all or any specified part of the
Lessee-Owned Alterations and Utility Installations. Unless otherwise instructed
per Subparagraph 7.4(a) hereof, all Lessee- Owned Alterations and Utility
Installations shall, at the expiration of earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor my
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
that their installation may have been consented to by Lessor. Lessor may require
the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises
by the end of the last day of the Lease term or any earlier termination date,
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. Ordinary wear and tear shall not
include any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations under this
Lease. Except as otherwise agreed or specified herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by the
Installation, maintenance or removal of Lessee's Trade Fixtures, furnishings,
equipment, and Lessee-Owned Alterations and Utility Installations, as well as
the removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material, or ground water contaminated
by Lessee, all as may then be required by Applicable Requirements and/or good
practice, Lessee's trade Fixtures shall remain the property of Lessee and shall
be removed by Lessee subject to its obligation to repair and restore the
Premises per this Lease.
8. Insurance; Indemnity:
8.1 Payment of Premiums. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
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(a) Carried by Lessee. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured Managers or Lessors of Premises" endorsement and contain
the "Amendment of the Pollution Exclusion" endorsement for damage caused by
heat, smoke or fumes from a hostile fire. The policy shall not contain any
Intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be required by this Lease or as carried by Lessee
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. All insurance to be carried by Lessee shall be primary to
and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and to any Lender(s), insuring against loss or
damage to the Premises. Such insurance shall be for full replacement cost, as
the same shall exist from time to time, or the amount required by any Lender(s),
but in no event more than the commercially reasonable and available insurable
value thereof it, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. Lessee-Owned
Alterations and Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
insure against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building required
to be demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered loss, but not
including plate glass insurance. Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located.
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(b) Rental Value. Lessor shall also obtain and keep in force
during the term of this lease a policy or policies in the name of the Lessor,
with loss payable to Lessor and any Lender(s), insuring the loss of the full
rental and other charges payable by all lessees of the Building to Lessor for
one year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insured loss,
the period of indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year's loss of rental revenues from the date of any such loss. Said
Insurance shall contain an agreed valuation provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected renal income, Real Property Taxes, Insurance premium costs
and other expenses, if any, otherwise payable, for the next 12-month period.
Common Area Operating Expenses shall include any deductible amount in the event
of such loss.
(c) Adjacent Premises. Lessee shall pay for any increase in
the premiums for the property insurance of the Building and for the Common Areas
or other buildings in the Industrial Center if said increase is caused by
Lessee's acts, omissions, use or occupancy of the Premises.
(d) Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to Insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $20,000.00 per occurrence. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property and the restoration of
Trade Fixtures and Lessee-Owned Alterations and Utility Installations. Upon
request from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.
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8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, or such other rating as may be required by a Lender, as set
forth in the most current issue of "Best's Insurance Guide." Lessee shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days' prior to written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
the perils required to be Insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage Insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding to be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor
and Lessor shall cooperate with Lessee in such defense. Lessor need not have
first paid any such claim in order to be so indemnified.
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8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. Damage or Destruction:
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction if fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty
percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of the Lessor, be deemed to be
Premises Total Destruction.
(c) "Insured Loss" shall mean damage or destruction to the Premises,
other than Lessee-Owned Alterations and Utility Installations and Trade
Fixtures, which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage
limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
Improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
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(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Premises Partial Damage - Insured Loss. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alternations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said (10) day period, Lessor shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If Lessor does
not receive such funds or assurance within said period. Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect. If lessor does not receive such funds or assurance within such ten (10)
day period, and if Lessor does not so elect to restore and repair, then this
Lease shall terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have any right to
reimbursement from Lessor for any funds contributed by Lessee to repair any such
damage or destruction. Premises Partial Damage due to flood or earthquake shall
be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
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9.3 Partial Damage - Uninsured Loss. If Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect), Lessor may at Lessor's
option, either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of this occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by (a) exercising such option, and (b) providing Lessor with any shortage
in insurance proceeds (or adequate assurance thereof) needed to make the repairs
on or before the earlier of (i) the date which is ten (10) days after Lessee's
receipt of Lessor's written notice purporting to terminate this Lease, or (ii)
the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible and
this Lease shall continue in full force and effect. If Lessee fails to exercise
such option and provide such funds or assurance during such period, then this
Lease shall terminate as of the date set forth in the first sentence of this
Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Bast Rent, Common area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have not claim against Lessor for any damage
suffered by reason of any such damage, destruction, , repair, remediation or
restoration.
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(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this Paragraph
9.6 shall mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises, whichever
occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the Investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to Investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times, the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
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9.8 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. Real Property Taxes:
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 Real Property Tax Definition. As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the industrial Center by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "Real Property Taxes" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
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10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under Paragraph
4.2, the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon the
Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvement included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 Lessee's Property Taxes. lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities:
Lessee shall pay directly for all utilities and services supplied to
the Premises, including but not limited to electricity, telephone, security, gas
and cleaning of the Premises, together with any taxes thereon. If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be
determined by Lessor of all such charges jointly metered or billed with other
premises in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).
12. Assignment and Subletting:
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five
percent (25%) or more of the voting control of Lessee shall constitute a change
in control for this purpose.
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(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, ale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net
Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessors's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment of subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty (30)
days' written notice (Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the new fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next installment(s) of Base Rent
coming due, and any underpayment for the period retroactively to the effective
date of the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its
highest and best use and in good condition) or one hundred ten percent (110%) of
the price previously in effect, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the time
of such adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) See Addendum A, Paragraph 9.
(f) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
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12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not (i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone
else responsible for the performance of the Lessee's obligations under this
Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to
the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall by reason of
accepting such assignment or entering into such sublease, be deemed for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
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(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein;
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by reason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
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(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or sublet all or any part of the Premises without Lessor's
prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.
See Addendum A, Paragraph 10.
13. Default; Breach; Remedies:
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent, Lessee's Share of Common Operating
Area Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which endangers
or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (i) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contracts required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30, (vi)
the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this lease, where any such failure continues for a period of ten (10) days
following written notice by or on behalf of Lessor to Lessee.
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(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of the
Lessee's Default is such that more than thirty (30) days are reasonably required
for its cure, then it shall not be deemed to be a Breach of this Lease by Lessee
if Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's Interest in this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or
of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
(g) If the performance of Lessee's obligations under this lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantors refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
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13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written notice
to Lessee (or in case of an emergency, without notice), Lessor may at its option
(but without obligation to do so), perform such duty or obligation on Lessee's
behalf, including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. The costs
and expenses of any such performance by Lessor shall be due and payable by
Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check. In the event of a Breach of this Lease by
Lessee (as defined in Paragraph 13.1), with or without further notice or demand,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all of or any part thereof in a separate suit for
such rent and/or damages. If a notice and grace period required under
Subparagraph 13.1(b), (c) or (d) was not previously given, notice to pay rent or
quit, or to perform or quit, as the case may be, given to Lessee under any
statute authorizing the forfeiture of leases for unlawful detainer shall also
constitute the applicable notice for grace period purposes required by
Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace period
under the unlawful detainer statue shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two (2) such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
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(b) Continue the Lease and Lessee's right to possession in effect (in
Washington under Washington Civil Code) after Lessee's Breach and recover the
rent as it becomes due, provided Lessee has the right to sublet or assign,
subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessor's right to possession.
(c) Pursue an other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, Inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
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13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to five percent (5%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder., In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for is performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. Condemnation:
If the Premises or any portion thereof are taken under the power of
eminent domain or sold under the threat of the exercise of said power (all of
which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten (10%) percent of the floor area of the
Premises, or more than twenty-five percent (25%) of the portion of the Common
Area designated for Lessee's parking, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises. No reduction of Base Rent shall occur if
the condemnation does not apply to any portion of the Premises. Any award for
the taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation, separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its net
severance damages received, over and above Lessee's Share of the legal and other
expenses incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation authority. Lessee shall be responsible for
the payment of any amount in excess of such net severance damages required to
complete such repair.
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15. Brokers' Fees:
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise
agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as
defined in Paragraph 39.1) granted under this Lease or any Option subsequently
granted, or (b) if Lessee acquires any rights to the Premises or other premises
in which Lessor has an interest, or (c) if Lessee remains in possession of the
Premises with the consent of Lessor after the expiration of the term of this
Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the Parties
pertaining to the Premises and/or any adjacent property in which Lessor has an
interest, or (e) if Base Rent is increased, whether by agreement or operation of
an escalation clause herein, then as to any of said transactions, Lessor shall
pay said Broker(s) a fee in accordance with the schedule of said Broker(s) in
effect at the time of the execution of this Lease. (See Addendum A, Paragraph
15).
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
Interest in this Lease, whether such transfer is by agreement or by operation of
law; shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
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15.4 Representations and Warranties. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. Tenancy and Financial Statements:
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within
ten (10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in writing
in a form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or
sell the Premises or the Building, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability:
The term "Lessor" as used herein shall mean the owner or owners at the
time in question of the fee title to the Premises. in the event of a transfer of
Lessor's title or interest in the Premises or in this Lease, Lessor shall
deliver to the transferee or assignee (in cash or by credit) any unused Security
Deposit held by Lessor at the time of such transfer or assignment. Except as
provided in Paragraph 15.3, such upon which transfer or assignment and delivery
of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as hereinabove defined.
18. Severability:
The invalidity of any provision of this Lease, as determined by a court
of competent jurisdiction, shall in no way affect the validity of any other
provision hereof.
19. Interest on Past-Due Obligations:
Any monetary payment due to Lessor hereunder, other than late charges,
not received by Lessor within ten (10) days following the date on which it was
due, shall bear interest from the date due at the prime rate charged by the
largest state chartered bank in the state in which the Premises are located plus
four percent (4%) per annum, but not exceeding the maximum ratio allowed by law,
in addition to the potential late charge provided for in Paragraph 13.4
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20. Time of Essence:
Time is of the essence with respect to the performance of all
obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined:
All monetary obligations of Lessee to Lessor under the terms of this
Lease are deemed to be rent.
22. No Prior or other Agreements; Broker Disclaimer:
This Lease contains all agreements between the Parties with respect to
any matter mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective. Lessor and Lessee each represents and warrants
to the Brokers that is has made, and is relying solely upon, its own
investigation as to the nature, quality, character and financial responsibility
of the other Party to this Lease and as to the nature, quality and character of
the Premises. Brokers have no responsibility with respect thereto or with
respect to any default or breach hereof by either Party. Each Broker shall be an
intended third party beneficiary of the provisions of this Paragraph 22.
23. Notices:
23.1 Notice Requirements. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for the purpose of mailing or delivering notices to Lessee. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt, requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail, the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday or a Sunday or a legal
holiday, it shall be deemed received on the next business day.
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24. Waivers:
No waiver by Lessor of the Default or Breach of any term, covenant or
condition hereof by Lessee, shall be deemed a waiver of any other term, covenant
or condition hereof, or of any subsequent Default or Breach by Lessee of the
same or any other term, covenant or condition hereof. Lessor's consent to, or
approval of, any such act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the acceptance
of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of
any provision hereof. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. Recording:
Either Lessor or Lessee shall, upon request of the other, execute,
acknowledge and deliver to the other a short form memorandum of this Lease for
recording purposes. The Party requesting recordation shall be responsible for
payment of any fees or taxes applicable thereto.
26. No Right To Holdover:
Lessee has no right to retain possession of the Premises or any part
thereof beyond the expiration or earlier termination of this Lease. In the event
that Lessee holds over in violation of this Paragraph 26 then the Base Rent
payable from and after the time of the expiration or earlier termination of this
Lease shall be increased to one hundred fifty percent (150%) of the Base Rent
applicable during the month immediately preceding such expiration or earlier
termination. Nothing contained herein shall be construed as a consent by Lessor
to any holding over by Lessee.
27. Cumulative Remedies:
No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
28. Covenants and Conditions:
All provisions of this Lease to be observed or performed by Lessee are
both covenants and conditions.
29. Binding Effect; Choice of Law:
This Lease shall be binding upon the Parties, their personal
representatives, successors and assigns and be governed by the laws of the State
in which the Premises are located. Any litigation between the Parties hereto
concerning this Lease shall be initiated in the county in which the Premises are
located.
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30. Subordination; Attornment; Non-Disturbance:
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such Option shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the term hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. Attorneys's Fees:
If any Party or Broker brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
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32. Lessor's Access; Showing Premises; Repairs:
Lessor and Lessor's agents shall have the right to enter the Premises
at any time, in the case of an emergency, and otherwise at reasonable times for
the purpose of showing the same to prospective purchasers, lenders, or lessees,
and making such alterations, repairs, Improvements or additions to the Premises
or to the Building, as Lessor may reasonably deem necessary. Lessor may at any
time place on or about the Premises or Building any ordinary "For Sale" signs
and Lessor may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary "For Lease" signs. All
such activities of Lessor shall be without abatement of rent or liability to
Lessee.
33. Auctions:
Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. Signs:
Lessee shall not place any sign upon the exterior of the Premises of
the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by
Lessor and comply with Applicable Requirements and the signage criteria
established for the Industrial Center by Lessor. The installation of any sign on
the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably interfere with the
conduct of Lessee's business; Lessor shall be entitled to all revenues from such
advertising signs.
35. Termination; Merger:
Unless specifically stated otherwise in writing by Lessor, the
voluntary or other surrender of this Lease by Lessee, the mutual termination or
cancellation hereof, or a termination hereof by Lessor for Breach by Lessee,
shall automatically terminate any sublease or lesser estate in the Premises;
provided, however, Lessor shall, in the event of any such surrender, termination
or cancellation, have the option to continue any one or all of any existing
subtenancies. Lessor's failure within ten (10) days following any such event to
make a written election to the contrary by written notice to the holder of any
such lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
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36. Consents:
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgement that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor:
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the from most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and Information required in
Paragraph 16.
37.2 Additional Obligations of Guarantor. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c) a
Tenancy Statement, or (d) written confirmation that the guaranty is still in
effect.
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38. Quiet Possession:
Upon payment by Lessee of the rent for the Premises and the performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession of
the Premises for the entire term hereof subject to all of the provisions of this
Lease.
39. Options:
39.1 Definition. As used in this Lease, the word "Option" has the
following meaning: (a) the right to extent the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of his refusal to lease the Premises or the right of first
offer to lease the Premises, or the right of first refusal to purchase the
Premises, or the right of first offer to purchase the Premises, or the right to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other property
of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured; or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee); or (iii) during the time
Lessee is in Breach of this Lease; or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during the twelve (12) month period immediately preceding the exercise of the
Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
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(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereto to Lessee), or (ii)
Lessor gives to Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during any twelve (12) month period, whether or not the Defaults
are cured, or (iii) Lessee commits a Breach of this Lease.
40. Rules and Regulations:
Lessee agrees that it will abide by, and keep and observe all
reasonable rules and regulations ("Rules and Regulations") which Lessor may make
from time to time for the management, safety, care and cleanliness of the
grounds, the parking and unloading of vehicles and the preservation of good
order, as well as for the convenience of other occupants or tenants of the
Building and the Industrial Center and their invitees.
41. Security Measures:
Lessee hereby acknowledges that the rental payable to Lessor hereunder
does not include the cost of guard service or other security measures, and that
Lessor shall have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee, its agents and
invitees and their property from the acts of third parties.
42. Reservations:
Lessor reserves the right, from time to time, to grant, without the
consent or joinder of Lessee, such easements, rights of way, utility raceways,
and dedications that Lessor deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights of way, utility
raceways, dedications, maps and restrictions do not reasonably interfere with
the use of the Premises by Lessee. Lessee agrees to sign any documents
reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest:
If at any time a dispute shall arise as to any amount or sum of money
to be paid by one Party to the other under the provisions hereof, the Party
against whom the obligation to pay the money is asserted shall have the right to
make payment "under protest" and such payment shall not be regarded as a
voluntary payment and there shall survive the right on the part of said Party to
institute suit for recovery of such sum. If it shall be adjudged that there was
no legal obligation on the part of said Party to pay such sum or any part
thereof, said Party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease.
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44. Authority:
If either Party hereto is a corporation, trust or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on its behalf. If Lessee is a corporation, trust or partnership,
Lessee shall, within thirty (30) days after request by Lessor, deliver to Lessor
evidence satisfactory to Lessor of such authority.
45. Conflict:
Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Offer:
Preparation of this Lease by either Lessor or Lessee or Lessor's agent
or Lessee's agent and submission of same to Lessee or Lessor shall not be deemed
an offer to lease. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. Amendments:
This Lease may be modified only in writing, signed by the parties in
interest at the time of the modification. The Parties shall amend this Lease
from time to time to reflect any adjustments that are made to the Base Rent or
other rent payable under this Lease. As long as they do not materially change
Lessee's obligations hereunder, Lessee agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by an
institutional insurance company or pension plan Lender in connection with the
obtaining of normal financing or refinancing of the property of which the
Premises are a part.
48. Multiple Parties:
Except as otherwise expressly provided herein, it more than one person
or entity is named herein as either Lessor or Lessee, the obligations of such
multiple parties shall be the joint and several responsibility of all persons or
entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
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IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR
YOUR ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD
BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE
POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR
HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN
CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Seattle, Washington Executed at: Seattle, Washington
on: July, 1997 on: July 9, 1997
By LESSOR: By LESSEE:
Victor Enterprises, LLC, a Washington Leonard's Metals, Inc. a Missouri
corporation corporation
/s/ Ronald S. Saks
By: By:
Name Printed: Victor DiPietro Name Printed: Ronald S. Saks
Title: President Title: President
By: By:
Name Printed: Name Printed:
Title: Title:
Address: Address:
Telephone: (206) 248-2700 Telephone: (314)949-1567
Facsimile: (206) 248-6454 Facsimile: (314)949-1576
BROKER: BROKER:
Kidder, Mathews,& Segner, Inc.,
a Washington corporation
Executed at: Seattle, Washington Executed at:
on: July 9, 1997 on:
/s/ Gordon K. Buchan
By: By:
Name Printed: Gordon K. Buchan Name Printed:
Title: Executive Vice President Title:
Address: 12886 Interurban Ave. South Address:
Seattle, Washington 98168
Telephone: (206) 248-7300 Telephone: ( )
Facsimile: (206) 248-7342 Facsimile: ( )
42
NOTE: These loans are often modified to meet changing requirements of
law and needs of the Industry. Always write or call to make sure or call to make
sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071. (213)687-8777
<PAGE>
EXHIBIT B
Exhibit B to Lease dated May 6, 1997, between Victor Enterprises, LLC, a
Washington corporation ("Lessor"), and Leonard's Metal, Inc., a Missouri
corporation ("Lessee"), for space located at 100 Western Avenue, Auburn,
Washington.
Legal Description:
BLK E+ LOT 5 THRU 9 LUNNS GARDEN TRS TO AUBURN LOTS 5 THRU 9 BLK 3 LESS PORS OF
LOTS 8 & 9 FOR ST HWY & LESS 3 10 FT OF LOTS 5 THRU 89 FOR ST TGW POR OF E 40 FT
OF E 1/2 OF SW 1/4 OF NW 1/4 OF SEC 13-21-4 LY SLY OF N MGN OF SD LOT 5 EXTENDED
WLY LESS POR FOR ST HWY - AKA PCL A OF AUBURN LLA #LLA-0001-93 REC #9304261728
LESS POR FOR STS.
<PAGE>
ADDENDUM "A"
This is "Addendum A" to Lease dated May 6, 1997, between Victor Enterprises,
LLC, a Washington corporation ("Lessor"), and Leonard's Metal, Inc., a Missouri
corporation ("Lessee"), and relates to space located at 100 Western Avenue,
Auburn, King County, Washington.
1. Base Rent Schedule:
Months 01-03 Common area operating expenses per month
Months 04-36 $13,900.00 per month, plus common area operating expenses
Months 37-60 $15,570.00 per month, plus common area operating expenses
2. First Option to Extend the Lease:
Lessee shall have the option to extend the initial base term hereof for
one (1) additional period of three (3) years upon the same terms and conditions
as stated herein, except for base rent. Lessee must exercise its right, if at
all, by written notification to Lessor not less than 150 days prior to the
expiration of the initial term hereof. Base rent for the first option to extend
the Lease shall be $17,450.00 per month.
3. Second and Third Option to Extend the Lease:
Provided Lessee exercises the first option to extend the Lease, then
Lessee shall have two (2) additional consecutive options to extend the Lease
upon the same terms and conditions as stated herein, except for base rent. Base
rent shall be set according to the Fair Market Rental set at the beginning of
each option to extend the Lease. Lessee must exercise its right, if at all, by
written notification to Lessor no less than 150 days prior to the expiration of
the initial term hereof.
A) Options are Personal. The option to extend granted herein is
personal to the original Lessee executing this Lease and
notwithstanding anything to the contrary contained in the
Lease, the rights contained in this Addendum are not
assignable or transferable by such original Lessee. Lessor
grants the rights contained herein to Lessee in consideration
of Lessee's strict compliance with the provisions hereof,
including, without limitation, the manner of exercise of this
option.
B) Fair Market Rental. If Lessee exercises the right to extend
the term then the Minimum Monthly Rent shall be adjusted to
equal the Fair Market Rental for the premises as of the date
of the commencement of such Extended Term, pursuant to the
procedures hereinafter set forth. The term "Fair Market
Rental" means the Minimum Monthly Rent chargeable for the
Leased Premises based upon the following factors applicable to
the Leased Premises or any comparable premises:
a) Rental rates being charged for comparable premises in
the same location.
b) The relative locations of the comparable premises.
c) Improvements,or allowances provided for improvements,
or to be provided.
d) Rental adjustments, if any, or rental concessions.
e) Services and utilities provided or to be provided.
f) Use limitations or restrictions.
g) Any other relevant Lease terms or conditions.
In no event, however, shall the Fair Market Rental be Less than the Minimum
Monthly Rent in effect immediately prior to the commencement date of the
Extended Term. The Fair Market Rental evaluation may include provision for
further rent adjustments during the Extended Term if such adjustments are
commonly required in the market place for similar types of leases.
<PAGE>
"Fair Market Rental" for purposes hereof shall be determined by good faith
negotiation and mutual agreement of the parties and be reduced to an executed
form or written Lease Amendment within 30 days of Landlord's receipt of Tenant's
notice of exercise of the option to extend the lease term. If Landlord and
Tenant have not reached agreement regarding "Fair Market Rental" for the lease
extension term and executed a lease amendment documenting their agreement as to
rent during the extension term of thirty (30) days after Landlord's receipt of
the notice, then during the next five (5) days Tenant must give notice to
Landlord in writing that it demands arbitration of the matter of "Fair Market
Rental," then within the next thirty (30) days Tenant and Landlord shall arrange
for and complete arbitration of the matter of "Fair Market Rental," for the
extension term with Tenant and Landlord sharing equally in the cost of
arbitration. The arbitration shall be conducted under the rules of arbitration
set by the American Arbitration Association.
4. Landlord Work:
To prepare for Lessee's occupancy, Landlord shall provide the following
modifications to the Premises at its sole expense:
A. Repair the roof insulation.
B. Repair the warped wainscot in the restrooms.
C. If the cause of the existing excess moisture in the premises
is due to a building defect, Lessor shall cure the defect
within a mutually agreed reasonable period of time at no cost
to Lessee.
D. Ensure the roof, including skylights, is watertight and
properly sealed.
E. Lessor shall at its cost complete the construction of a
demising wall 140 feet by 26 feet as depicted on Exhibit "A"
to this Lease, which wall shall be completed no later than 120
days after the execution of this lease.
5. First Opportunity to Lease Adjacent Space:
Lessee shall have, during the lease term, an on-going first opportunity
to lease the adjacent approximately 39,560 square feet of contiguous space
(Adjacent Space). Each time the Adjacent Space becomes available, Lessor shall
first offer it to Lessee in writing. Lessor and Lessee shall then have five (5)
business days to mutually agree upon the terms and conditions of the lease for
the Adjacent Space. If Lessee fails to notify Lessor of its interest to pursue
the space and/or Lessor and Lessee cannot agree on terms and conditions of the
lease for the Adjacent Space, then Lessor is free to offer the Adjacent Space to
other parties.
6. To 2.10, Common Areas - Changes add:
"in so long as such changes do not unduly interfere with the use and
utilization of Premises and parking as existed prior to the change and in so
long as such changes are required by any governmental authority and are
therefore beyond Lessor's control.
7. Capital Operating Expenses:
Paragraph 4.29(a)(1) shall be modified as follows:
the operation, repair (exclusive of capital expenditure), and
maintenance, in neat, clean, good order and condition, of the following:
8. Lessee shall, at its option, within the first two months of the lease,
provide a Phase I environmental study of the Industrial Center for the purpose
of establishing a baseline with respect to the existence or non-existence of
Hazardous Substances as of the commencement of the Lease. Such study shall not
delay commencement of the Lease. Lessor shall pay one-half the cost of the
study, however, Lessor's contribution shall not exceed $750.00 and Lessee shall
pay all study costs in excess of $1,500.00. Lessor shall have the right to
approve the agency performing the study and shall receive a copy of the study
report and a copy of the supporting data.
<PAGE>
9. Paragraph 12.1(e): Anything herein to the contrary notwithstanding, no
consent shall be required with respect to any assignment or subletting of all or
any part of the Premises to a parent, subsidiary or affiliated entity of Lessee,
so long as Leonard's Metal, Inc., the Lessee, remains as a Guarantor on the
Lease, and Provided further, that Lessor shall receive written notice of the
assignment or subletting, at least sixty (60) days prior to the effective date
of such event.
10. New Subparagraph 12.4 of "Assignment and Subletting" to read: "Anything
herein to the contrary notwithstanding, Article XII shall not apply to any
reorganization or merger of Lessee into another company or a change of control
occasioned by the public issuance of common stock of Lessee, Provided that
Lessor shall receive financial statements of the reorganized, merged or altered
Lessee indicating financial strength satisfactory to Lessor, and Provided
Further, that Lessor shall receive written notice of the change in the structure
of the Lessee at least sixty (60) days prior to the effective date of the
transfer.
11. Lessor represents and warrants that there is 800 amps, 277/480 volt, 3-phase
electrical power available at the panel in the Premises for the exclusive use of
the Lessee.
12. There shall be added to the Lease the following paragraph:
7.2 (a) Lessor's Obligations. Lessor shall keep in good order and
repair, the foundations, exterior walls, structural condition of the interior
bearing walls, the roof structural members, and shall paint the exterior
surfaces of the exterior walls as needed. If the need to perform those repairs
is caused by the Lessee's abuse or misuse of the premises or by the negligent
acts of the Lessee, its agents, servants, licensees or invitees, the obligation
to make those repairs shall be the Lessee's obligation.
Lessor shall be responsible for the replacement of the exterior roof
membrane, but routine maintenance, repair and inspection are included in common
area maintenance and repair.
13. Concrete Floors: The slab-on-grade was designed under the Uniform Building
Code (I 994 edition) with loading criteria for heavy storage of 250 pounds per
square foot, uniformly applied. Lessee shall be responsible for any damage
caused by any excessive overloading or violation of the design capacity or by
Lessee's abusive use of the slab-on- grade.
14. Lessee shall provide Lessor with a corporate resolution indicating that the
corporate representative executing this lease has been granted specific
authority to so do.
15. Real Estate Fees: Lessor shall pay to the Broker the following fee(s) for
services provided by the Broker for this transaction:
(A) Original Term. Five percent (5%) of the total Base Rents,
including adjustments for additions and/or expansion,
scheduled for the Original Term, due and payable in full i)
upon final execution of this Lease, and ii) upon commencement
of any increase in Base Rent during the Original Term.
(B) Extensions. In the event Lessee exercises the First Option to
Extend this lease, two and one-half percent (2.5%) of the
total Base Rent scheduled, due and payable in full upon
commencement of said First Option. In the event Lessee
exercises the Second Option to Extend this Lease, and provided
<PAGE>
Broker directly participates and negotiates a new monthly Base
Rent, two and one-half percent (2.5%) of the total Base Rent
scheduled through the one hundred twentieth (120th) month, due
and payable in full upon commencement of Second Option.
16. Parking: Six (6) of the parking places located on the east side of the
building at its south end are reserved to the Landlord to be designated for the
use of a new tenant in the north end of the building. Two (2) of the remaining
parking spaces shall be designated as handicapped parking, and shall, along with
the remaining parking spaces in this area, be designated as Common Area
Personnel Vehicle Parking.
17. Notices:
To Tenant: Mr. Ed Dickinson
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302
To Landlord: Victor Enterprises, LLC
3600 South 124th Street
Seattle, WA 98168
ACKNOWLEDGED AND AGREED:
Landlord: Victor Enterprises LLC Tenant: Leonard's Metal, Inc.
/s/ Ronald S. Saks
By: By:
Victor DiPietro, President Ronald S. Saks, President
<PAGE>
ADDENDUM "B"
This is Addendum "B" to that certain Lease dated May 6, 1997, including Addendum
"A", Exhibit A and Exhibit B thereto, between Victor Enterprises, LLC, a
Washington corporation ("Lessor"), and Leonard's Metal, Inc., a Missouri
corporation ("Lessee"), pertaining to space located at 101 Western Avenue,
Auburn, King County, Washington (the "Lease").
1. Term
Replacing Paragraph 1.3 of the Lease, the Original Term of this Lease
shall be eight years and zero months ("Revised Original Term")
commencing July 1, 1997 ("Commencement Date") and ending June 30, 2005
("Expiration Date").
2. Expansion of Premises
A. The Premises as originally defined in paragraphs 1.2(a) and
1.2(b), including Exhibit "A" ("Original Premises" -
consisting of the southerly portion of the existing building
which is located on that portion of the "Total premises" as
defined below which has been developed, blacktopped and
curbed) shall be expanded to include all of the northerly
portion of the existing building and the northerly portion of
the property which has been improved, blacktopped and curbed
(the "Additional Premises") to include all of the Building and
improvements to the property legally described under Exhibit B
("Total Premises") and shown on Exhibit "A" to the original
Lease dated May 6, 1997. The description Total Premises does
not include the unimproved portion of the Lessor's property
lying to the west and north of the improved portion of the
property. Accordingly, the Lessee shall have the exclusive use
of all current and future vehicle parking areas of the Total
Premises. This paragraph eliminates Paragraph 5 - First
Opportunity to lease Adjacent Space and Paragraph 16 - Parking
of Addendum "A", and modifies Exhibit "A" accordingly.
B. In the event Lessor shall in the future develop the unimproved
portion of the entire property of which the Total Premises is
a part, the parties agree that Lessor, Lessor's successors,
and other Lessee's of such property shall have a right of
common ingress, egress and access adjacent to the Total
Premises.
C. Should Lessee require additional parking space, and if Lessor
shall have such space available, as a result of Lessor's
development of the unimproved portion of Lessor's property or
otherwise, Lessor agrees to negotiate additional parking space
for Lessee on Lessor's property lying to the west and/or north
of the Total Premises occupied by Lessee.
3. Base Rent Schedule
The following Base Rent Schedule shall replace the Base Rent Schedule
outlined under Paragraph 1 of Addendum "A":
Months 01-03 July 1, 1997 through September 30,
1997. Common Area Operating Expenses (see
Paragraph 4.2 Common Area Operating Expenses
of the Lease - including real estate taxes
and property insurance premiums for the
building and property) per month for the
Original Premises.
Months 04-06 October 1, 1997 through December 31, 1997.
$13,900.00 per month plus Common Area
Operating Expenses per month for the
Original Premises.
<PAGE>
ADDENDUM "B"
This is Addendum "B" to that certain Lease dated May 6, 1997, including Addendum
"A", Exhibit A and Exhibit B thereto, between Victor Enterprises, LLC, a
Washington corporation ("Lessor"), and Leonard's Metal, Inc., a Missouri
corporation ("Lessee"), pertaining to space located at 101 Western Avenue,
Auburn, King County, Washington (the "Lease").
1. Term
Replacing Paragraph 1.3 of the Lease, the Original Term of this Lease
shall be eight years and zero months ("Revised Original Term")
commencing July 1, 1997 ("Commencement Date") and ending June 30, 2005
("Expiration Date").
2. Expansion of Premises
A. The Premises as originally defined in Paragraphs 1.2(a) and
1.2(b), including Exhibit "A" ("Original Premises" -
consisting of the southerly portion of the existing building
which is located on that portion of the "Total Premises" as
defined below which has been developed, blacktopped and cured)
shall be expanded to include all of the northerly portion of
the existing building and the northerly portion of the
property which has been improved, blacktopped and curbed (the
"Additional Premises") to include all of the building and
improvements to the property legally described under Exhibit B
("Total Premises") and shown on Exhibit "A" to the original
Lease dated May 6, 1997. The description Total Premises does
not include the unimproved portion of the Lessor's property
lying to the west and north of the improved portion of the
property. Accordingly, the Lessee shall have the exclusive use
of all current and future vehicle parking areas of the Total
Premises. This paragraph eliminates Paragraph 5 - First
Opportunity to Lease Adjacent Space and Paragraph 16 - Parking
of Addendum "A", and modifies Exhibit "A" accordingly.
B. In the event Lessor shall in the future develop the unimproved
portion of the entire property of which the Total Premises is
a part, the parties agree that Lessor, Lessor's successors,
and other Lessee's of such property shall have a right of
common ingress, egress and access adjacent to the Total
Premises.
C. Should Lessee require additional parking space, and if Lessor
shall have such space available, as a result of Lessor's
development of the unimproved portion of Lessor's property or
otherwise, Lessor agrees to negotiate additional parking space
for Lessee on Lessee's property lying to the west and/or north
of the Total Premises occupied by lessee.
3. Base Rent Schedule
The following Base Rent Schedule shall replace the Base Rent Schedule
outlined under Paragraph 1 of Addendum "A":
Months 01-03 July 1, 1997 through September 30, 1997.
Common Area Operating Expenses (see Paragraph 4.2 -
Common Area Operating Expenses of the lease -
including real estate taxes and property insurance
premiums for the building and property) per month
for the Original Premises.
Months 04-06 October 1, 1997 through December 31, 1997.
$13,900.00 per month plus Common Area Operating
Expenses per month for the Original Premises.
<PAGE>
Months 07-11 January 1, 1998 through May 31, 1998.
$13,900.00 per month plus Common Area Operating
Expenses per month for the Total Premises.
Months 12-36 June 1, 1998 through June 30, 2000.
$27,800.00 per month plus Common Area Operating
Expenses per month for the Total Premises.
Months 37-60 July 1, 2000 through June 30, 2002.
$31,140.00 per month plus Common Areas Operating
Expenses per month for the Total Premises.
Months 61-96 July 1, 2002, through June 30, 2005.
$34,900.00 per month plus Common Area Operating
Expenses per month for the Total Premises.
4. First Option to Extend the Lease
Under Paragraph 2 - First Option to Extend the lease of Addendum "A"
and this Addendum "B" for the period July 1, 2005 through June 30,
2008, the last sentence shall read "Base rent for the first option to
extend the Lease shall be $39,090.00 per month".
5. Additional Security Deposit
Upon full execution of this Addendum "B", Lessee shall deposit with the
Lessor an Additional Security Deposit of $15,570.00, subject to
Paragraph 5 - Security Deposit of the Lease, for a Total Security
Deposit of $31,140.00 and, in addition thereto, Lessee shall pay Lessor
Month 12's additional rent of $13,900.00, making the payment due in
full upon execution of Addendum "B" the total sum of $29,470.00.
6. Additional Improvements and Lessor's Contribution
Lessor and Lessee agree that Additional Improvements shall be made to
the Total Premises in a timely manner, subject to the Lessor's prior
written approval, which shall not be unreasonably withheld:
A. Additional Office: Lessor and Lessee shall jointly contract
with a mutually selected and approved general contractor
("Contractor") to construct approximately 2,700 square feet of
finished office area on the first floor, and approximately
2,900 square feet of storage mezzanine area above, in the
northeast corner of the Total Premises. The grade of finish
for the first floor of this Additional Office shall be equal
to the grade of finish of the first floor of the office area
in the Original Premises. See attached preliminary floor plan.
The Contractor's contract shall be attached as Exhibit D to
the Lease. The Lessee's architect ("Architect") shall provide
permit-ready construction drawings for the Lessor's prior
written approval, which approval shall not be unreasonably
withheld, prior to permit application and/or construction.
B. Lessor's Work and Contribution: Lessor, at Lessor's sole
expense, shall provide a second 800 amps, 277/480 volt,
3-phase electrical power supply to the Total Premises.
In addition, Lessor shall contribute no more than $171,000.00
towards the cost of the Additional Improvements in a mutually
agreed manner with the Lessee, based on verified progress
payments to the Contractor. Lessee shall hold harmless and
indemnify Lessor from all costs of the Additional Improvements
in excess o the Lessor's $171,000.00 contribution.
<PAGE>
C. Lessee's Improvements: Lessee may, at Lessee's sole expense
and discretion, make the following improvements, subject to
applicable jurisdictional requirements and the Lessor's prior
written approval, which shall not be unreasonably withheld:
1. Install additional heating and lighting in the
warehouse area.
2. Paint the interior walls of the warehouse area.
3. Add additional vehicle parking stalls in the truck
loading zone of the Total Premises.
D. Demising Wall: Due to the expansion of the Premises as
described above in this Addendum "B", Lessor and Lessee agree
the demising wall specified under Paragraph 4(E) of Addendum A
and further modified by the letter of agreement dated October
14, 1997 between the Lessor and Lessee (attached hereto as
Exhibit "C") shall not be constructed, and Lessor is hereby
released from that obligation.
7. Lessee's Authority (Corporate Resolution): Lessee shall provide Lessor
with a Corporate Resolution authorizing its representative to execute
this Addendum "B" on its behalf.
8. Real Estate Fees:
Lessor shall pay to the Broker the following fee(s) for services
provided by the Broker for this transaction:
A. Revised Original Term:
1. Original Premises: For the Original Premises, five
percent (5%) of the total Base Rents scheduled for
the Original Term (Months 01-60), as previously paid
by the Lessor to the Broker, plus two and one-half
percent (2 1/2%) of the total Base Rents scheduled
for Months 61-96 of the Revised Original Term, due
and payable in full upon final execution of this
Addendum "B".
2. Additional Premises: For the Additional Premises, two
and one-half percent (2 1/2%) of the total Base Rents
scheduled for the entire Revised Original Term
(specifically Months 12-96), due and payable in full
upon final execution of this Addendum "B".
B. Extension: In the event Lessee exercises the First Option to
Extend the Lease under Paragraph 4 above, two and one-half (2
1/2%) of the total Base Rents scheduled during Months 97-120,
due and payable in full upon the commencement of said First
Option to Extend this Lease. Lessor shall not be required to
pay any commissions for any period beyond Month 120 covered by
the Lease, including this Addendum "B".
This Real Estate Fee agreement shall supersede all other agreements, written or
verbal, including Paragraph 15 of Addendum "A", between Lessor and Broker.
Broker's Approval:
Kidder, Mathews & Segner, Inc., /s/ John C. Jewett John C. Jewett
Broker and John C. Jewett, Agent Associate Broker
do hereby agree to the commission /s/ Gordon K. Buchan for Broker
terms herein set forth.
<PAGE>
ACKNOWLEDGED AND AGREED: ACKNOWLEDGED AND AGREED:
Landlord: Victor Enterprises LLC Tenant: Leonard's Metal, Inc.
/s/ Victor DiPietro /s/ Ronald S. Saks
By: By:
Victor DiPietro Ronald S. Saks
Its: President Its: President
Date: January 7, 1998 Date: January 7, 1998
<PAGE>
EXHIBIT "C"
October 14, 1997
Mr. Victor DiPietro
President
VICTOR ENTERPRISES, LLC
3600 S. 124th Street
Seattle, WA 98168
Subject: Demising Wall; Main Street Industrial Park, Auburn, Washington
Dear Vic:
For practical business reasons, Leonard's Metal, Inc. ("Lessee") hereby requests
mutual agreement with Victor Enterprises, L.L.C. ("Lessor") to modify Addendum
"A", Section 4, subparagraph E of the subject Lease Agreement dated May 6, 1997
("Lease") as follows:
E. Lessor shall, at its cost, complete the construction of a
demising wall 140 feet by 26 feet as depicted on Exhibit "A"
to this Lease, which wall shall be completed within thirty
(30) days of advance written notification by lessee to Lessor
or by Lessor to Lessee.
Please indicate your acknowledgement and agreement by signature/date below and
return two executed originals to me at your earliest convenience.
Thank you. Please contact me at (206) 248-7311 if you have any questions.
Sincerely,
/s/ John C. Jewett
John C. Jewett
Associate Broker
ACKNOWLEDGEMENT AND AGREEMENT
I/we, the undersigned, hereby acknowledge and agree to the above change in the
subject Lease.
LESSOR LESSEE
Victor Enterprises, LLC Leonard's Metal, Inc.
/s/ Victor DiPietro /s/ Ronald S. Saks
By: By:
Victor DiPietro Ronald S. Saks
Its: President Its: President
Date: 10/14/97 Date: 10/14/97
<PAGE>
STATE OF WASHINGTON, ) CORPORATE
) ss.
COUNTY OF KING )
On this 7th day of January A.D. 1998, before me personally appeared
Ronald S. Saks to me known to be the President and _____________________ to me
known to be the _________________ of Leonard's Metal, Inc. the corporation that
executed the within and foregoing instrument, and acknowledged the same
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath state that they were
authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed my official
seal, the day and year first above written.
/s/ Kay L. Black
Notary Public in and for the State
of Washington, residing at Kent, WA.
STATE OF ) CORPORATE
) ss.
COUNTY OF )
On this 7th day of January A.D. 1998, before me personally appeared
Victor DiPietro to me known to be the President and _____________________ to me
known to be the _________________ of Victor Enterprises LLC the corporation that
executed the within and foregoing instrument, and acknowledged the same
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath state that they were
authorized to execute said instrument.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed my official
seal, the day and year first above written.
/s/ Kay L. Black
Notary Public in and for the
State of Washington, residing at Kent.
STATE OF WASHINGTON, ) INDIVIDUAL
) ss.
COUNTY OF KING )
This is to certify that on this ___________ day of _____________ A.D.
19__, before me the undersigned, a Notary Public in and for the State of
Washington, duly commissioned and qualified, personally appeared
_______________________________________________________________________________
to me known to be the individual___ described in and who executed the within and
foregoing instrument, and acknowledged to me that ___________________ signed and
sealed the same as ____________________ free and voluntary act and deed, for the
uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed my official
seal, the day and year first above written.
Notary Public in and for the State
of Washington, residing at Kent, WA.
STATE OF WASHINGTON, ) INDIVIDUAL
) ss.
COUNTY OF KING )
This is to certify that on this ___________ day of _____________ A.D.
19__, before me the undersigned, a Notary Public in and for the State of
Washington, duly commissioned and qualified, personally appeared
_______________________________________________________________________________
to me known to be the individual___ described in and who executed the within and
foregoing instrument, and acknowledged to me that ___________________ signed and
sealed the same as ____________________ free and voluntary act and deed, for the
uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set by hand and affixed my official
seal, the day and year first above written.
Notary Public in and for the State
of Washington, residing at Kent, WA.
LEASE
THIS LEASE, made and entered into as of the 1st day of February, 1995,
BY AND BETWEEN: RFS Investments
P. O. Box 13057
Wichita, KS 67213
LESSOR
and LEONARD'S METAL, INC.
2629 W. Esthner Ct.
Wichita, KS 67213
LESSEE
W I T N E S S E T H : That
1. Premises. In consideration of the rental provided for, and the
covenants and conditions contained herein, Lessor does hereby grant, demise,
lease, and let unto Lessee, approximately 19,545 square feet of space,
designated as Suite B, in a building to be constructed by Lessor at 2621 West
Esthner Ct., Wichita, Kansas. Attached hereto as Exhibit "A" is a schedule of
the plans for the building, which have been initialled by Lessor and Lessee to
indicate their approval of such plans. Lessor agrees to cause the building and
the leased premises to be constructed in accordance with such plans and that any
and all material changes to such plans shall be subject to the review and prior
written approval of Lessee. The Lease shall include all appurtenances to such
building and the property on which it is located (including, without limitation,
any and all driveways, sidewalks and other paved areas), as well as any
possessory right and interest of Lessor in and to any and all streets adjoining
said premises. The southern most twelve parking stalls shall be designated for
Lessee's use.
2. Term. Lessee is to have and hold said premises for a term of sixty
(60) months, commencing thirty (30) days after construction of the building and
related improvements have been completed and the leased premises are available
for occupancy by Lessee (the "Commencement Date"). Lessor shall give Lessee not
less than fifteen (15) days' prior written notice of the expected date on which
the leased premises will be available for occupancy by Lessee (the "Occupancy
Date"). In the event that the Occupancy Date does not occur on or before the 1st
day of July, 1995, Lessee shall have the right to terminate this Lease by
delivery of written notice thereof to Lessor.
Lessee shall have two (2) options to extend the term of this Lease
for an additional thirty-six (36) months each on the same terms and conditions
as are contained in this Lease, except that the monthly rental shall be Five
Thousand and 00/100 Dollars ($5,000.00) during the first option term and Five
Thousand Three Hundred and 00/100 Dollars ($5,300.00) during the second option
term. Each option shall be exercised (if at all) by delivery of written notice
thereof by Lessee to Lessor not less than six (6) months prior to the expiration
of the then current term.
1
<PAGE>
3. Rental. Lessee shall pay to Lessor, as rental for said premises, a
monthly rental payable in advance on the first day of each month in the sum of
Four Thousand Six Hundred and 00/100 Dollars ($4,600.00) with the first payment
to be paid contemporaneously with the occupancy of the leased premises. If the
full rent payment is not received by Lessor within ten (10) days of any monthly
due date, an administrative and late charge of Fifty Dollars ($50.00) will be
assessed against Lessee for each month or portion thereof of delinquent payment.
Notwithstanding the above charges, Lessee's failure to timely pay rent shall,
subject to the provisions of paragraph 17, constitute a default and shall be
grounds for termination of this Lease pursuant to paragraph 17.
4. Utilities. Lessee shall be solely responsible for all utilities used
upon the leased premises, and shall make application for and pay for all such
utilities, including all required deposits. Subject to the provisions of
paragraph 17, failure to timely pay utilities shall be grounds for termination
of this Lease.
5. Taxes. Lessor and Lessee agree that, during the term of this Lease,
Lessee shall bear responsibility for the payment of 50% of all increases in real
estate taxes assessed against the property on which the building containing the
leased premises is located, being Tax ID Key #94-0- -D-30770, over the real
estate taxes last assessed against such property without such building thereon;
provided that Lessee shall not be responsible for any increased real estate
taxes resulting from the construction of additional buildings or other
improvements upon such property during the term of this Lease. Lessee shall pay
to Lessor any of Lessee's obligations for taxes within ten (10) days of notice
from Lessor to Lessee of the amount thereof (which notice shall be accompanied
by a copy of the tax bill), but in no event more than ten (10) days prior to the
due date for payment of such taxes. Lessee shall be solely responsible for all
personal property taxes levied against the property of Lessee and shall be
responsible for any taxes arising out of Lessee's use of the property. All such
payments shall be considered as additional rental payments under this Lease.
6. Repairs and Maintenance. Lessee shall maintain the interior of the
leased premises and the HVAC, mechanical, plumbing and electrical equipment
serving the leased premises and be responsible for all repairs thereto during
the term hereof. Lessor shall be responsible for all maintenance and repair of
the other portions of the building in which the leased premises are located and
the property on which the building is located, including (without limitation)
any and all driveways, parking lots, sidewalks and other pavement.
7. Insurance. Lessee shall obtain and keep in force during the term of
this Lease a Comprehensive Public Liability Insurance policy insuring against
any liability arising out of the use, occupancy or maintenance of the leased
premises in an amount of not less than $200,000.00 for property damage and
$1,000,000.00 for any one bodily injury. Lessor shall be named as an additional
named insured to the insurance policy, with Lessor to be provided a copy of said
policy or a certificate of insurance and proof of premium payments. Lessor and
Lessee each hereby waive any and every claim for recovery from the other for any
and all loss or damage that is covered by insurance.
2
<PAGE>
8. Indemnification.
(a) Lessee hereby agrees to indemnify and hold harmless Lessor from and
against any and all claims, demands, liability and expense of any kind or
character, including reasonable attorney's fees, arising out of injuries to
persons or damages to property which claims arise out of Lessee's, its agents',
servants', employees', invitees', guests' or contractors' use or misuse of the
leased premises or other negligent or malfeasant act.
(b) Lessor hereby agrees to indemnify and hold harmless Lessee from and
against any and all claims, demands, liability and expense of any kind or
character, including reasonable attorney's fees, arising out of injuries to
persons or damages to property which claims arise out of Lessor's, its agents',
servants', employees', invitees', guests' or contractors' negligent or
malfeasant act.
9. Rules and Regulations. Lessee covenants and agrees that Lessee shall
not use or permit to be used the leased premises in violation of any local,
state or federal laws, regulations or statutes of any kind or character. Lessee
shall comply with all applicable laws, ordinances, rules and regulations
concerning the use of said premises, including but not limited to all such rules
or restrictions governing the purchase, use, storage or discharge of any
hazardous or harmful wastes or Hazardous Substance (as hereinafter defined), and
shall indemnify and hold harmless Lessor from all costs, claims and legal
defense costs arising out of the breach or alleged breach of the same by Lessee.
10. Warranty of Title. Lessor hereby warrants the title to the leased
premises and property and the property covered by easements, if any, and will
defend the same against all claims of all persons.
11. Destruction of Leased Premises. (a) If, during the term of this
Lease, the leased premises are totally or partially destroyed from any cause,
rendering the leased premises totally or partially unusable, Lessor shall
restore the leased premises to substantially the same condition as it was in
immediately before destruction. If the restoration can be made under the
existing laws and can be completed within ninety (90) working days after the
date of the destruction, then such destruction shall not terminate this Lease,
but Lessee shall be entitled to a reduction of rent based directly on the amount
of time, if any, the leased premises are inaccessible or unusable and the
percentage of inaccessibility or unusability of the leased premises. If,
however, the damage resulted from any acts of Lessee, its agents or employees,
no reduction shall be allowed.
(b) If Lessor in its sole discretion determines that the restoration
cannot be made in the time stated in this section, then within fifteen (15) days
after said destruction Lessor shall so notify Lessee, and Lessee can terminate
this Lease within fifteen (15) days by giving written notice of termination to
Lessor. If Lessee fails to terminate this Lease and if restoration is permitted
under the existing laws, Lessor may, at its option, terminate this Lease or
elect to restore the leased premises and improvements within a reasonable time,
in which instance this Lease shall continue in full force and effect with rent
to be abated in accordance with paragraph (a) above. Notwithstanding any
provision to the contrary contained herein, in the event that the leased
premises have not been restored within one hundred eighty (180) days after the
date of destruction, Lessee shall have the right to terminate this Lease by
delivery of written notice thereof to Lessor.
3
<PAGE>
12. Condemnation. If the whole of the leased premises is taken, or if
any portion is taken, rendering the leased premises unusable for Lessee's
existing use, then this Lease shall automatically terminate on the date of the
actual physical taking of the leased premises. Any partial taking which does not
render the leased premises unusable for Lessee's existing use shall effect a
reduction in rent equal to that percentage of taking of the leased premises. All
compensation arising from any taking shall be the sole property of Lessor.
Notwithstanding the foregoing, Lessee shall be entitled to any separate
compensation or award that is available for moving or relocation expenses.
13. Holding Over. In the event Lessee continues to occupy the leased
premises after the last day of the term hereby created, and Lessor elects to
accept rent thereafter, a tenancy from month to month only shall be created and
not for any longer period, and may be terminated at Lessor's option upon ten
(10) days notice.
14. Right of First Refusal. In the event Lessor, during the term of
this Lease, receives a written offer from a bona fide third party to purchase
the property containing the leased premises that Lessor is willing to accept,
Lessor shall deliver written notice thereof to Lessee, together with a copy of
such written offer. Lessee shall have the right to purchase the property that is
the subject of such written offer on the same terms and conditions as are
contained in such written offer (except that Lessee shall have the right to
substitute equivalent cash for any other consideration), which right shall be
exercisable by delivery of written notice thereof by Lessee to Lessor within ten
(10) working days following the delivery of the aforesaid notice by Lessor to
Lessee. If Lessee shall fail to exercise such right, Lessor may sell the
property that is the subject of the aforesaid written offer to the bona fide
third party on the terms and conditions set forth therein. The failure or
refusal of Lessee to exercise its right to purchase pursuant to this paragraph
shall not affect or diminish in any manner Lessee's right hereunder with respect
to any subsequent proposed sale or transfer of the property containing the
leased premises.
15. Surrender at Termination. Upon expiration of this lease for any
reason, whether by reason of expiration of the term hereof or cancellation for
default or otherwise, Lessee shall, and hereby covenants and agrees to,
forthwith peaceably surrender and deliver up possession of the leased premises
to Lessor, broom clean and in as good condition and repair as the same was in at
inception of this Lease, reasonable wear and tear and casualty losses excepted,
including but not limited to the obligations to repair any and all damages
caused by Lessee's removal of any trade fixtures or equipment installed by
Lessee during the term hereof. Lessor shall be entitled to reasonable attorney's
fees arising out of Lessee's breach of this covenant.
4
<PAGE>
16. Immediate Default - Bankruptcy, Receivership, Insolvency. Any of
the following acts shall constitute an immediate default under this Lease,
without the necessity of Lessor giving notice to Lessee, to wit: If Lessee shall
commit an act of bankruptcy, receivership, insolvency, reorganization,
dissolution, liquidation, or if another similar proceeding shall be instituted
by Lessor for all or any part of its leased premises under the Federal
Bankruptcy Act or other law of the United States or of any state or other
competent jurisdiction; or if any act of bankruptcy, receivership, insolvency,
reorganization, dissolution, liquidation or other similar proceedings shall be
instituted against Lessee for all or any part of the Lessee's property under the
Federal Bankruptcy Act or other law of the United States or of any state of
competent jurisdiction, and Lessee shall either consent thereto or fail to cause
the same to be discharged within sixty (60) days.
17. Monetary Default. If Lessee shall fail to pay any rental payment or
any other monetary obligations required by this Lease, and such failure to pay
shall continue for ten (10) business days after receipt by Lessee of written
notice thereof from Lessor, then Lessee shall be in default.
18. Other Defaults. If Lessee fails to perform any of the other
covenants, duties, agreements, undertakings or terms of this Lease, Lessor shall
give Lessee twenty (20) days written notice to cure the same or to commence to
cure the same and diligently prosecute to completion if the same cannot be cured
within a twenty (20) day period. If Lessee does not cure the breach or begin to
take such steps and institute and diligently prosecute to completion such
proceedings as will cure such breach (if same cannot be cured) within twenty
(20) days after Lessor gives notice, Lessee shall be in default.
19. Remedies Under Default. Lessor shall have the following remedies if
Lessee defaults under the terms of this Lease. These remedies are not exclusive;
they are cumulative and in addition to any remedies now or later allowed by law
or otherwise provided for in this Lease:
Lessor may continue this Lease in full force and effect, and the Lease
shall continue in effect as long as Lessor does not terminate Lessee's right to
possession and Lessor shall have the right to collect rent when due. During the
period Lessee is in default, Lessor may enter the leased premises and relet
them, or any part of them, to third parties for Lessee's account. Lessee shall
be liable immediately to Lessor for all costs Lessor incurs in reletting the
leased premises, including, without limitation, attorney fees, brokers'
commissions, expenses of remodeling the leased premises required by the
reletting, and like costs. Reletting may be for a period shorter or longer than
the remaining term of this Lease. Lessee shall pay to Lessor the rent due under
this Lease on the dates the rent is due, less the rent Lessor received from any
reletting. No act by Lessor allowed by this section shall terminate this Lease
unless Lessor notifies Lessee that Lessor elects to terminate this Lease. After
Lessee's default and for as long as Lessor does not terminate Lessee's right to
possession of the leased premises, if Lessee obtains Lessor's consent, Lessee
shall have the right to assign or sublet its interest in this Lease, but Lessee
shall not be released from liability. Lessor's consent to a proposed assignment
or subletting shall not be unreasonably withheld.
5
<PAGE>
Lessor may terminate Lessee's right to possession of the leased
premises at any time Lessee is in default. No act by Lessor other than giving
notice to Lessee shall terminate this Lease insofar as Lessor's right to
terminate is concerned. Acts of maintenance, efforts to relet the leased
premises, or the appointment of a receiver on Lessor's initiative to protect
Lessor's interest under this Lease shall not constitute a termination of
Lessee's right to possession.
20. Prohibition Against Assignment or Subletting. Lessee shall not
voluntarily assign or encumber its interest in this Lease or in the leased
premises, or sublease all or any part of the leased premises, or allow any other
person or entity (except Lessee's authorized representatives) to occupy or use
all or any part of the leased premises, without first obtaining Lessor's
consent, which shall not be arbitrarily or unreasonably withheld. Any
assignment, encumbrance, or sublease without Lessor's consent shall be voidable
and, at Lessor's election, shall constitute a default. No consent to any
assignment, encumbrance, or sublease shall constitute a further waiver of the
provisions of this section. No interest of Lessee in this Lease shall be
assignable by operation of law.
Each of the following acts shall be considered an involuntary
assignment:
(1) If Lessee is or becomes bankrupt or insolvent, makes an assignment
for the benefit of creditors, or institutes a proceeding under the Bankruptcy
Act in which Lessee is bankrupt; or, if Lessee is a partnership or consists of
more than one person or entity, if any partner of the partnership or other
person or entity is or becomes bankrupt or insolvent, or makes as assignment for
the benefit of creditors;
(2) If a writ of attachment or execution is levied on this Lease; or
(3) If, in any proceeding or action to which Lessee is a party, a
receiver is appointed with authority to take possession of the leased premises.
21. Notices. All notices required or which may be given hereunder shall
be considered properly given if delivered in writing, personally or sent by
certified mail, postage prepaid with return receipt requested, addressed as set
forth below, or at such other address as may be furnished in writing in the same
manner as is provided herein for the giving of notices. Notices served by mail
shall be deemed to have been given on the date on which such notice is deposited
in the United States mail.
If to Lessor: RFS Investments
2815 Esthner Court
P.O. Box 13057
Wichita, Kansas 67213
6
<PAGE>
If to Lessee: Leonard's Metal, Inc.
2629 Esthner Court
Wichita, Kansas 67213
Attn:_________________
With a copy to: Leonard's Metal, Inc.
P.O. Box 678
St. Charles, Missouri 63301
Attn:_________________
22. Entirety of Agreement. This instrument incorporates all of the
obligations, agreements and understandings between the parties hereto concerning
the property covered by this Lease.
23. Captions. The captions and paragraph headings of this Lease are for
the sole purpose of ready identification and reference, and shall not be
considered as any part hereof or utilized or considered in interpreting or
construing this Lease.
24. Successors and Assigns Bound Hereby. This lease shall be binding
upon, and, subject to all restrictions on voluntary assignments contained
herein, shall extend to and inure to the benefit of the respective heirs,
executors, administrators, devisees, legatees, trustees, successors and assigns
of the parties hereto.
25. Preexisting Hazardous Substances. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the premises or
the property containing the premises, is either: (1) potentially injurious to
the public health, safety or welfare, the environment or the premises; (2)
regulated or monitored by any governmental authority; or (3) a basis for
liability to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products, by-products or
fractions thereof. Lessor agrees to indemnify, defend and hold harmless Lessee
and its agents, officers and employees from and against any and all losses,
liabilities and expenses of any kind or nature whatsoever (including, without
limitation, attorney's and consultant's fees and litigation costs) arising out
of or involving the existence of any Hazardous Substance on or about the
premises or the property of which the premises are a part on or before the
Commencement Date."
IN WITNESS WHEREOF, the parties have hereunto set their hands and
caused this Lease to be executed in duplicate, each of which shall constitute an
original, the day, month and year first above written.
RFS INVESTMENTS
/s/ Rudolf Sauerwein
/s/ Frank J. Sauerwein
By:
Rudolf Sauerwein
Frank J. Sauerwein
Title: Partners
LEONARD'S METAL, INC.
/s/ Ronald S. Saks
By:
Ronald S. Saks
Title: President
7
<PAGE>
EXHIBIT "A"
Plan Sheets
Site Plan M-179-1 Revised 12-16-94
Site Drainage Plan M-179-1A Revised 12-16-94
Wall Elevations M-179-2 Revised 12-16-94
Floor Plan M-179-3 Revised 12-16-94
Office Floor Plan & Schedules M-179-4 Revised 12-16-94
Reflected Ceiling Plan M-179-5 Revised 12-15-94
Foundation Floor Plan M-179-6 Revised 12-16-94
Details M-179-7 Revised 12-22-94
Mechanical Floor Plan M-1 Revised 12-10-94
Mechanical Floor Plan M-2 Revised 12-9-94
Plumbing Floor Plan P-1 Revised 12-14-95
Electrical Plan E-1 & E-2 Revised 12-19-94
LEONARD'S METAL, INC.
PROFIT SHARING AND SAVINGS PLAN AND TRUST
As Amended and Restated
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<PAGE>
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.
<PAGE>
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
<PAGE>
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:
<PAGE>
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
<PAGE>
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:
<PAGE>
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
<PAGE>
FIFTH 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 May 5, 1997 (collectively the
"Plan"); and
WHEREAS, pursuant to the provisions of Section 16.1 of the 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 Plan, the Employer hereby amends the Plan effective as January 1, 1998 in
the following respects:
I. Section 6.5 of Article VI of the Plan is hereby amended by deleting
said section and inserting the following in lieu thereof, which shall henceforth
be read as Section 6.5 of the Plan:
<PAGE>
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 equal to a fraction of the sum of the Profit Sharing Contribution
and the forfeitures for the Plan Year, the numerator of which is one
and the denominator of which is the number of Active Participants for
the Plan Year.
2. Article X of the Plan is hereby amended by adding the following
section thereto which shall henceforth be read as Section 10.11 of the Plan:
10.11 Senior Employee Withdrawal Option. A Participant who
attains 59 1/2 years of age while in the employ of an Employer may
withdraw, upon written notice delivered to the Plan Administrator, all
or any portion of the amounts then allocated to those such
Participant's Account; provided, however, neither the portion of the
Participant's Account which is invested in employer securities nor the
portion of the Account which is security for a Participant loan shall
be available for withdrawal under this section. Not more than one
withdrawal under this section shall be permitted during any plan year.
3. Except as expressly set forth in this Fifth 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 Fifth Amendment to be
executed this 2nd day of March, 1998.
LEONARD'S METAL, INC.
By:
Title:
The undersigned Trustee acknowledges and accepts the foregoing
amendment:
THE GUARANTY TRUST COMPANY OF MISSOURI
By:
Title:
Dated: _____________________, 1998
<PAGE>
SIXTH AMENDMENT TO THE LEONARD'S METAL, INC.
PROFIT SHARING AND SAVINGS PLAN AND TRUST,
AS AMENDED AND RESTATED
WHEREAS, LMI Aerospace, Inc. (formerly known as Leonard's Metal, Inc.)
(the "Company") 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 January1, 1989 and most recently amended as of January 1, 1998; (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 (as that term is defined in the Plan) hereby
amends the restated Plan effective as of April 16, 1998 in the following
respects:
1. By deleting in its entirety Section 2.11 of Article II of the
Restated Plan (on page 3 of the Restated Plan) and substituting in lieu thereof
the following language which shall henceforth be read as Section 2.11 of Article
II of the Restated Plan:
"2.11 Company - shall mean LMI Aerospace, Inc."
2. By deleting in its entirety Section 2.22 of Article II of the
Restated Plan (on page 4 of the Restated Plan) and substituting in lieu thereof
the following language which shall henceforth be read as Section 2.22 of Article
II of the Restated Plan:
"2.22 Employer - shall mean LMI Aerospace, Inc., Leonard's
Metal, Inc., LMI Finishing, Inc. and any other
business entity that adopts this Plan."
3. By deleting in its entirety Section 2.36 of Article II of the
Restated Plan (on page 8 of the Restated Plan) and substituting in lieu thereof
the following which shall henceforth be read as Section 2.36 of the Plan:
"2.36 Plan - shall mean the LMI Aerospace, Inc. Profit
Sharing and Savings Plan and Trust, as set forth
herein."
4. Except as expressly set forth in this Sixth 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 Sixth Amendment to be
executed this 11th day of May, 1998.
LMI AEROSPACE, INC.
By: ______________________________
Title: ____________________________
Attest:
- -------------------
LEONARD'S METAL, INC.
By: _______________________________
Title: _____________________________
Attest:
- -------------------
LMI FINISHING, INC.
By: _______________________________
Title: ____________________________
Attest:
- ------------------------
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF ST, CHARLES COUNTY, MISSOURI
And
LEONARD'S METAL, INC.
LOAN AGREEMENT
Dated as of September 1, 1990
All right, title and interest of The Industrial Development Authority of St.
Charles County, Missouri (the "Issuer") (with the exception of the right to
receive payments, if any, under Sections 3,3, 4*2(b), 5,3 and 6,3 hereof and the
rights to make determinations and receive notices as herein provided) in this
Agreement has been assigned pursuant to the Indenture referred to herein, for
the benefit of the holders of, and as security for payment of, the Bonds of the
Issuer described herein and for certain other of its obligations as described
herein.
LOAN AGREEMENT
(This Table of Contents is not a part of this Loan Agreement and is only for
convenience of reference)
TABLE OF CONTENTS
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT dated as of September 1, 1990 (the "Agreement"), by
and between The Industrial Development Authority of St. Charles County,
Missouri, a public corporation created and existing under the laws of the State
of Missouri (the "Issuer"), and Leonard's Metal, Inc., a Missouri corporation
(the "Company");
W I T N E S S E T H:
WHEREAS, the Issuer is authorized by the Industrial Development
Corporations Act, Chapter 349 of the Revised Statutes of Missouri (as
supplemented and amended, the "Act") to issue its revenue bonds for the purpose
of providing funds to purchase, construct, extend and improve certain "projects"
(as defined in the Act) and to refund any prior issue of bonds; and
WHEREAS, pursuant to such authority the Issuer has previously issued
its Industrial Development Revenue Bonds (LM Holding Project) Series 1983, in
the original aggregate principal amount of $3,100,000, on December 20, 1983 (the
"Prior Bonds"), the proceeds of which have been used to provide financing for
the acquisition, construction, improvement, furnishing and equipping of certain
manufacturing facilities located in St. Charles County, Missouri; and
WHEREAS, the Company has now requested the Issuer to make a loan to the
Company to (a) redeem the Prior Bonds and (b) acquire, construct, equip and/or
install additions and improvements to the Company's existing manufacturing
facilities located in St. Charles County, Missouri (the "Project", as
hereinafter more fully described); and
WHEREAS, the Issuer has determined that making the loan to the Company
will serve the intended purposes of the Act, provide the public benefits
contemplated by the Act and in all respects conform with the provisions and
requirements of the Act; and
WHEREAS, to obtain funds to lend to the Company, the Issuer has agreed
to issue and sell its Variable Rate Demand Industrial Development Revenue Bonds,
Series 1990 (Leonard's Metal, Inc. Project), in the aggregate principal amount
of $5,000,000 (the "Bonds"), which Bonds will be issued under the terms of an
Indenture of Trust (the "Indenture") of even date herewith between the Issuer
and Mark Twain Bank, St, Louis, Missouri, as trustee (the "Trustee"); and
WHEREAS, the Bonds will be secured by (i) an assignment and pledge of
this Agreement and the Promissory Note of the Company issued pursuant to this
Agreement (the "Note"), and (ii) moneys derived from drawings under the
irrevocable, transferable letter of credit issued by Harris Trust and Savings
Bank, Chicago, Illinois (the "Bank"), in favor of the Trustee for the benefit of
the owners f rom time to time of the Bonds, and any other letter of credit
issued in substitution therefor in accordance with the terms hereof (the "Letter
of Credit");
NOW, THEREFORE, in consideration of the respective representations and
agreements herein contained, the Parties hereto agree as follows (provided, that
in the performance of the agreement of the Issuer herein contained, any
obligation it may thereby incur shall not constitute a debt of the Issuer, or a
charge against its general credit, but shall be payable solely out of the
revenues and receipts derived from this Agreement, the Note, the sale of the
Bonds, the income from the temporary investment thereof and moneys derived from
drawings under the Letter of Credit, all as herein provided):
<PAGE>
ARTICLE I
DEFINITION OF TERMS
All words and phrases defined in Article I of the Indenture shall have
the same meanings in this Agreement. Certain terms used in this Agreement are
hereinafter defined in this Article I. When used herein, such terms shall have
the meanings given them by the language employed in this Article I defining such
terms unless the context clearly indicates otherwise:
"Acquisition and Construction Fund" means The Industrial Development
Authority of St. Charles County, Missouri Variable Rate Demand Industrial
Development Revenue Bond Acquisition and Construction Fund (Leonard's Metal,
Inc. Project) created and established in Section 6.6 of the Indenture.
"Acquisition and Construction Period" means the period between the
beginning of the acquisition, construction, equipping and/or installation of the
Project or the date on which the Bonds are first delivered to the purchasers
thereof., whichever is earlier, and the Completion Date,
"Act" means the Industrial Development Corporations Act, Chapter 349 of
the Revised Statutes of Missouri, as supplemented and amended.
"Agreement" means this Loan Agreement, as from time to time
supplemented and amended.
"Alternate Credit Facility" means an irrevocable letter of credit, a
surety bond, an insurance policy or other credit facility delivered to the
Trustee pursuant to Section 5,9(e) hereof.
"Authorized Company Representative" means such person at the time and
from time to time designated to act on behalf of the Company by written
certificate furnished to the Issuer, the Trustee and the Bank, containing the
specimen signature of such person, signed on behalf of the Company by the chief
executive officer, any vice president, the treasurer or the secretary of the
Company, Such certificate may designate an alternate or alternates.
"Bank" means Harris Trust and Savings Bank, Chicago, Illinois, in its
capacity as the issuer of the initial Letter of Credit pursuant to Section
5,9(a) hereof, its successors in such capacity and their assigns, and the issuer
of any substitute Letter of Credit pursuant to Section 5.9(b), Section 5.9(c) or
Section 5.9(d) hereof, its successors in such capacity and their assigns.
<PAGE>
"Bond Counsel" means the counsel who renders the opinion as to the
tax-exempt status of the interest on the Bonds on the date of the issuance, sale
and delivery of the Bonds or such other nationally recognized municipal bond
counsel of recognized expertise with respect to such matters as may be mutually
satisfactory to the Issuer, the Company, the Bank and the Trustee,
"Bond Fund" means The Industrial Development Authority of St, Charles
County, Missouri Variable Rate Demand Industrial Development Revenue Bond Fund,
Series 1990 (Leonard's Metal, Inc. Project), created and established in Section
6,2 of the Indenture.
"Bond Purchase Fund" means The Industrial Development Authority of St.
Charles County., Missouri Variable Rate Demand Industrial Development Revenue
Bond Purchase Fund, Series 1990 (Leonard's Metal, Inc. Project), created and
established in Section 6.8 of the Indenture.
"Bonds" means the Variable Rate Demand Industrial Development Revenue
Bond, Series 1990 (Leonard's Metal, Inc, Project) of the Issuer, in the
aggregate principal amount of $5,000,000 issued pursuant to the Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Leonard's Metal, Inc., a Missouri corporation, and any
surviving, resulting or transferee corporation as permitted by Section 5,2
hereof.
"Completion Date" means the earlier of (i) September 1, 1993 or (ii)
the date of completion of the Project as that date shall be certified as
provided in Section 3,4 hereof.
"Conversion Date" means the date on which the Fixed Rate on the Bonds
shall be effective pursuant to Section 2.2 of the Indenture.
"Cost of the Project" means the sum of the items authorized to be paid
from the Acquisition and Construction Fund pursuant to the provisions of (a)
through (h) of Section 3,3 hereof.
"Costs of Issuance" means those issuance costs described in Section
147(g) of the Code and any Regulations thereunder.
"Determination of Taxability" means a decision by the Internal Revenue
Service or a court of competent jurisdiction, as a result of the proceedings in
which the Company participates or is given the opportunity to participate, from
which decision no further right of appeal exists, that as a result of any action
taken, permitted or omitted to be taken by the Company, the interest payable on
the Bonds or any of them is includable in the gross income of any owner thereof
for federal income tax purposes (other than any owner who is a "substantial
user" or a "related person" within the meaning of Section 147(a) of the Code and
the applicable Regulations thereunder).
<PAGE>
"Event of Default" means any occurrence or event specified as such in
and defined as such by Section 6.1 hereof.
"Event of Taxability" means the enactment of legislation, the issuance
or rendering of a judicial decision or decree, or an order, ruling, regulation
or official statement, in any case of general application of the Department of
the Treasury or of the Internal Revenue Service of the United States, the
issuance or revocation of any published ruling or other announcement or
procedure of general application by the Department of the Treasury or the
Internal Revenue Service of the United States., or the occurrence of any other
act, event or circumstance, but in all cases excluding the occurrence of a
Determination of Taxability, which, in the opinion of Bond Counsel will cause
interest income on the Bonds, or any portion thereof, to be includable either
currently or retroactively in the gross income of any owner thereof for federal
income tax purposes (other than an owner who is a "substantial user" or "related
person" within the meaning of Section 147(a) of the Code and the applicable
Regulations thereunder) , Taxes which are or may be imposed on the interest
payable on the Bonds because such interest is or may be treated as a specific
preference item for individuals or corporations or as an adjustment item in
computing any minimum tax or in computing the environmental tax imposed on
certain corporations or in computing the branch profits tax imposed on certain
foreign corporations or with respect to interest on indebtedness which is not
deductible under Section 265 of the Code are examples of taxes which do not
result in the interest payable on the Bonds or any of them being includable in
the gross income of any owner thereof for federal income tax purposes.
"Fixed Rate" means the interest rate to be borne by the Bonds on and
after the Conversion Date, established in accordance with Section 2.2 of the
Indenture.
"Fixed Rate Period" means the period from and after the Conversion Date
until the maturity date of the Bonds.
"Indenture" means the Indenture of Trust dated as of September 1, 1990,
by and between the Issuer and the Trustee, as from time to time supplemented and
amended.
"Investment Obligations" shall mean, to the extent lawful for the
investment of moneys to be made therein, any of the following obligations or
securities on which neither the Company nor any of its subsidiaries is the
obligor:
(a) Governmental Obligations;
(b) interest-bearing deposit accounts (which may be represented by
certificates of deposit including Eurodollar certificates of deposit) in
national or state banks (which may include the Trustee, the Paying Agent, any
Co-Paying Agent, the Bond Registrar, the Tender Agent, the Remarketing Agent and
the Bank) having a combined capital and surplus of not less than $100,000,000;
(c) bankers' acceptances drawn on and accepted by commercial banks
(which may include the Trustee, the Paying Agent, any Co-Paying Agent, the Bond
Registrar, the Tender Agent, the Remarketing Agent and the Bank) having a
combined capital and surplus of not less than $100,000,000;
<PAGE>
(d) obligations of any agency or instrumentality of the United States
of America;
(e) commercial or finance company paper which is rated in The highest
rating category by a nationally recognized rating agency;
(f) repurchase agreements with banking or financial institutions having
a combined capital and surplus of not less than $100,000,000 (which may include
the Trustee, the Paying Agent, any Co-Paying Agent, the Bond Registrar, the
Tender Agent, the Remarketing Agent and the Bank), provided (i) that such
repurchase agreements shall be secured as to principal (but only to the extent
not insured by the Federal Deposit Insurance Corporation, the Federal Savings
and Loan Insurance Corporation, or a similar corporation chartered by the United
States of America) by Governmental obligations, the fair market value of which
is equal to one hundred percent (100%) of such principal, (ii) the Trustee or a
third party acting solely as agent for the Trustee has possession of the
underlying securities, (iii) the Trustee or its agent has a perfected first
security lien in such collateral, and (iv) such collateral is free and clear of
third party liens;
(g) Obligations of any state or political subdivision thereof or any
agency or instrumentality of such a state or political subdivision, the interest
on which, in the opinion of Bond Counsel, is not includable in the gross income
of the owners thereof for federal income tax purposes; and
(h) Any other obligations agreed upon in writing by the Bank and the
Company,
"Issuer" means The Industrial Development Authority of St, Charles
County, Missouri, a public corporation created and existing under the laws of
the State of Missouri, and any successor body to the duties or functions of the
Issuer.
"Land" means the real estate described in Exhibit B of this Agreement.
"Letter of Credit" means the initial irrevocable, transferable Letter
of Credit delivered to the Trustee pursuant to Section 5,9(a) hereof, and,
unless the context or use indicates another or different meaning or intent, any
substitute Letter of Credit delivered to the Trustee pursuant to Section 5,9(b),
Section 5.9(c) or Section 5,9(d) hereof.
"Letter of Instructions" means the Arbitrage Letter of Instructions,
dated the date of original delivery of the Bonds, and attached to the Issuer's
Arbitrage Certificate, as from time to time supplemented and amended.
"Note" means the promissory note of the Company made payable to the
Issuer and endorsed by the Issuer to the Trustee, delivered by the Company
pursuant to Section 4,2(a) hereof., in order to evidence the obligation of the
Company to repay the loan made hereunder, payments on which Note are provided to
be sufficient to pay the principal of, premium, if any, and interest on the
Bonds when due.
<PAGE>
"Principal User" means a principal user within the meaning of Section
144(a)(2) of the Code and the Regulations.
"Project" means the acquisition, construction, equipping and/or
installation of additions and improvements to the Company's existing
manufacturing and assembly facilities located at 3600 Mueller Road in the City
of St. Charles, Missouri and at 3030 N, Highway 94 in an unincorporated area of
St. Charles County, Missouri.
"Project Certificate" means the Company's Closing Certificate delivered
concurrently with the issuance of the Bonds.
"Rebate Fund" means the Rebate Fund created and established under the
Letter of Instructions.
"Redemption Fund" means The Industrial Development Authority of St.
Charles County, Missouri Redemption Fund for Industrial Development Revenue
Bonds (LM Holding Project) Series 1983, created and established in Section 6.14
of the Indenture.
"Regulations" means those regulations, whether now or hereafter
adopted, proposed or temporary, prepared by the United States Department of the
Treasury with respect to Section 103 or any of Sections 141 through 150 of the
Code.
"Reimbursement Agreement" means the Reimbursement Agreement dated as of
September 1, 1990, between the Company and the Bank, as from time to time
supplemented and amended, under the terms of which the Bank agrees to issue and
deliver the initial Letter of Credit to the Trustee, and, unless the context or
use indicates another or different meaning or intent, any letter of credit or
reimbursement agreement between the Company and the issuer of any substitute
Letter of Credit delivered to the Trustee pursuant to Section 5,9(b), Section
5.9(c) or Section 5,9(d) hereof, as from time to time supplemented and amended,
which provides that it is a Reimbursement Agreement for purposes of this
Agreement and the Indenture,
"Remarketing Agent" means Harris Trust and Savings Bank, Chicago,
Illinois, and any successors thereto, appointed in accordance with Section 10.11
of the Indenture.
"Remarketing Agreement" means the Placement and Remarketing Agreement
dated as of September 1, 1990 by and between the Company and the Remarketing
Agent, as from time to time supplemented and amended.
"Section 144 (a) (4) Capital Expenditures" means those expenditures
required to be taken into account with respect to the Bonds pursuant to Section
144(a)(4)(A) and (B) of the Code and the Regulations, including Section
1,103-10(b)(2)(ii) and (iii) of the Regulations [including any expenditures no
matter by whom made (regardless of how paid, whether in cash, notes or stock
<PAGE>
in a taxable or nontaxable transaction) paid or incurred during the six-year
period beginning 3 years before the date of issuance and delivery of the Bonds
with respect to facilities located in St, Charles County, Missouri and which
may, under-any rule or election under the Code, be treated as a capital
expenditure (whether or not such expenditure is so treated) and not paid or
reimbursed out of the proceeds of the Bonds], but not including excluded
expenditures pursuant to Section 144(a)(4)(C) of the Code and the Regulations,
including Section 1,103-10(b)(2)(iv) and (v) of the Regulations. Such term shall
also include research and development costs properly allocable to the Project no
matter where paid or incurred.
"Section 144 Related Person" means a "related person" within the
meaning of Section 144(a)(3) of the Code (or any successor sections thereto) and
the Regulations,
"Section 147 Related Person" means a "related person" within the
meaning of Section 147(a)(2) of the Code (or any successor sections thereto) and
the Regulations.
"State" means the State of Missouri.
"Stated Termination Date" means the date on which the Letter of Credit
is stated to expire.
"Substantial User" means "substantial user" within the meaning of
Section 147(a) of the Code (or any successor sections thereto) and the
Regulations.
"Trustee" means the Trustee at the time serving as such under the
Indenture.
"Variable Rate Period" means the period f rom the date of the initial
delivery of the Bonds to the earlier of the Conversion Date or the maturity date
of the Bonds.
The words "hereof", "herein$#, "hereunder" and other words of similar
import refer to this Agreement as a whole.
Unless otherwise specified, references to Articles, Sections and other
subdivisions of this Agreement are to the designated Articles, Sections and
other subdivisions of this Agreement as originally executed.
The headings of this Agreement are for convenience only and shall not
define or limit the provisions hereof.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations of the Issuer. The Issuer makes the
following representations as the basis for the undertakings on its part herein
contained:
<PAGE>
(a) The Issuer is a public corporation duly organized and existing
under the laws of the State, including particularly the Act, Under the
provisions of the Act and proceedings of the Issuer, the Issuer has the power
and authority to enter into and accept the benefits of the transactions
contemplated by., and to execute and deliver., this Agreement and the Indenture
and to carry out its obligations hereunder and thereunder.
(b) To its knowledge, neither the execution and delivery of this
Agreement, the Indenture or the Bonds, the consummation of the transactions
contemplated hereby or thereby nor the fulfillment of or compliance with the
terms and conditions of this Agreement, the Indenture or the Bonds conflicts
with or results in a breach of the terms, conditions or provisions of any
restriction or any agreement or instrument to which the Issuer is now a party or
constitutes a default under any of the foregoing.
(c) The Issuer has not assigned or pledged and will not assign or
pledge its right, title or interest in or to this Agreement or the Note, other
than to secure the Bonds and as otherwise provided in the Indenture.
(d) To its knowledge,. the Issuer is not in default under any of the
provisions of the laws of the State which would affect its existence or its
powers referred to in the preceding subsection (a).
(e) The Issuer has found that the refunding of the Prior Bonds and the
financing of the Cost of the Project will further the public purposes stated in
the Act.
(f) The Issuer has complied with all requirements of the Act and other
controlling State law in the authorization, execution and delivery of this
Agreement and the Indenture. No consent, approval, authorization or order of any
court or governmental or public agency, authority or body except those
heretofore obtained is required* by the Act with respect to the Issuer for the
valid execution, delivery and performance by the Issuer of this Agreement or the
Indenture.
(g) To its knowledge, there is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before or by any court, public board or
body, pending or threatened against the Issuer wherein an unfavorable decision,
ruling or finding would in any way materially adversely affect the transactions
contemplated by this Agreement, or which in any way would adversely affect the
validity or enforceability of the Bonds, the Indenture, this Agreement or any
proceedings of the Issuer in connection therewith.
(h) To its knowledge, no member of the Board of Directors of the Issuer
or any other officer of the Issuer has any significant or conflicting interest
(financial, employment or otherwise) in the Company, the Project or in the
transactions contemplated hereby,
Section 2.2. Representations of the Company. The Company makes the
following representations as the basis for the undertakings on its part herein
contained:
<PAGE>
(a) The Company is a corporation duly organized and validly existing
under the laws of the State of Missouri, is duly Qualified to do business and is
in good standing in the State, and has the power to enter into, and, by proper
corporate action has been duly authorized to execute and deliver this Agreement,
the Note, the Reimbursement Agreement, the Letter of Instructions and the
Remarketing Agreement.
(b) Neither the execution and delivery of this Agreement, the Note, the
Reimbursement Agreement, the Letter of Instructions and the Remarketing
Agreement to the consummation of the transactions contemplated hereby or
thereby, nor the fulfillment of or compliance with the terms and conditions of
this Agreement, the Note, the Reimbursement Agreement, the Letter of
Instructions and the Remarketing Agreement, conflicts with or results in a
breach of any of the terms, conditions or provisions of any material restriction
or any material agreement or instrument to which the Company is now a party or
by which it is bound, or constitutes a default under any of the foregoing, or
results in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of the property or assets of the Company or any subsidiary
thereof (excluding any liens created in contemplation of the issuance of the
Bonds). No condition exists which would, upon the execution of this Agreement,
with the lapse of time or the giving of notice, or both, become an Event of
Default hereunder.
(C) The statements, information, descriptions, estimates and
assumptions contained in the Project Certificate and the Letter of Instructions
are true, correct and complete, are based upon the best information available to
the Company, do not and will not, on the date of delivery of the Bonds, contain
any untrue statement or misleading statement of a material fact, and do not and
will not on the date or delivery of the Bonds, omit to state a material fact
required to be stated therein or necessary to make the statements, information,
descriptions, estimates and assumptions contained therein, in the light of the
circumstances under which they were made, not misleading.
(d) To its knowledge, no event has occurred or is continuing which has
resulted or would result in the interest paid on the Prior Bonds being included
or includable in the gross income of any owner thereof for federal income tax
purposes.
ARTICLE III
ACQUISITION, CONSTRUCTION, INSTALLATION AND
EQUIPPING OF THE PROJECT; ISSUANCE OF THE BONDS
Section 3.1. Acquisition, Expansion, Renovation, Installation and
Equipping of the Project; Title. The Company agrees that it will acquire,
construct, equip and/or install, or complete the acquisition, construction,
equipping and/or installation of, the Project; any plans and specifications for
any construction, including any and all supplements, amendments and additions
(or deletions) thereto (or therefrom), . shall be made available to the Issuer,
the Trustee and the Bank on written request.
<PAGE>
Except as otherwise disclosed to the Trustee and the Bank, the Company
represents and warrants that it has, or prior to the delivery of the Bonds will
have, acquired good and marketable title to the Land to enable the Company to
acquire, construct, equip and/or install and use the Project as contemplated by
this Agreement, The Company further represents that it has or will acquire good
and marketable title to all the real and personal property constituting the
Project in order to enable the Company to use the Project as contemplated by
this Agreement.
Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. In
order to provide funds to redeem the Prior Bonds and to finance a portion of the
Cost of the Project, as provided in Section 4.1 hereof, the Issuer agrees that
it will issue, sell and cause to be delivered to the purchasers thereof, the
Bonds in the aggregate principal amount of $5,000,000, bearing interest,
maturing and subject to prior redemption as set forth in the Indenture. The
Issuer will thereupon lend the proceeds of the Bonds to the Company by causing
the deposit of the proceeds of the Bonds in the Redemption Fund and in the
Acquisition and Construction Fund.
Section 3.3. Disbursements from the Acquisition and Construction Fund.
The Issuer authorizes and directs the Trustee, upon compliance with the
Indenture, to disburse the moneys in the Acquisition and Construction Fund to or
on behalf of the Company for the following purposes and, subject to the
provisions of Section 3,5 hereof and the provisions of the Project Certificate,
for no other purposes:
(a) Payment to the Company of such amounts, if any, as shall be
necessary to reimburse the Company in full for all advances and payments made by
it at any time prior to or after the delivery of the Bonds for expenditures in
connection with the preparation of plans and specifications for the Project
(including any preliminary study or planning of the Project or any aspect
thereof) and the acquisition, construction, equipping and/or installation of the
Project.
(b) Payment or reimbursement of any legal, financial and accounting
fees and expenses, the established administrative fees and expenses of the
Issuer, costs of the execution and filing of any instruments and the preparation
of all other documents in connection therewith, and payment or reimbursement of
all fees, costs and expenses for the preparation of this Agreement, the
Reimbursement Agreement, the Letter of Credit, the Letter of Instructions, the
Indenture, the Remarketing Agreement and the Bonds.
(c) Payment or reimbursement for labor, services, materials and
supplies used or furnished in the acquisition, construction, equipping and/or
installation of the Project, all as provided in the plans, specifications and
work orders therefor, payment or reimbursement for the cost of the acquisition,
construction, equipping and/or installation of utility services or other
facilities and the acquisition and installation of all real and personal
property deemed necessary in connection with the Project and payment or
reimbursement for the miscellaneous capitalized expenditures incidental to any
of the foregoing items.
(d) Payment or reimbursement of the fees, if any, for architectural..
engineering, legal, investment banking and supervisory services with respect to
the Project.
<PAGE>
(e) To the extent not paid by a contractor for construction or
installation with respect to any part of the Project, payment or reimbursement
of the premiums on all insurance required to be taken out and maintained during
the Acquisition and Construction Period, if any.
(f) Payment of the taxes, assessments, interest on the Bonds and other
charges, if any, that may become payable during the Acquisition and Construction
Period with respect to the Project, or reimbursement thereof if paid by the
Company.
(g) Payment or reimbursement of expenses incurred in seeking to enforce
any remedy against any supplier, conveyor., grantor, contractor or subcontractor
in respect of any default under a contract relating to the Project.
(h) Payment of any other costs permitted by the Act.
(i) All moneys remaining in the Acquisition and Construction Fund after
the Completion Date and after payment or provision for payment of all other
items provided for in the preceding subsections (a) to (h), inclusive, of this
Section 3,3, shall at the direction of the Company be used in accordance with
Section 3,4 hereof.
Notwithstanding the foregoing, in no event shall the Costs of Issuance
financed with the proceeds of the Bonds exceed 2% of the proceeds of the Bonds
within the meaning of Section 147(g) of the Code.
Except as otherwise provided in the Letter of Instructions, each of the
payments referred to in this Section 3.3, other than those payments referred to
in subsection (i) above, shall be made upon receipt by the Trustee of a written
requisition (substantially in the form set forth in Exhibit A to the Indenture)
signed by the Authorized Company Representative and approved in writing by the
Bank stating with respect to each payment to be made: (i) the requisition
number., (ii) the name and address of the person, firm or corporation to whom
payment is due, (iii) the amount to be paid, (iv) that each obligation mentioned
therein has been properly incurred, is a proper charge against the Acquisition
and Construction Fund and has not been the basis of any previous withdrawal, (v)
that payment of such requisition will not breach any limitation on disbursements
contained in the Project Certificate, (vi) that the amount remaining in the
Acquisition and Construction Fund after the withdrawal in question is made, the
reasonable estimate of investment income thereon, plus funds of the Company
available for such purpose will, after payment of the amounts then requested, be
sufficient to pay the cost of completing the Project, and (vii) in the case of
subsection (h), stating that such costs are costs permitted by the Act.
<PAGE>
Section 3.4. Establishment of Completion Date; Obligation of Company to
Complete. The Completion Date shall be evidenced to the Trustee and the Bank by
a certificate signed by the Authorized Company Representative, stating the Cost
of the Project and stating that (i) the acquisition, construction, equipping
and/or installation of the Project has been completed substantially in
accordance with the plans., specifications and work orders therefor and all
labor, services, materials and supplies used in such acquisition, construction,
equipping and/or installation have been paid for, and (ii) all other facilities
necessary in connection with the Project have been acquired, constructed,
equipped and/or installed in accordance with the plans, specifications and work
orders therefor, and all costs and expenses incurred in connection therewith
(other than costs and expenses for which the Company has withheld payment) have
been paid. If the Company withholds the payment of any such cost or expense of
the Project, the certificate shall state the amount of such withholding and the
reason therefor, Notwithstanding the foregoing., such certificate may state that
it is given without prejudice to any rights against third parties which exist at
the date of such certificate or which may subsequently come into being. It shall
be the duty of the Company to cause such certificate to be furnished to the
Trustee and the Bank promptly after the Project shall have been completed.
Within ten (10) days of the delivery by the Authorized Company
Representative of the certificate evidencing the Completion Date, the Trustee
shall retain in the Acquisition and Construction Fund a sum equal to the amounts
necessary for payment of Costs of the Project not then due and payable or the
liability for which the Company is contesting as set forth in said certificate,
Any amount not so retained in the Acquisition and Construction Fund for such
costs, and all amounts so retained but not subsequently used and for which
notice of such failure of use has been given by the Company to the Trustee,
shall be segregated by the Trustee and used by the Trustee, at the direction of
the Authorized -Company Representative, (a) to redeem Bonds on the earliest
redemption date permitted by the Indenture for which no prepayment premium or
penalty pertains, or, at the option of the Company, at an earlier redemption
date (provided that, in neither event shall such amounts be used to pay interest
or premium on the Bonds in connection with such redemption), (b) to purchase
Bonds on the open market (including Bonds subject to mandatory purchase) prior
to such redemption date (provided that, if Bonds are purchased at an amount in
excess of the principal amount thereof, the Company shall pay such excess out of
other funds) for the purpose of cancellation, or (c) for any other purpose,
provided that the Trustee is furnished with an opinion of Bond Counsel to the
effect that such use is lawful under the Act and will not adversely affect the
exclusion from federal income taxation of interest on any of the Bonds, Until
used for one or more of the foregoing purposes, such segregated amount may be
invested as permitted by Section 3.5 hereof, but may not be invested, without an
opinion of Bond Counsel to the effect that such investment will not adversely
affect the exclusion from federal income taxation of interest on any of the
Bonds, to produce a yield on such amount (computed from the Completion Date and
taking into account any investment of such amount from the Completion Date)
greater than the yield on the Bonds, computed in accordance with applicable
provisions of the Code and Regulations, The Issuer agrees to cooperate with the
Trustee and take all required action necessary to redeem the Bonds or to
accomplish any other purpose contemplated by this Section 3.4. To the extent
that Revenue Procedure 79-5, as amplified by Revenue Procedure 81-22, of the
Internal Revenue Service is applicable to the Bonds, the Company agrees to
comply therewith.
In the event the moneys in the Acquisition and Construction Fund available
for payment of the Cost of the Project should not be sufficient to pay the costs
thereof in full, the Company agrees to pay directly the costs of completing the
Project as may be in excess of the moneys available therefor in the Acquisition
and Construction Fund, The Issuer does not make any warranty, either express or
implied, that the moneys which will be paid into the Acquisition and
Construction Fund and which, under the provisions of this Agreement, will be
available for payment of a portion of the Cost of the Project, will be
sufficient to pay all the costs which will be incurred in that connection, The
Company agrees that if after exhaustion of the moneys in the Acquisition and
Construction Fund the Company should pay any portion of the Cost of the Project
pursuant to the provisions of this Section 3.4, it shall not be entitled to any
reimbursement therefor from the Issuer, from the Trustee or from the Bank, nor
shall it be entitled to any diminution of the amounts payable under Section 4.2
hereof or under the Note,
<PAGE>
Section 3.5. Investment of Moneys in the Acquisition and Construction
Funds the Bond Fund and the Bond Purchase Fund. Any moneys held as part of the
Acquisition and Construction Fund shall be invested or reinvested by the
Trustee, at the oral (promptly confirmed in writing) or written direction of the
Authorized Company Representative, as provided in Article VII of the Indenture,
in Investment Obligations specified by the Authorized Company Representative,
Any moneys held as a part of the Bond Fund (including any moneys held for the
payment of a particular Bond) shall be invested or reinvested by the Trustee at
the written direction of the Authorized Company Representative as provided in
Article VII of the Indenture, to the extent permitted by law, in bonds, notes,*
certificates of indebtedness, treasury bills or other securities constituting
direct obligations of the United States of America specified by the Authorized
Company Representative, except to the extent Article VII of the Indenture
requires that said moneys be invested or reinvested solely in Governmental
Obligations. Any such securities may be purchased at the offering or market
price thereof at the time of such purchase. The Trustee may make any and all
such investments through its own bond department.
The investments so purchased shall be held by the Trustee and shall be
deemed at all times a part of the Acquisition and Construction Fund or the Bond
Fund, as the case may be, and the interest accruing thereon and any profit
realized therefrom shall be credited to such fund and any net losses resulting
from such investment shall be charged to such fund and paid by the Company.
Any moneys held as part of the Bond Purchase Fund shall not be
invested.
Section 3.6. Special Arbitrage Covenants. The Issuer and the Company
each covenant for themselves, but not each other, that so long as Bonds shall
remain outstanding (any provisions in this Agreement or the Indenture to the
contrary notwithstanding with respect to investment of moneys, whether such
moneys were derived from the proceeds of the Bonds or from any other source), no
use will be made by them of any moneys which would cause the Bonds to be
classified as "arbitrage bonds" within the meaning of Section 148 of the Code,
and further covenant to comply with the requirements of the Letter of
Instructions and of said Section 148 and the Regulations and to execute such
certificates as may be necessary to evidence such compliance. To the extent of
any inconsistency between the Letter of Instructions and this Agreement, the
Letter of Instructions shall control.
The Issuer hereby authorizes and directs the Company to cause the
Trustee to transfer moneys in the Acquisition and Construction Fund to the
Rebate Fund to the extent required under the Letter of Instructions.
<PAGE>
Section 3.7. No Additional Bonds. The Issuer covenants that it shall
not issue additional bonds on a parity with the Bonds.
Section 3.8. Redemption of Prior Bonds. Such proceeds of the Bonds as
shall be directed by the Issuer to the Trustee at the time of issuance and
delivery of the Bonds shall be deposited in the Redemption Fund established
under the Indenture for redemption of the Prior Bonds, The balance of the
proceeds of the Bonds (exclusive of accrued interest, if any) shall be deposited
in the Acquisition and Construction Fund.
ARTICLE IV
REPAYMENT PROVISIONS
Section 4.1 Bond Proceeds. The Issuer covenants and agrees, upon the
terms and conditions of this Agreement, to lend the proceeds received from the
sale of the Bonds to the Company in order to redeem the Prior Bonds and to
finance the Cost of the Project, Pursuant to said covenant and agreement, the
Issuer will issue the Bonds upon the terms and conditions contained in the
Indenture and this Agreement, and will lend the proceeds of the Bonds to the
Company by causing the Bond proceeds to be applied as provided in Article III
hereof, Such proceeds shall be disbursed by the Trustee to or on behalf of the
Company as provided in Section 3.3 hereof.
Section 4.2. Repayment of the Loan and Payment of Other Accounts
Payable. (a) As evidence of its obligation to repay the loan made hereunder by
the Issuer, the Company will issue its Note in the principal amount of
$5,000,000, The Note shall be dated the date of issuance and delivery of the
Bonds, shall mature on November 1 in the years and in the amounts set forth in
Exhibit A attached hereto, except as the provisions hereinafter set forth with
respect to prepayment may become applicable thereto, The Note shall bear
interest on the unpaid principal amount thereof from the date of the Note at
such rates equal to the interest rates from time to time borne by the Bonds,
calculated on the same basis and to be paid at the same times as interest on the
Bonds is calculated and paid from time to time, The Note shall be subject to
prepayment as herein provided, Payments of principal, of premium, if any, and
interest on the Note shall be made in lawful money of the United States of
America in Federal or other immediately available funds, The Note shall be in
substantially the same form as Exhibit A attached hereto and made a part hereof,
The Issuer and the Company agree that the Note shall be payable to the Issuer,
and shall be endorsed and pledged by the Issuer to the Trustee. The Company
covenants and agrees that the payments of principal of, premium, if any, and
interest on the Note shall at all times be sufficient to enable the Issuer to
pay when due the principal of, premium, if any, and interest on the Bonds;
provided, that the Excess Amount (as hereinafter defined) held by the Trustee in
the Bond Fund on a payment date shall be credited against the payment due on
such date; and provided further, that, subject to the provisions of the
immediately following sentence, if at any time the amount held by the Trustee in
the Bond Fund should be sufficient (and remain sufficient) to pay on the dates
required the principal of, interest and premium, if any, on the Bonds then
remaining unpaid, the Company shall not be obligated to make any further
<PAGE>
payments under the provisions of this Section 4.2(a) or on the Note.
Notwithstanding the provisions of the preceding sentence, if on any date the
Excess Amount held by the Trustee in the Bond Fund is insufficient to make the
then required payments of principal (whether at maturity or upon redemption
prior to maturity or acceleration), interest and premium, if any, on the Bonds
on such date, the Company shall forthwith pay such deficiency. The term "Excess
Amount" as of any interest payment date shall mean the amount in the Bond Fund
on such date in excess of the amount required for the payment of the principal
of the Bonds which theretofore has matured at maturity or on a date fixed for
redemption and premium, if any, on such Bonds in all cases where Bonds have not
been presented for payment and paid, or for the payment of interest which has
theretofore come due in all cases where interest checks have not been presented
for payment and paid.
If the Company shall fail to pay any installment of principal of,
premium, if any, or interest on the Note or under this Section 4,2(a), the
installment so in default shall continue as an obligation of the Company until
the amount so in default shall have been fully paid, and the Company agrees to
pay same with interest thereon until paid (to the extent legally enforceable) at
a rate equal to the rate borne by the Bonds from time to time from the due date
thereof until paid.
(b) The Company also agrees to pay the established administrative fees
and expenses of the Issuer incurred in fulfilling the Issuer's obligations under
this Agreement, the Note and the Indenture, which are not otherwise required to
be paid by the Company under the terms of this Agreement.
(c) The Company also agrees to pay to the Bond Registrar, the Tender
Agent and the Trustee (1) the initial acceptance fee of the Trustee and the
costs and expenses, including reasonable attorneys' fees, incurred by the
Trustee in entering into and executing the Indenture, and (2) during the term of
this Agreement (i) an amount equal to the annual fee of the Trustee for the
ordinary services of the Trustee, as trustee, rendered and its ordinary expenses
incurred under the Note and the Indenture, including reasonable attorneys' fees,
as and when the same become due, (ii) the fees, charges and expenses of the
Trustee, the Bond Registrar and the Tender Agent., as and when the same become
due, and (iii) the fees, charges and expenses of the Trustee for the necessary
extraordinary services rendered by it and extraordinary expenses incurred by it
under the Note and the Indenture, including reasonable attorneys' fees, as and
when the same become due.
(d) The Company also agrees to pay all fees, charges and expenses of
the Remarketing Agent as set forth in the Remarketing Agreement in carrying out
its duties and obligations and performing its services under and pursuant to the
Indenture and the Remarketing Agreement.
(e) In addition to the payments required to be made by the Company
pursuant to the foregoing subsections of this Section 4.2 and the Note, the
Company agrees to pay to the Tender Agent amounts sufficient to pay the purchase
price of any Bonds to be purchased pursuant to Section 4,1 or Section 4,2 of the
Indenture, on the purchase date of such Bonds as set forth in said Section 4.1
or said Section 4.2, as the case may be, All such payments shall be made to the
<PAGE>
Tender Agent in lawful money of the United States of America in Federal or other
immediately available funds at the principal corporate trust office of the
Tender Agent.
(f) In the event that the Trustee is authorized and directed to draw
moneys under the Letter of Credit in accordance with the provisions of the
Indenture to the extent necessary to pay the principal of, premium, if any, and
interest on the Bonds and the purchase price of Bonds if and when due, any
moneys derived from' a drawing under the Letter of Credit shall constitute a
credit against the obligation of the Company to make corresponding payments on
the Note and under subsections (a) and (e) of this Section 4.2.
(g) If the date when any of the payments required to be made by this
Section 4.2 is not a Business Day, then such payments may be made on the next
Business Day with the same force and effect as if made on the nominal due date,
and no interest shall accrue for the period after such date.
(h) The Company shall have, and is hereby granted, the option to elect
to convert the interest rate borne by the Bonds to the Fixed Rate pursuant to
the provisions of Section 2.2 of the Indenture, subject to the terms and
conditions set forth therein.
(i) The Company also agrees to pay all rebatable arbitrage to the
United States Government in the amounts and at the times as required under
Section 148(f) of the Code.
Section 4.3. No Defense or Set-Off; Unconditional Obligation. The
obligations of the Company to make the payments required in Section 4.2 hereof
and pursuant to the Note and to perform and observe the other agreements on its
part contained herein shall be absolute and unconditional, irrespective of any
defense or any rights of set-off, recoupment or counterclaim it might otherwise
have against the Issuer, the Trustee, the Tender Agent, the Paying Agent, the
Bond Registrar, the Remarketing Agent or the Bank, The Company shall pay net
during the term of this Agreement the payments to be made on account of the loan
as prescribed in Section 4,2 hereof and all other payments required hereunder
free of any deductions and without abatement, diminution or set-off other than
those herein expressly provided, Until such time as the principal of, premium,
if any, and interest on the Note and the Bonds shall have been fully paid, or
provision for the payment thereof shall have been made in accordance with the
Indenture, the Company: (i) will not suspend or discontinue any payments
provided for in Section 4,2 hereof or the Note; (ii) will perform and observe
all of its agreements contained in this Agreement in all material respects; and
(iii) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, its failure to complete the Project,
the occurrence of any acts or circumstances that may constitute failure of
consideration, destruction of or damage to the Project, commercial frustration
of purpose, any change in the tax laws of the United States of America or the-
State or any political subdivision thereof, or any failure of the Issuer, the
Trustee or the Bank to perform and observe any agreement, whether express or
implied, or any duty, liability or obligation arising out of or connected with
this Agreement, except to the extent permitted by this Agreement.
<PAGE>
Section 4.4. Assignment and Pledge of Issuer's Rights. As security for
the payment of the Bonds, the Issuer will assign and pledge to the Trustee all
right, title and interest of the Issuer in and to this Agreement and the Note,
including the right to receive payments hereunder and thereunder (except the
right to receive payments, if any, under Sections 3,3, 4.2(b)j, 5,3 and 6.3
hereof and the rights to make determinations and receive notices as herein
provided), and hereby directs the Company to make said payments directly to the
Trustee. The Company herewith assents to such assignment and pledge and will
make payments directly to the Trustee without defense or set-off by reason of
any dispute between the Company and the Issuer or the Trustee.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
Section 5.1. Issuer's and Trustee's Right of Access to the Project. The
Company agrees that during the term of this Agreement the Issuer, the Trustee,
the Bank and their duly authorized agents shall have the right during regular
business hours, with reasonable notice, to enter upon the Land and examine and
inspect the Project, The Company agrees that the Issuer, the Trustee and their
duly authorized agents shall have, subject to such limitations, restrictions and
requirements as the Company may reasonably prescribe such rights of access to
the Project.
Section 5.2. Company to Maintain its Corporate Existence; Conditions
under which Exceptions Permitted. The Company agrees that during the term of
this Agreement it will maintain its corporate existence, will not dissolve or
otherwise dispose of all or substantially all of its assets, and will not
consolidate with or merge into another corporation or permit one or more
corporations to consolidate with or merge into it; provided, that the Company
may, without violating the agreements contained in this Section 5.2. consolidate
with or merge into another domestic corporation (i.e., a corporation
incorporated and existing under the laws of the United States of America or any
state, district or territory thereof) or permit one or more other domestic
corporations to consolidate with or merge into it, or sell or otherwise transfer
to another domestic corporation all or substantially all of its assets as an
entirety and thereafter dissolve, provided, in the event the Company is not the
surviving, resulting or transferee corporation, as the case may be, that the
surviving, resulting or transferee corporation (i) is a domestic corporation as
aforesaid, (ii) is qualified to do business in the State, (iii) assumes in
writing all of the obligations of the Company under this Agreement, the Note,
the Letter of Instructions, the Reimbursement Agreement and the Remarketing
Agreement and (iv) has a "Consolidated Tangible Net Worth" (after giving effect
to such merger, consolidation or transfer) of not less than 95% of the
Consolidated Tangible Net Worth of the Company immediately prior to such merger,
consolidation or transfer, The term "Consolidated Tangible Net Worth", as used
in this Section 5.2, shall mean the difference obtained by subtracting total
consolidated liabilities of the Company and its consolidated subsidiaries, from
total consolidated assets of the Company and its consolidated subsidiaries, less
the aggregate amount of any intangible assets, including, without limitation,
good will, franchises, licenses, patents, trademarks, trade names, copyrights,
service marks and brand names.
<PAGE>
Section 5.3. Release and Indemnification Covenants. (a) The Company
shall indemnify and hold the Issuer (including any official, agent, officer,
director or employee thereof and counsel to the Issuer) harmless against any and
all claims asserted by or on behalf of any person, firm, corporation, private or
public, arising or resulting from, or in any way connected with (i) the
financing, installation, operation, use or maintenance of the Project, (ii) any
act, including negligent acts, failure to act or misrepresentation by any
person, firm, corporation or governmental authority, including the Issuer, in
connection with the issuance, sale or delivery of the Bonds, (iii) any act,
failure to act or misrepresentation by the Issuer in connection with, or in the
performance of any obligation related to the issuance, sale and delivery of the
Bonds or under this Agreement, the Letter of Instructions or the Indenture,
including all liabilities, costs and expenses, including reasonable attorneys'
fees, incurred in any action or proceeding brought by reason of any such claim.
In the event that any action or proceeding is brought against the Issuer by
reason of any such claim, such action or proceeding shall be defended against by
counsel as the Issuer shall determine, and the Company shall indemnify the
Issuer for costs of such counsel. The Company upon notice from the Issuer shall
resist and defend such an action or proceeding on behalf of the Issuer. The
Company shall also indemnify the Issuer from and against all costs and expenses,
including reasonable attorneys, fees, lawfully incurred in enforcing any
obligation of the Company under this Agreement. Notwithstanding the foregoing,
nothing contained in this subsection shall be construed to indemnify or release
the Issuer from any liability which it would otherwise have had arising from the
intentional misrepresentation or willful misconduct on the part of the Issuer,
or any official, officers, employees, agents or representatives of the Issuer
acting in their capacities other than as contemplated by this Agreement.
(b) The Company also agrees to pay and to indemnify and hold harmless
the Bank., the Trustee, the Bond Registrar, any person who "controls" the Bank,
the Bond Registrar or the Trustee within the meaning of Section 15 of the
Securities Act of 1933, as amended, and any member, officer, director, official
and employee of the Remarketing Agent, the Bank, the Bond Registrar or the
Trustee (collectively called the "Indemnified Parties") from and against, any
and all claims, damages, demands, expenses, liabilities and losses of every
kind, character and nature asserted by or on behalf of any person arising out
of, resulting from, or in any way connected with, the condition, use,
possession, conduct., management, planning, design, acquisition, construction,
installation, renovation or sale of the Project or any part thereof, The Company
also covenants and agrees, at its expense, to pay, and to indemnify and save the
Indemnified Parties harmless of, from and against, all costs, reasonable counsel
fees, expenses and liabilities incurred in any action or proceeding brought by
reason of any such claim or demand, In the event that any action of proceeding
is brought against the Indemnified Parties by reason of any such claim or
demand, the Indemnified Parties shall immediately notify the Company, which
shall resist and defend any action or proceeding on behalf of the Indemnified
Parties, including the employment of counsel, the payment of all expenses and
the right to negotiate and consent to settlement. Any one or more of the
Indemnified Parties shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Parties unless the
employment of such counsel has been specifically authorized by the Company. If
such separate counsel is employed, the Company may join in any such suit for the
protection of its own interests.
<PAGE>
The Company shall not be liable for any settlement of any such action
effected without its consent, but if settled with the consent of the Company or
if there be a final judgment for the plaintiff in any such action, the Company
agrees to indemnify and hold harmless the Indemnified Parties.
Section 5.4. Records and Financial Statements of Company. So long as a
Letter of Credit is not in effect, the Trustee shall be permitted after
reasonable notice during regular business hours during the term of this
Agreement, to examine the books and records of the Company with respect to the
Project.
The Company agrees to furnish the Trustee with a financial report of
the Company within one hundred twenty (120) days after the close of each fiscal
year of the Company and after any Conversion Date, a balance sheet and statement
of income, showing the financial position of the Company and its consolidated
subsidiaries, if any., at the close of each such fiscal year and the results of
the operations of the Company and its consolidated subsidiaries, if any, for
each such fiscal year, certified by an independent certified public accountant
selected by the Company for such fiscal year, The obligation of the Company
under the preceding sentence shall be satisfied by delivering to the Trustee a
copy of its annual report to its stockholders, The Company further agrees to
furnish the Trustee with a financial report of the Company within sixty (60)
days of the close of each quarter of each fiscal year of the Company (other than
the fourth quarter of each such fiscal year) a balance sheet and statement of
income, showing the financial position of the Company and its consolidated
subsidiaries, if any, at the close of each such quarter and the results of
operations of the Company and its consolidated subsidiaries, if any, for each
such quarter.
The Company further agrees to furnish the Trustee with such other
financial statements and information concerning the Company as the Trustee may
reasonably require on any date when the Letter of Credit is not in effect.
Section 5.5. Tax-Exempt Status. The Issuer covenants that it shall,
prior to or concurrently with the issuance of the Bonds, and does hereby duly
elect to have the provisions of Section 144(a)(4) of the Code apply to such
issue, The Company covenants that it shall furnish to the Issuer whatever
information is necessary for the Issuer to perfect such election and shall file
or cause to be filed such information with respect to said election or may be
required by Bond Counsel.
The Company represents that (i) the proceeds of the Bonds are to be
used with respect to facilities located or to be located within St, Charles
County, Missouri, (ii) on the date of issuance of the Bonds, the Company will be
the only Principal User of the facilities financed with the proceeds of the
Prior Bonds or to be financed with the proceeds of the Bonds, and the Company
presently intends that it will be the only Principal User of the facilities
financed with the proceeds of the Prior Bonds or to be financed with the
proceeds of the Bonds; (iii) there are no outstanding obligations of any state,
territory or possession of the United States, or any political subdivision of
the foregoing or of the District of Columbia constituting "exempt small issues"
within the meaning of the Code and Regulations, the proceeds of which have been
or are to be used primarily with respect to facilities located in St. Charles
County, Missouri., and which are to be used primarily by the Company (including
any Section 144 Related Person to the Company) other than the Bonds and the
Prior Bonds, which are to be redeemed in full on the date of issuance of the
Bonds.
<PAGE>
The Company further represents that it does not presently intend to
make any Section 144(a)(4) Capital Expenditures which will cause the interest on
the Bonds to become subject to federal income taxation pursuant to the
provisions of Section 144 of the Code. The Company further covenants and
represents that it shall not take any action (other than making the aforesaid
Section 144(a)(4) Capital Expenditures) and it has not permitted and will not
permit any action to be taken (other than the making by the Company of the
Section 144(a)(4) Capital Expenditures described in the immediately preceding
sentence) which would cause the interest on the Bonds to become subject to
federal income taxes, provided, that the Company shall not have violated this
covenant if the interest on any of the Bonds becomes taxable to a person who is
a Substantial User of the Project or a Section 147 Related Person thereto, If
(i) Revenue Ruling 81-216 or Proposed Treasury Regulation Sections 1,103-7(b)(b)
and 1,103-10(a), or (ii) Section 144(a)(9) of the Code are applicable to the
Bonds and result in the aggregation of Bonds with any other obligation issued or
to be issued by or on behalf of any state, territory or possession of the United
States, or any political subdivision of the foregoing, or of the District of
Columbia, which constitutes an "industrial development bond" or "private
activity bond" within the meaning of the Code, causing the interest on the Bonds
to be or become subject to federal income taxation pursuant to Section 144 of
the Code, the Company shall be deemed to have failed to observe the immediately
foregoing covenant.
The Company further covenants that it shall furnish to the Issuer and
the Trustee (i) at the time of the issuance of the Bonds, a statement of the
aggregate amount of Section 144(a)(4) Capital Expenditures other than those to
be paid or reimbursed out of the proceeds of the Bonds, made or incurred with
respect to facilities located in St. Charles County, Missouri during the period
beginning three (3) years before the date of such issue, (ii) within thirty (30)
days after the Company or a Section 144 Related Person has made 'or incurred the
maximum amount of Section 144(a)(4) Capital Expenditures permitted under Section
144(a)(4) of the Code, a statement to that effect and (iii) at least annually,
supplemental statements listing by date and amount any Section 144(a)(4) Capital
Expenditures during the three-year period beginning as of the date of issuance
of the Bonds.
The Company further covenants and agrees, so long as the Bonds are
outstanding, that it will not sell any portion of the Project to, or enter into
a lease, sublease or other arrangement for the management or direct or indirect
use of all or any portion of the Project with any person who would be a test
period beneficiary with respect to the Bonds (including any Section 144 Related
Person thereto) within the meaning of Section 144(a)(10) of the Code or who
would be a Principal User of the Project (including any Section 144 Related
Person thereto), if such sale., lease, sublease or other arrangement would cause
the dollar limitations set forth in Section 144(a)(10) or Section 144(a)(4) of
the Code to be exceeded, The Company further covenants that, with respect to any
lease, sublease or arrangement for use of all or any portion of the Project with
a person who would be a test period beneficiary with respect to the Bonds
(including any Section 144 Related Person thereto) within the meaning of Section
144(a)(10) of the Code or who would be a Principal User of the Project
<PAGE>
(including any Section 144 Related Person thereto), it will cause such lease,
sublease or arrangement to contain a provision requiring the test period
beneficiary (or any Section 144 Related Person thereto) or the Principal User
(or any Section 144 Related Person thereto), as the case may be, to comply with
all applicable covenants set forth in this Section 5.5, Without limiting the
generality of the foregoing, the Company specifically agrees that all purchasers
of any portion of the Project who would be a test period beneficiary and all
lessees and sublessees of more than ten percent (10%) of the net leasable floor
space of the Project, or whose net rental payments exceed ten percent (10%) of
the total net rental payments derived from the Project, will be required by the
terms of the sale agreement, the lease, the sublease or other arrangement to
file such statements and cooperate with the Issuer and the Company to comply
with the requirements of this Section, Promptly after. the Company first becomes
aware of any Determination of Taxability, the Company shall give written notice
thereof to the Issuer, the Trustee, the Remarketing Agent and the Bank.
Section 5.6. Taxes and Governmental Charges. The Company will promptly
pay, as the same become due, all lawful taxes, assessments, utility charges and
other governmental charges of any kind whatsoever levied or assessed by federal,
state or any municipals government upon or with respect to the Project or any
part thereof or any payments under this Agreement, The Company may, at its
expense and in its own name and behalf in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, permit the
taxes, assessments or other charges so contested to remain unpaid during the
period of such contest and any appeal therefrom, provided that during such
period enforcement of any such contested item shall be effectively stayed. The
Issuer, at the expense of the Company, will cooperate fully with the Company in
any such contest.
Section 5.7. Maintenance and Repair; Insurance. The Company will
maintain the Project in a reasonably safe and sound operating condition, making
from time to time all reasonably needed material repairs thereto, and shall
maintain reasonable amounts of insurance coverage with respect to the Project
and shall pay all costs of such maintenance, repair and insurance.
Section 5.8. Qualification in State. Subject to the provisions of
Section 5,2 hereof, the Company agrees that throughout the term of this
Agreement, it will be qualified to do business in the State.
Section 5.9. Letter of Credit. (a) on or prior to the issuance, sale
and delivery of the Bonds to the purchaser or purchasers thereof pursuant to
Section 2.6 of the Indenture, the Company hereby covenants and agrees to obtain
and deliver to the Trustee the initial, irrevocable, transferable Letter of
Credit to be issued by the Bank in favor of the Trustee for the benefit of the
owners from time to time of the Bonds in the form of Appendix I to the initial
Reimbursement Agreement. The initial Letter of Credit shall be dated the date of
issuance and delivery of the Bonds; shall expire on September 15, 1993, unless
otherwise extended in accordance with the terms and provisions of subsection (b)
below and the Reimbursement Agreement; shall be in the amount of (i) the
aggregate principal amount of the Bonds (A) to enable the Trustee to pay the
principal of the Bonds at maturity, upon call for redemption prior to maturity
<PAGE>
or acceleration, and (B) to enable the Trustee to pay the portion of purchase
price of Bonds tendered or deemed to be tendered to the Trustee for purchase,
equal to the aggregate principal amount of such Bonds, plus (ii) an amount equal
to the interest to accrue on the Bonds. for fifty-eight (58) days at the Cap
Rate (A) to enable the Trustee to pay interest accrued on the Bonds on the dates
and in the manner set forth in the Indenture, and (B) to enable the Trustee to
pay the portion of the purchase price of Bonds tendered or deemed to be tendered
to the Trustee for purchase, equal to the accrued interest on such Bonds, plus
(iii) an amount equal to three percent (3%) of the principal amount of the Bonds
to enable the Trustee to pay any redemption premium on the Bonds.
(b) During the Variable Rate Period, except as hereinafter provided, at
any time prior to the fifteenth Business Day prior to the interest payment date
on the Bonds immediately preceding the Stated Termination Date of the Letter of
Credit, the Company may, at its option provide for the extension of the term of
the Letter of Credit or deliver to the Trustee a substitute Letter of Credit as
hereinafter provided. If the Company chooses to extend the term of the Letter of
Credit then such extension shall be to the fifteenth day of any calendar month
at least one (1) year after the Stated Termination Date of the existing Letter
of Credit, and the Company shall furnish proof of such extension, in the form of
an amendment to the Letter of Credit evidencing such extension, to the Trustee
no later than the fifteenth Business Day prior to the interest payment date on
the Bonds immediately preceding the Stated Termination Date of the Letter of
Credit, Subject to the provisions of Section 2.9 of the initial Reimbursement
Agreement and any similar provision of any subsequent Reimbursement Agreement if
the Company chooses to provide a substitute Letter of Credit, such substitute
Letter of Credit shall be an irrevocable letter of credit in substantially the
same form and tenor as the initial Letter of Credit in an amount equal to the
Outstanding principal amount of the Bonds, plus an amount equal to the interest
to accrue on the Bonds then outstanding for fifty-eight (58) days at the Cap
Rate, plus an amount equal to three percent (3%) of the principal amount of the
Bonds to enable the Trustee to pay any redemption premium on the Bonds, with
administrative provisions reasonably satisfactory to the Trustee, but provided
to expire on the fifteenth day of any calendar month at least one (1) year after
the Stated Termination Date of the existing Letter of Credit., such substitute
Letter of Credit to be issued by a commercial bank provider and delivered to the
Trustee on or before the fifteenth Business Day prior to the interest payment
date on the Bonds immediately proceeding the Stated Termination Date of the
Letter of Credit; provided, that unless, simultaneously with the delivery of the
substitute Letter of Credit to the Trustee, the Company shall furnish to the
Trustee written evidence from each Rating Agency by which the Bonds are then
rated, if any, to the effect that such Rating Agency has reviewed the proposed
substitute Letter of Credit and that the substitution of the proposed substitute
Letter of Credit will not, by itself, result in a reduction or withdrawal of its
rating of the Bonds from that which then prevails or, if the Bonds are not then
rated by a Rating Agency, the provider of the substitute Letter of Credit shall
have a commercial paper credit rating at least equal to the then commercial
paper credit rating of the bank which provided the Letter of Credit for which
the substitute Letter of Credit is being issued, the Bonds shall be subject to
mandatory tender pursuant to Section 4,2 of the Indenture. Simultaneously with
the delivery of any such substitute Letter of Credit to the Trustee, the Company
shall also have provided the Trustee with written evidence from the Bank which
issued the existing Letter of Credit that the Company shall have paid all of its
obligations under the related Reimbursement Agreement to such Bank (other than
any obligations with respect to reimbursement for drawings under the Letter of
<PAGE>
Credit to purchase Bonds tendered or deemed to be tendered for purchase pursuant
to Section 4,1 or Section 4,2 of the Indenture, which obligations are not yet
due and owing under the Reimbursement Agreement) and shall have paid all other
amounts due and owing under the Reimbursement Agreement pursuant to which the
existing Letter of Credit was issued (except as aforesaid). Simultaneously with
the delivery of such substitute Letter of Credit to the Trustee, the Company
shall also provide the Trustee with an opinion of Bond Counsel that such
substitute Letter of Credit is authorized under this Agreement, complies with
the terms hereof and will not have an adverse effect on the exclusion of the
interest on the Bonds from gross income for purposes of federal income taxation,
If the Company shall fail to furnish to the Trustee such opinion of Bond Counsel
on or before the specified date., the Trustee shall be deemed not to have
received the substitute Letter of Credit, and the Bonds shall be subject to
mandatory tender for purchase pursuant to Section 4,2 of the Indenture. Upon
delivery of a substitute Letter of Credit and the foregoing evidence and
opinion, the Trustee is authorized to surrender the existing Letter of Credit
and to approve the cancellation of the existing Letter of Credit and the
termination of the related Reimbursement Agreement, The Company hereby covenants
and agrees to give the Issuer, the Trustee, the Bank and the Remarketing Agent
written notice of its intention to deliver any such substitute Letter of Credit
at least ten (10) Business Day prior to the date on which the Company expects to
deliver such substitute Letter of Credit.
(c) If the Company elects to exercise its option to cause the interest
rate on the Bonds to be converted to the Fixed Rate in accordance with the
provisions of Section 2,2 of the Indenture, the Company may not deliver to the
Trustee in connection with such conversion, or after such conversion, an
Alternate Credit Facility, a substitute Letter of Credit or an extension of the
Letter of Credit or substitute Letter of Credit then in effect, unless the
Company shall also provide the Trustee with an opinion of Bond Counsel to the
effect that such addition, substitution or extension is authorized under this
Agreement, complies with the terms hereof and of the Indenture, and will not
have an adverse effect on the exclusion of the interest on the Bonds from gross
income for purposes of federal income taxation.
(d) At any time while a Letter of Credit is in effect, the Company from
time to time may, at its option, deliver to the Trustee a substitute Letter of
Credit in substitution for the existing Letter of Credit, The substitute Letter
of Credit shall be an irrevocable, transferable letter of credit in
substantially the same form and tenor as the existing Letter of Credit with
administrative provisions reasonably satisfactory to the Trustee, provided to
expire on the same date as the existing Letter of Credit or on the fifteenth day
of any calendar month at least one (1) year after the Stated Termination Date of
the existing Letter of Credit, such substitute Letter of Credit to be issued by
a commercial bank and delivered to the Trustee; provided, that unless,
simultaneously with the delivery of the substitute Letter of Credit to the
Trustee, the Company shall furnish to the Trustee written evidence from each
Rating Agency by which the Bonds are then rated, if any, to the effect that such
Rating Agency has reviewed the proposed substitute Letter of Credit and that the
substitution of the proposed substitute Letter of Credit for the existing Letter
of Credit will not, by itself, result in the reduction or withdrawal of its
rating assigned to the Bonds from that which then prevails or, if the Bonds are
not then rated by a Rating Agency, the provider of the substitute Letter of
Credit shall have a commercial paper credit rating at least equal to the then
<PAGE>
commercial paper credit rating of the Bank which provided the Letter of Credit
for which the substitute Letter of Credit is being issued, the Bonds will be
subject to mandatory tender pursuant to Section 4,2 of the Indenture,
Simultaneously with the delivery of any such substitute Letter of Credit to the
Trustee, the Company shall also have provided the Trustee with written evidence
from the Bank which issued the existing Letter of Credit that the Company shall
have paid all of its obligations under the Reimbursement Agreement to such Bank
(other than any obligations with respect to reimbursement for drawings under the
Letter of Credit to purchase Bonds tendered or deemed tendered for purchase
pursuant to Section 4,1 or Section 4,2 of the Indenture, which obligations are
not yet due and owing under the Reimbursement Agreement) and shall have paid all
other amounts due and owing under the Reimbursement Agreement pursuant to which
the existing Letter of Credit was issued (except as aforesaid), Simultaneously
with the delivery of such substitute Letter of Credit to the Trustee, the
Company shall also provide the Trustee with an opinion of Bond Counsel that such
substitute Letter of Credit is authorized under this Agreement, complies with
the terms hereof and will not have an adverse effect on the exclusion of the
interest on the Bonds from gross income for purposes of federal income taxation,
If the Company shall fail to furnish to the Trustee such opinion of Bond
Counsel, the Trustee shall not be deemed to have received the substitute Letter
of Credit and shall not surrender the existing Letter of Credit, Upon delivery
of a substitute Letter of Credit and the foregoing evidence and opinion, the
Trustee is authorized to surrender the existing Letter of Credit and to approve
the cancellation of the existing Letter of Credit and the termination of the
related Reimbursement Agreement. The Company hereby covenants and agrees to give
the Issuer, the Trustee, the Bank and the Remarketing Agent written notice of
its intention to deliver any such substitute Letter of Credit at least fifteen
(15) Business Days prior to the date on which the Company expects to deliver
such substitute Letter of Credit.
(e) Subject to Section 5.9(c) hereof, the Company may, at its option,
provide for the delivery to the Trustee of an Alternate Credit Facility to
supplement the Letter of Credit, to replace the Letter of Credit or to provide
credit enhancement.if the Letter of Credit is not then in effect; provided,
however, in no event shall any such Alternate Credit Facility replace the Letter
of Credit prior to the fifteenth day immediately following the Conversion Date.
Any such Alternate Credit Facility shall be payable to the Trustee for the
benefit of the owners of the Bonds and shall have administrative provisions
reasonably satisfactory to the Trustee, Simultaneously with the delivery of such
an Alternate Credit Facility to the Trustee, the Company shall provide the
Trustee with an opinion of Bond Counsel to the effect that the delivery of such
Alternate Credit Facility is authorized under this Agreement, complies with the
terms hereof and will not have an adverse effect on the exclusion of the
interest on the Bonds from gross income for purposes of federal income taxation,
The Company hereby covenants and agrees to give the Issuer, the Trustee, the
Bank and the Remarketing Agent written notice of its intention to deliver any
such Alternate Credit Facility at least to ten (10) Business Days prior to the
date on which the Company expects to deliver such Alternate Credit Facility.
(f) In the event that the Letter of Credit is set to expire and the
Company does not intend to deliver a substitute Letter of Credit to the Trustee,
the Company shall, on or before the fifteenth Business Day prior to the interest
payment date immediately preceding the Stated Termination Date, give written
notice to the Issuer, the Trustee, the Remarketing Agent and the Bank that the
Company does not intend to deliver such a substitute Letter of Credit to the
Trustee prior to the Stated Termination Date.
<PAGE>
Section 5.10. Environmental Laws. The Company will comply in all
material respects with the requirements of all federal, state and local
environmental and health and safety laws, rules., regulations and orders
applicable to or pertaining to the Project.
Section 5.11. Annual Certificate. The Company will furnish to the
Issuer and to the Trustee on or before January 31 of each year, a certificate of
the Company signed by its President stating that the Company has made a review
of its activities during the preceding calendar year for the purpose of
determining whether or not the Company has complied with all of the terms,
provisions and conditions of this Agreement and the Company has kept, observed,
performed and fulfilled each and every covenant, provision and condition of this
Agreement on its part to be performed and is not in default in the performance
or observance of any of the terms, covenants, provisions or conditions hereof,
or if the Company shall be in default such certificate shall specify all such
defaults and the nature thereof.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default. The occurrence and continuation of any
one of the following shall constitute an Event of Default hereunder:
(a) failure by the Company to pay any amounts required to be paid as
principal, premium, if any, or interest under the Note and this Agreement on the
dates and in the manner specified therein of herein; or
(b) failure by the Company to pay any amounts pursuant to Section
4.2(e) hereof on the dates and in the manner specified therein; or
(c) failure by the Company to observe or perform any material covenant,
condition or agreement on its part to be observed or performed in this
Agreement, other than as referred to in subsections (a) and (b) above, for a
period of thirty (30) days after written notice, specifying such failure and
requesting that it be remedied, is given to the Company by the Issuer, the
Trustee or the Bank, unless (i) the Trustee and the Bank shall agree in writing
to an extension of such time prior to its expiration or (ii) if the failure is
such that it can be corrected but not within such 30-day period, corrective
action is instituted by the Company within such period and diligently pursued
until such failure is corrected; or
(d) the dissolution or liquidation of the Company or the filing by the
Company of a voluntary petition in bankruptcy, or failure by the Company
promptly to lift any execution, garnishment or attachment of such consequence as
will impair its ability to carry on its obligations hereunder, or an order for
relief under Title 11 of the United States Code, as amended from time to time,
<PAGE>
is entered against the Company, or a petition or answer proposing the entry of
an order for relief against the Company under Title 11 of the United States
Code, as amended from time to time, or its reorganization, arrangement or debt
readjustment under any present or future Federal bankruptcy act or any similar
Federal or state law shall be filed in any court and such petition or answer
shall not be discharged within ninety (90) days after the filing thereof, or the
Company shall fail generally to pay its debts as they become due, or a custodian
(including without limitation a receiver, trustee, assignee for the benefit of
creditors or liquidator of the Company) shall be appointed for or take
possession of all or a substantial part of its property and shall not be
discharged within ninety (90) days after such appointment or taking possession,
or the Company shall consent to or acquiesce in such appointment or taking
possession, or assignment by the Company for the benefit of its creditors, or
the entry by the Company into an agreement of composition with its creditors, or
the adoption of a resolution by the board of directors of the Company or the
taking of any other corporate action to file a petition or answer proposing the
entry of an order for relief against the Company under Title 11 of the United
States Code, as amended from time to time, or its reorganization, arrangement or
debt readjustment under any present or future Federal bankruptcy act or any
similar Federal or state laws; provided, that the term "dissolution or
liquidation of the Company", as used in this subsection (d), shall not be
construed to include the cessation of the corporate existence of the Company
resulting either from a merger or consolidation of the Company into or with
another domestic corporation or a dissolution or liquidation of the Company
following a transfer of all or substantially all of its assets as an entirety,
under the conditions permitting such actions contained in Section 5.2 hereof; or
(e) any material warranty, representation or other statement made by or
on behalf of the Company contained herein, or in any document or certificate
furnished by the Company in compliance with or in reference hereto, is false or
misleading in any material respect; or
(f) an "event of default" shall occur and be continuing under the
Indenture.
Section 6.2. Remedies on Default. Whenever any Event of Default shall
have occurred and be continuing hereunder, the Issuer or the Trustee may take
any one or more of the following remedial steps:
(a) The Issuer or the Trustee may exercise any right, power or remedy
permitted to it by law as a holder of the Note, and shall have in particular,
without limiting the generality of the foregoing, the right to declare the
entire principal and all unpaid interest accrued on the Note to the date of such
declaration and any premium the Company shall have become obligated to pay to be
immediately due and payable, if concurrently with or prior to such notice the
unpaid principal of and all unpaid accrued interest and premium on the Bonds
have been declared to be due and payable under the Indenture, and upon such
declaration the Note and the unpaid accrued interest thereon and such premium
shall thereupon become forthwith due and payable in an amount sufficient to pay
the principal of, premium, if any, and interest on the Bonds under Section 9,2
of the Indenture, without presentment, demand or protest., all of which are
hereby expressly waived. The Company shall forthwith pay to the Trustee the
entire principal of, premium, if any, and interest accrued on the Note.
<PAGE>
The Issuer and the Trustee shall waive, rescind and annul such
declaration and the consequences thereof, when any declaration of acceleration
on the Bond has been waived, rescinded and annulled pursuant to and in
accordance with Section 9.2 of the Indenture.
(b) The Issuer or the Trustee may take whatever action at law or in
equity may appear necessary or desirable to collect the payments and other
amounts then due and thereafter to become due or to enforce the performance a '
nd observance of any obligation, agreement or covenant of the Company under this
Agreement,
In case the Issuer or the Trustee shall have proceeded to enforce its
rights under this Agreement, and such proceedings shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Issuer or the Trustee, as the case may be, then and in every such case the
Company, the Issuer and the Trustee shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Company, the Issuer and the Trustee shall continue as though no such
proceeding had been taken.
In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Company, or in the case of any other similar judicial
proceedings relative to the Company, or to the creditors or property of the
Company, the Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and the Note and, in case of
any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee allowed in such judicial proceedings relative to the Company, its
creditors or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to the Trustee, and to pay to the Trustee any amount due it for
compensation and expenses, including reasonable counsel fees incurred by it up
to the date of such distribution.
Section 6.3. Agreement to Pay Attorneys' Fees and Expenses. In the
event the Issuer or the Trustee should reasonably employ attorneys or incur
other expenses for the collection of the payments due under this Agreement or
the Note or the enforcement of the performance or observance of any obligation
or agreement on the part of the Company herein contained, the Company agrees
that it will on demand therefor pay to the Issuer or the Trustee the reasonable
fees of such attorneys and such other expenses so incurred by the Issuer or the
Trustee.
Section 6.4. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Issuer or the Trustee is intended to be exclusive of any other
available remedy or remedies but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement and
the Indenture of now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power and accruing upon any Event of
Default hereunder shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right and power may be exercised from time to
time and as often as may be deemed expedient, In order to entitle the Issuer to
exercise any remedy reserved to it in this Article VI, it shall not be necessary
to give any notice other than such notice as may be herein expressly required.
Such rights and remedies as are given the Issuer hereunder shall also extend to
the Trustee, and the Trustee and the owners from time to time of the Bonds shall
be deemed third party beneficiaries of all covenants and agreements herein
contained.
<PAGE>
Section 6.5. No Additional Waiver Implied by One Waiver. In the event
any agreement contained in this Agreement should be breached by the Company and
thereafter waived by the Issuer or the Trustee, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
ARTICLE VII
PREPAYMENT OF NOTE
Section 7.1. Obligation to Prepay the Note Upon Determination of
Taxability or Event of Taxability. (a) Upon the occurrence of a Determination of
Taxability the Company shall have, and hereby accepts, the obligation to prepay
the principal of the Note as a whole, and not in part, on any date within thirty
(30) days of the occurrence of a Determination of Taxability, for redemption of
the Bonds pursuant to Section 3,1(c) of the Indenture, The amount to be prepaid
pursuant to this Section 7,1(a) in such event shall be 103% of the then
outstanding principal amount of the Bonds plus accrued interest to the date
fixed for redemption.
(b) Upon the occurrence of an Event of Taxability., the Company shall
have, and hereby accepts, the obligation to prepay the principal of the Note as
a whole, and not in part, on any date within thirty (30) days of the occurrence
of an Event of Taxability, for redemption of the Bonds pursuant to Section
3,1(d) of the Indenture, The amount to be prepaid pursuant to this Section
7.1(b) in such event shall be 100% of the then outstanding principal amount of
the Bonds plus accrued interest to the date fixed for redemption.
(c) So long as the Letter of Credit is in effect, and to the extent
that Available Moneys described in clause (a) of Section 6.4 of the Indenture
are not on deposit in the Bond Fund and available to repay the principal of and
accrued interest on the Note payable under this Section 7.1, the Trustee shall,
in accordance with Section 6,4 of the Indenture, draw upon the Letter of Credit
to prepay the principal of, premium, if any, and accrued interest on the Note
payable under this Section 7.1 in accordance with the terms of the Letter of
Credit.
Section 7.2. General Option to Prepay the Note. The Company shall have,
and is hereby granted, the option to prepay the principal of the Note as a
whole, or in part, by paying to the Trustee an amount sufficient to redeem all
or a portion of the Bonds then Outstanding., in the manner., at the redemption
prices (including premium, if any), from the sources and on the dates specified
in Sections 3,1(a) and 3,1(b) of the Indenture, So long as the Letter of Credit
is in effect, and to the extent that Available Moneys described in clause (a) of
Section 6.4 of the Indenture are not on deposit in the Bond Fund and available
to prepay the principal of and accrued interest on the Note under this Section
7.2, the Trustee shall, in accordance with Section 6,4 of the Indenture, draw
upon the Letter of Credit to prepay the principal of, premium, if any, and
accrued interest on the Note payable under this Section 7,2 in accordance with
the terms of the Letter of Credit.
<PAGE>
Section 7.3. Redemption of the Bonds. To perform an obligation imposed
upon the Company or to exercise an option granted to the Company by this Article
VII, the Company shall give written notice to the Issuer, the Trustee and the
Bank which notice shall specify therein the date upon which prepayment of the
Note (or a portion thereof) will be made, which date shall be not less than
thirty (30) days from the date the notice is mailed, and shall specify that all
of the principal amount of the Note or a specified portion thereof is to be so
prepaid. On or before the date such notice is given to the Bank, the Company
shall obtain the consent of the Bank to such redemption required by Section 5.4
of the Reimbursement Agreement or any similar provision of any subsequent
Reimbursement Agreement, The Issuer will direct the Trustee to take forthwith
all steps (other than the payment of the money required to redeem the Bonds)
necessary under the applicable provisions of the Indenture to effect the
redemption of the Bonds (or a portion thereof) in amounts equal to the amount of
the principal of the Note so prepaid as provided in this Article VII.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Notices. All notices, certificates or other communications
shall be sufficiently given and shall be deemed given when the same are (i)
deposited in the United States mail and sent by first class mail, postage
prepaid, or (ii) delivered, in each case, to the parties at the addresses set
forth below or at such other address as a party may designate by notice to the
other parties: if to the Issuer, at Suite 200, # 1 Mid Rivers Mall Drive, St.
Peters, Missouri 63376. Attention: President; if to the Company, at 3030 N.
Highway 94, St. Charles, Missouri 63301, Attention: President; if to the
Trustee., at 8820 Ladue Road, Second Floor, St, Louis, Missouri 63124,
Attention: Corporate Trust Department; if to the Bank, at 111 West Monroe
Street, Chicago., Illinois 60603, Attention: Division A; and if to the
Remarketing Agent, at 111 West Monroe Street, Chicago, Illinois 60603,
Attention: Mr, Nicholas E. Knorr. A duplicate copy of each notice.., certificate
or other communication given hereunder by either the Issuer or the Company to
the other shall also be given to the Trustee, the Remarketing Agent and the
Bank.
Section 8.2. Assignments. This Agreement may not be assigned by either
party without the consent of the other and the Trustee and the Bank, except that
the Issuer shall assign and pledge to the Trustee its right, title and interest
in and to this Agreement as provided by Section 4,4 hereof, and the Company may
without any consent assign to any surviving, resulting or transferee corporation
its rights under this Agreement as provided by Section 5.2 hereof.
This Promissory Note is subject to mandatory prepayment as a whole, and
optional prepayment as a whole or in part, as provided in Article VII of the
Agreement.
<PAGE>
In certain events, on the conditions., in the manner and with the
effect set out in the Agreement, the principal installments of this Promissory
Note may be declared due and payable before the stated maturity thereof,
together with accrued interest thereon, Reference is hereby made to the
Agreement for a complete statement of the terms and conditions under which the
maturity of the principal installments of this Promissory Note may be
accelerated.
IN WITNESS WHEREOF, the Company has caused this Promissory Note to be duly
executed, attested, sealed and delivered as of September 25, 1990.
LEONARD'S METAL, INC,
(SEAL) By:
President
Attest:
By:
Assistant Secretary
<PAGE>
ENDORSEMENT
Pay, without recourse or warranty, to the order of Mark Twain Bank, St,
Louis, Missouri, as Trustee under the Indenture of Trust dated as of September
1, 1990, from the undersigned to said Trustee,
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF ST, CHARLES COUNTY, MISSOURI
By:
Vice President
<PAGE>
EXHIBIT B
All of the following described real estate located in St. Charles
County, Missouri:
PARCEL #1:
A tract of land being parts of. U. S. Surveys 189, 190 and 191 of the St.
Charles Commons Fields, Township 47 North, Range 5 East, St. Charles County,
Missouri and being more particularly described as follows: ' Beginning at a
point in the centerline of Itueller Road (40 feet wide) said point being distant
North 57 degrees 56 minutes East, 404.6 feet and South 48 degrees. East, @469-70
feet from the northeastern corner of U. S. Survey 1667, being also the
intersection of the Northwesterly line of Parcel 2 conveyed to Leonard's Metal
Inc. , by instrument recorded in Book 1120 page 465 of the St. Charles County
Records, and the centerline of Mueller Road, 40 feet wide; thence along said
centerline, North 48 degrees West, 301.43 feet; thence departing said
centerline, North 42 degrees East, 20.00 feet to the easterly line of a 50 foot
easement and a point of curvature; thence along said easterly line the following
courses and distances; thence along a curve to the right, through an arc
distance of 31.42 feet, said curve having a radius of 20 feet and a central
angle of 90 degrees to a point of tangency; thence North 42 degrees East, 107.72
feet to a point of curvature; thence along a curve to the left, through an arc
distance of 200.54 feet, said curve having a radius of 225 feet and a central
angle of 51 degrees 04 minutes 01 second to a point of reverse curvature; thence
along a curve to the right, through an arc distance of 156.01-feet, said curve
having a radius-Of-175 feet and a central angle of 51 degrees 04 minutes 46
seconds; thence North 42 degrees 00 minutes 45 seconds East 0.14 feet to the
southwesterly line of Elm Point Easement Plat, as recorded in Plat Book 26, Page
'142, St. Charles County Records; thence along said southwesterly line, South 47
degrees 59 minutes 15 seconds East, 536.20 feet to the northwesterly I:Ene of
the aforementioned Leonard's Metal Inc.; thence along said northwesterly line,
South 52 degrees 07 minutes West'@466.17 feet to the point of beginning.
PARCEL #2:
A tract of land being parts of U. S. Surveys 189, 190 and 191 of the St. Charles
Common Fields, St. Charles, Missouri in Township 47 North, Range 5 East', more
particularly described as;follows: Beginning at a point in the centerline of
Mueller Road (40 feet wide) said point.being distant,..North 57 degrees 56
minutes East 404.6 feet and South 48 degrees 00 minutes East 2855,45 feet from
the Northeastern corner of U. S. Survey 1667; thence, from said point of
beginning and along the centerline of Mueller Road, being also the common line
between U. S. Surveys 188 and 189, North 48 degrees 00 minutes West 370.00 feet
to a point; thence, leaving the centerline of said road, North 52 degrees 07
minutes Fast 515- 00 feet an iron pipe; thence South 48 degrees 00 minutes East
370.00 feet to a point on the Northwestern line of Fox Run Mobile Home Estates,
a subdivision recorded in Plat Book 12 page 12 of the St. Charles County
Records; thence, along the Northwestern line of said Fox Run Mobile Home
Estates, South 52 degrees 07 minutes West 515.00 feet to the point of beginning
according to a plat and survey thereof executed by Maran-Cooke, Inc., during
June. 1973.
PARCEL #3:
Part of U. S. Surveys 189, 190 and 191 of the St. Charles Commons Fields,
St. Charles, Missouri, in Township 47 North, Range 5 East, entire particularly
described as follows:
Beginning at a point in the centerline of Mueller Road (40 feet wide), said
point being distant, North 57 degrees 56 minutes East 404.6 feet and South 48
degrees 00 minutes East 2485.45 feet from the Northeastern corner of U. S.
Survey 1667; thence leaving said centerline of Mueller Road North 52 degrees 07
minutes East 515 feet; thence North 48 degrees West 15.75 feet; thence South 52
degrees 07 minutes West 515 feet to the centerline of Mueller Road; thence South
48 degrees East 15.75 feet to the point of beginning.
<PAGE>
A TRACT OF LAND SITUATE IN U.S, SURVEY 161, TOWNSHIP 47 NORTH, RANGE 5 EAST IN
THE CUL-DE-SAC, COMMON, FIELDS, FRONTING 255,67 FEET ON THE EAST SIDE OF
MISSOURI STATE HIGHWAY 94, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS, TO WIT:
BEGINNING AT A POINT AN IRON PIPE SET IN THE EASTERN RIGHT OF WAY LINE OF
MISSOURI STATE HIGHWAY 94 DISTANT 1476.73 FEET NORTH 6 DEGREES 5' EAST FROM A
POINT AN IRON PIPE MARKING THE NORTHWEST CORNER OF STERLING ALUMINUM PRODUCTS,
INC, TRACT OF LAND ACCORDING TO A DEED OF RECORD IN BOOK 274, PAGE. 566 IN THE
ST. CHARLES COUNTY RECORDER'S OFFICE; THENCE FROM SAID BEGINNING POINT NORTH SIX
DEGREES 05' EAST ALONG THE SAID EASTERN RIGHT OF WAY LINE OF SAID MISSOURI STATE
HIGHWAY NO. 94 A DISTANCE OF 255.67 FEET TO A POINT MARKED BY AN IRON PIPE;
THENCE-SOUTH 84 DEGREES 26' EAST 494.42 FEET TO A POINT; THENCE SOUTH 9 DEGREES
26' EAST 264,26 FEET TO A POINT; THENCE NORTH 84 DEGREES 26' WEST 565.09 FEET TO
THE POINT OF BEGINNING.
<PAGE>
GENERAL TERMS AGREEMENT
between
THE BOEING COMPANY
and
LEONARD/S METAL, INC,
<PAGE>
GENERAL TERMS AGREEMENT
TABLE OF CONTENTS
CLAUSE TITLE PAGE
1.0 DEFINITIONS 2
2.0 ISSUANCE OF PURCHASE ORDERS
AND APPLICABLE TERMS 5
2.1 Issuance of Purchase Orders 5
2.2 Acceptance of Purchase Orders 5
2.3 Written Authorization to Proceed 6
2.4 Formation of Contract 6
2.5 Rejection of Purchase Orders 6
3.0 TITLE AND RISK OF LOSS 6
4.0 DELIVERY 6
4.1 Requirements 6
4.2 Delay 7
5.0 ON-SITE REVIEW AND RESIDENT 7
REPRESENTATIVES
5.1 Review 7
5.2 Resident Representatives 7
6.0 INVOICE AND PAYMENT 8
7.0 PACKING AND SHIPPING 8
8.0 QUALITY CONTROL, INSPECTION
REJECTION AND ACCEPTANCE 8
8.1 Controlling Document 8
8.2 Inspection and Rejection 9
8.3 Sale of Spare Parts to Third Parties 10
8.4 Right of Entry 10
8.5 Certification 10
<PAGE>
8.6 Federal Aviation Administration or
Equivalent Government Agency Inspection 10
8.7 Retention of Records 11
8.8 Source Inspection 11
9.0 EXAMINATION OF RECORDS 11
10.0 CHANGES 12
10.1 General 12
10.2 Obsolescence 13
10.3 Model Mix 13
11.0 PRODUCT ASSURANCE 13
12.0 TERMINATION/CANCELLATION 13
12.1 Termination-Convenience 13
12.2 Cancellation-Default 14
12.3 Excusable Delay 14
12.4 Other 14
12.4 Seller Termination 14
13.0 RESPONSIBILITY FOR PROPERTY 15
14.0 LIMITATION OF SELLER'S RIGHT TO
ENCUMBER ASSETS 15
15.0 PROPRIETARY INFORMATION AND ITEMS 15
16.0 COMPLIANCE WITH LAWS 17
17.0 INFRINGEMENT 18
18.0 BUYER'S RIGHTS IN SELLER'S INVENTIONS 19
19.0 BUYER'S RIGHTS IN SELLER'S WORK PRODUCT 19
20.0 BUYER'S RIGHTS IN SELLER'S, PATENTS
COPYRIGHTS, TRADE SECRETS AND TOOLING 20
21.0 NOTICES 22
21.1 Addresses 22
21.2 Effective Date 22
<PAGE>
21.3 Approval or Consent 22
21.3 Approval or Consent 22
22.0 PUBLICITY 22
23.0 FACILITIES 23
24.0 SUBCONTRACTING 23
25.0 NOTICE OF LABOR DISPUTES 23
26.0 ASSIGNMENT 24
27.0 RELIANCE 24
28.0 NON-WAIVER 24
29.0 HEADINGS 25
30.0 PARTIAL INVALIDITY 25
31.0 APPLICABLE LAW 25
32.0 AMENDMENT 25
33.0 LIMITATION 25
34.0 TAXES 26
34.1 Inclusion of Taxes in Price 26
34.2 Litigation 26
34.3 Rebates 26
34.2 Litigation 26
34.3 Rebates 26
34.4 Payment of Taxes on Tooling 26
35.0 FOREIGN PROCUREMENT OFFSET 26
36.0 ENTIRE AGREEMENT/ORDER OF PRECEDENCE 27
36.1 Entire Agreement 27
36.2 Incorporated By Reference 27
36.3 Order of Precedence 27
36.4 Disclaimer 28
<PAGE>
REVISION
REV
SYM SCRIPTION DATE APPROVAL
1 INCORPORATE NEW CONTRACT LANGUAGE 09-15-92
L-71 (03-13-91 REV C OF PRO FORMA)
TO EXISTING CONTRACT LANGUAGE
-NOTE-EXCEPTIONS TO PREVIOUS
CONTRACT INCORPORATED INTO NEW
REVISION FOR LEONARD'S
<PAGE>
GENERAL TERMS AGREEMENT
RELATING TO
BOEING MODEL AIRCRAFT
THIS GENERAL TERMS AGREEMENT ("Agreement") is entered into as of August
30, 1990 and amended as of September 15, 1992, by Leonard's Metal, Inc, a
Missouri corporation, with its principal office in St. Charles, Missouri,
("Seller"), and Boeing Commercial Airplane Group, a Division of The Boeing
company, a Delaware corporation with its principal office in Seattle, Washington
("Buyer"),
RECITALS
A. Buyer is currently producing commercial aircraft.
B. Seller manufactures and sells certain goods and services for use in the
production and support of commercial aircraft.
C. Seller desires to sell and Buyer desires to purchase certain of
Seller's goods and services for the production and support of
commercial aircraft,
D. Seller and Buyer desire to enter into an agreement for the sale by
Seller and purchase by Buyer of Products as defined herein.
Now therefore, in consideration of the mutual covenants set forth herein, the
parties agree as follows:
AGREEMENTS
1.0 DEFINITIONS
The definitions set forth below shall apply to the following terms as
they are used in any order issued pursuant to this General Terms
Agreement.
(a) The term "Product" shall mean (a) goods purchased and described
on any purchase order except for Rotating Use Tools and (b)
services purchased and described on any purchase order.
(b) The term "FAR" shall mean the Federal Acquisition Regulations in
effect on the date of this Agreement.
(c) The term "FAA" shall mean the United States Federal Aviation
Administration or any successor agency of the Federal Aviation
Administration.
(d) The term "Computer-Aided design" (CAD) shall mean (1) any
computer system or program that supports the design process or,
(2) the use of computers to assist engineering design in
developing, producing, and evaluating design, data, and drawings.
(e) The term "Computer-Aided Manufacturing" (CAM) shall mean the use
of computers and computer data in the development of a Product,
including fabrication, assembly, and installation.
(f) The term "Computer-Aided Design/Computer-Aided Manufacturing"
(CAD/CAM) shall mean engineering/Manufacturing applications
released as datasets in a digital format and provided by the
Buyer to the Seller to be utilized in the Manufacturing process,
(g) The term "Dataset" means any compilation of data or information
(including, without limitation, numerical data, geometric
definitions, program instructions or coded information) which may
be used directly in, integrated with or applied to, a computer
program for further processing. A Dataset may be a composite of
two or more other Datasets or an extract of a larger Dataset.
<PAGE>
(h) The term "Drawing" shall mean an automated or manual depiction of
graphics or technical information representing a Product
including parts list and specifications relating thereto.
(i) Words importing the singular number shall also include the plural
number and vice versa.
(j) The term "Tooling" shall mean all tooling, as defined in Boeing
Document M31-24, "Boeing Suppliers Tooling Manual," described on
any purchase order, including but not limited to Boeing-Use
Tooling, Supplier-Use Tooling and Common-Use Tooling as defined
in Boeing Document D6-49004, "Operations General Requirements for
Suppliers," and Rotating-Use Tooling as defined in Boeing
Document M31-13, "Accountability of Inplant/Outplant Special
(Contract) Tools." For purposes of this Agreement, in the
documents named in this subparagraph, the term "Supplier Use
Tooling" shall be changed to Seller Use Tooling and the term
"Boeing Use Tooling" shall be changed to Buyer Use Tooling.
(k) The term "Shipset" shall mean the total quantity of a given part
number necessary for installation on one airplane.
(1) The term "Derivative" shall mean any model airplane developed
from the existing Model airplane which has a new model
designation and which satisfies all of the following criteria:
(1) has the same number of engines as the existing Model
airplane;
(2) utilizes essentially the same aerodynamic and propulsion
design, major assembly components, and systems and the existing
Model airplane and
(3) achieves other payload/range combinations by changes in body
length, engine thrust, or variations in certified gross weight.
(m) The term "End Item Assembly" shall mean any Product which is
described by a single part number and which is comprised of more
than one component part.
(n) The term "Spare" shall mean any Product, regardless of whether
the product is an End Item Assembly or a Purchased on Assembly
Production Detail part, which is to be used other than in the
initial production of the airplane.
<PAGE>
(o) The term "Purchased on Assembly Production Detail Part (POA)"
shall mean a component part of an End Item Assembly.
(p) "Material Representative" shall mean the employee and his/her
management designated as such by Buyer from time to time, or in
the absence of such designation, Buyer's employee and his/her
management primarily responsible for dealing with Seller in
connection with administration of an applicable Order.
2.0 ISSUANCE OF PURCHASE ORDERS AND APPLICABLE TERMS
2.1 Issuance of Purchase Orders
Buyer may issue purchase orders to Seller from time to time. Each
purchase order shall contain a description of the Products ordered, a
reference to the applicable specifications and drawings, the quantities
and prices, the delivery schedule, the terms and place of delivery, any
special conditions and the following notation:
"This Order is subject to and incorporates by this reference the
General Terms Agreement PLR-1289 between The Boeing Company and
Leonard's Metal, Inc. dated August 30, 1990."
Each purchase order bearing such notation shall be governed by and be
deemed to include the provisions of this Agreement. Purchase Order
Terms and Conditions, Form Dl-4100-4045, Rev. 4/83, as revised from
time to time, does not apply to such purchase orders.
2.2 Acceptance of Purchase Orders
Each purchase order is Buyer's offer to Seller and acceptance is
strictly limited to its terms. Buyer will not be bound by and
specifically objects to any term or condition which is different from
or in addition to the provisions of the purchase order, whether or not
such term or condition will materially alter the purchase order.
Seller's commencement of performance or acceptance of the purchase
order in any manner shall conclusively evidence Seller's acceptance of
the purchase order as written. Buyer may revoke any purchase order
prior to the earlier of Buyer's receipt of Seller's written acceptance
or Seller's commencement of performance.
<PAGE>
2.3 Written Authorization to Proceed
Buyer may give written authorization to Seller to commence performance
before Buyer issues a purchase order. If Buyer in its written
authorization specifies that a purchase order will be issued, Buyer and
Seller shall proceed as if a purchase order had been issued. This
Agreement, the applicable Special Business Provisions and the terms
stated in the written authorization shall be deemed to be a part of
Buyer's offer and the parties shall promptly agree on any open purchase
order terms. If Buyer does not specify in its written authorization
that a purchase order shall be issued, Buyer's obligation is strictly
limited to the terms of the written authorization.
If Seller commences performance (a) before a purchase order is issued
or (b) without receiving Buyer's prior written authorization to
proceed, such performance shall be at Seller's expense.
2.4 Formation of Contract
Each purchase order accepted by Seller is a contract between Buyer and
Seller and shall be referred to herein as an "Order."
2.5 Rejection of Purchase Order
Any rejection by Seller of a purchase order shall specify the reasons
for rejection and any changes or additions that would make the purchase
order acceptable to Seller; provided, however, that Seller may not
reject any purchase order for reasons inconsistent with the provisions
of this Agreement or the applicable Special Business Provisions.
3.0 TITLE AND RISK OF LOSS
Title to and risk of any loss of or damage to the Products shall pass
from Seller to Buyer at the F.O.B. point specified in the applicable
Order, except for loss or damage thereto resulting from Seller's fault
or negligence. Passage of title on delivery does not constitute Buyer's
acceptance of Products.
4.0 DELIVERY
4.1 Requirements
Deliveries shall be strictly in accordance with the quantities, the
schedule and other requirements specified in the applicable Order.
Seller may not make early deliveries without Buyer's prior written
authorization.
<PAGE>
4.2 Delay
Seller shall notify Buyer immediately, of any circumstances that may
cause a delay in delivery, stating the estimated period of delay and
the reasons therefore. If requested by Buyer, Seller shall use
additional effort, including premium effort, and shall ship via air or
other expedited routing to avoid or minimize delay to the maximum
extent possible. All additional costs resulting from such premium
effort or premium transportation shall be borne by Seller except when
(i) such additional costs result from delays caused by an act or
omission of Buyer, or (ii) such additional costs result from a delay
that is an "excusable delay." For purposes of this clause and this
clause only, "excusable delay" means a delay which arises from causes
beyond the control and without the fault or negligence of the Seller.
Examples of such causes include (i) acts of God or of the public enemy,
(ii) acts of the Government in either its sovereign or contractual
capacity, (iii) fires, (iv) floods, (v) epidemics, (vi) quarantine
restrictions, (vii) strikes, (viii) freight embargoes and (ix)
unusually severe weather. Nothing herein may be construed to prejudice
any of the rights or remedies provided to Buyer in the applicable Order
or by law.
5.0 ON-SITE REVIEW AND RESIDENT REPRESENTATIVES
5.1 Review
At Buyer's request, Seller shall provide at Buyer's facility, or at a
place designated by Buyer, a review explaining the status of the Order,
actions taken or planned to be taken relating to the Order and any
other relevant information. Nothing herein may be construed as a waiver
of Buyer's rights to proceed against Seller because of any delinquency.
5.2 Resident Representatives
Buyer may in its discretion and for such periods as it deems necessary
assign at its expense, resident personnel at Seller's facilities in
addition to the resident Quality Control personnel provided for in
Section 8.4, "Right of Entry." The resident team will function under
the guidance of Buyer's manager who will provide program coordination
within the scope of the work authorized by the Order. The resident team
will provide communication and coordination to ensure timely
performance of the Order. Buyer's resident team shall be allowed access
to all work areas, Order status reports and management review necessary
to assure timely coordination and conformance with the requirements of
each Order. Seller, however,remains fully responsible for performing in
accordance with each order except where (i) Seller has given Buyer
written notice that Seller objects to a particular requirement and
states the specific reasons for such objection, and (ii) Buyer, in its
sole discretion, determines that the objection is valid, and not
withstanding such validity, requests Seller to go forward with the
requirement. If the Product fails to conform to the Order for the
reasons stated in the Seller's written objection, Seller shall not be
in default under the terms of this Agreement as a result of such
failure.
<PAGE>
6.0 INVOICE AND PAYMENT
Unless otherwise provided in the applicable Order, a separate invoice
in duplicate shall be issued for each shipment of Products and no
invoice shall be issued prior to shipment of the Products. Payment
shall be in accordance with the Section identified as "Payment," of the
Special Business Provisions.
7.0 PACKING AND SHIPPING
Seller shall (a) prepare for shipment and suitably pack all Products to
prevent damage or deterioration, (b) secure lowest transportation
rates, (c) comply with the appropriate carrier tariff for the mode of
transportation specified by Buyer and (d) comply with any special
instructions stated in the applicable Order.
Buyer shall pay no charges for preparation, packing, crating or cartage
unless stated in the applicable Order. All shipments forwarded on one
day via one route must be consolidated. Each container must be
consecutively numbered and marked with the applicable Order and part
numbers. Container and Order numbers must be indicated on the
applicable Bill of Lading. Two copies of the packing sheets, showing
the applicable Order numbers, must be attached to the No. 1 container
of each shipment. Products sold F.O.B. place of shipment must be
forwarded collect. Seller may not make any declaration concerning the
value of the Products shipped, except on Products where the tariff
rating or rate depends on the released or declared value, and in such
event the value shall be released or declared at the maximum value for
the lowest tariff rating or rate.
8.0 QUALITY CONTROL, INSPECTION, REJECTION, & ACCEPTANCE
8.1 Controlling Document
The controlling Quality Control Document for orders under this contract
shall be identified on the individual purchase orders. Said orders
shall identify the document in accordance with one of the following:
8.1.1 All work performed under this Order shall be in accordance with
Document Dl-8000A, "Quality Control Requirements for Boeing Suppliers,"
Revision F as said Document may be amended from time to time; or
<PAGE>
8.l.2 All work performed under this Order shall be in accordance with
Document D1-9000, "Advance Quality System for Boeing Suppliers," as
said Document may be amended from time to time.
NOTE: In the event that Buyer fails to identify the controlling
document on the Order then Section 8.1,2, as outlined above, shall
govern the order.
8.2 Inspection and Rejection
Products shall be subject to final inspection and acceptance by Buyer
at destination, notwithstanding any payment or prior inspection. Buyer
may reject any or all of the Products which do not strictly conform to
the requirements of the applicable Order. Buyer shall by notice,
rejection tag or other communication notify Seller of such rejection.
At Seller's risk and expense, all such Products will be returned to
Seller for immediate repair, replacement or other correction and
redelivery to Buyer; provided, however, that with respect to any or all
of such Products and at Buyer's election and at Seller's risk and
expense, Buyer may: (a) hold, retain or return such Products without
permitting any repair, replacement or other correction by Seller; (b)
hold or retain such Products for repair by Seller or, at Buyer's
election, for repair by Buyer with such assistance from Seller as Buyer
may require; (c) hold such Products until Seller has delivered
conforming replacements for such Products; (d) hold such Products until
conforming replacements are obtained from a third party; or (e) return
such Products with instructions to Seller as to whether the Products
shall be repaired or replaced and as to the manner of redelivery. All
repair, replacement and other corrections and redelivery shall be
completed within such time as Buyer may require. All costs and
expenses, loss of value and any other damages incurred as a result of
or in connection with nonconformance and repair, replacement or other
correction may be recovered from Seller by an equitable price
reduction, set-off or credit against any amounts that may be owed to
Seller under the applicable Order or otherwise. Buyer may revoke its
acceptance of any Products and have the same rights with regard to the
Products involved as if it had originally rejected them.
8.3 Sale to Third Parties
All Products shall be considered as Buyer-designed Products and may
only be sold to third parties by Buyer. Seller shall respond to any
inquiry concerning the purchase of Products received from such a third
party by directing such inquiry to Buyer and informing Buyer of such
inquiry.
<PAGE>
8.4 Right of Entry
Buyer's authorized representatives may enter Seller's plant at all
reasonable times to conduct preliminary inspections and tests of the
Products and work-in-process. Seller shall include in its subcontracts
issued in connection with an Order a like provision giving Buyer the
right to enter the plants of Seller's subcontractors. Buyer may assign
representatives at Seller's plant on a full-time basis. Seller shall
furnish, free of charge, all office space, secretarial service and
other facilities and assistance reasonably required by Buyer's
representatives at Seller's plant.
8.5 Certification
A certification that materials and/or finished Products have been
controlled and tested in accordance with and will meet specified Order
requirements and applicable specifications and that records are on file
subject to Buyer's examination shall be included on or with the packing
sheet accompanying shipments.
In the case of Spares, the drawing or specification revision level will
be noted on the packing sheet. The packing sheet shall note if Buyer
has provided materials. Copies of manufacturing planning, test and
inspection results or certifications shall be furnished to Buyer on its
request.
8.6 Federal Aviation Administration or Equivalent Government
Agency-Inspection
Representatives of Boeing or the FAA may inspect and evaluate Seller's
plant including, but not limited to, Seller's facilities, systems,
data, equipment, personnel, testing, and all work-in-process and
completed Products manufactured for installation on Boeing Commercial
Airplanes. The Seller's costs for such inspection and evaluation are
included in the Order price.
GENERAL TERMS AGREEMENT
8.7 Retention of Records
Quality Control records shall be maintained on file and available to
Buyer's authorized representatives. Seller shall retain such records
for a period of not less than seven years from the date of final
payment under the applicable Order. Prior to disposal of any such
records, Buyer shall be notified and Seller shall transfer such records
as Buyer may direct.
<PAGE>
8.8 Source Inspection
If an Order contains a notation that 100% Source Inspection" is
required, the Products shall not be packed for shipment until they have
been submitted to Buyer's quality Control representative for inspection
said inspection and approval shall not be unreasonably withheld or
delayed. Both the packing list and Seller's invoice must reflect
evidence of this inspection.
9.0 EXAMINATION OF RECORDS
Seller shall maintain complete and accurate records showing the sales
volume of all Products. Such records shall support all services
performed, allowances claimed and costs incurred by Seller in the
performance of each Order, including but not limited to those factors
which comprise or affect direct labor hours, direct labor rates,
material costs, burden rates and subcontracts, Such records and other
data shall be capable of verification through audit and analysis by
Buyer and be available to Buyer at Seller's facility for Buyer's
examination and audit at all reasonable times from the date of the
applicable Order until three (3) years after final payment under such
Order. Seller shall provide assistance to interpret such data if
required by Buyer. Such examination shall provide Buyer with complete
information regarding Seller's performance for use in price
negotiations with Seller relating to existing or future orders for
Products (including but not limited to negotiation of equitable
adjustments for changes and termination/obsolescence claims pursuant to
Section 10.0, "Changes." Buyer shall treat such information as
confidential.
<PAGE>
10.0 CHANGES
10.1 General
Buyer's Materiel Representative may at any time by written change order
make changes within the general scope of an Order in any one or more of
the following: (a) drawings, designs, or specifications; (b) shipping
or packing; (c) place of inspection, delivery or acceptance; (d)
adjustments in quantities and delivery schedules, or both; and (e) the
amount of Buyer-Furnished Material. Seller shall proceed immediately to
perform the Order as changed. If any such change causes an increase or
decrease in the cost of or the time required for the performance of any
part of the work, whether changed or not changed by the change order,
an equitable adjustment shall be made in the price of or the delivery
schedule for those Products affected, and the applicable Order shall be
modified in writing accordingly. Any claim by Seller for adjustment
under this Section 10.0 must be received by Buyer in writing within one
hundred eighty (180) days from the date of receipt by Seller of the
written change order or engineering drawing requirement, whichever is
later, or within such further time as the parties may agree in writing
or such claim shall be deemed waived. Nothing in this Section shall
excuse Seller from proceeding with an Order as changed, including
failure of the parties to agree on any adjustment to be made under this
Section.
If Seller considers that the conduct of any of Buyer's employees has
constituted a change hereunder, Seller shall immediately notify Buyer
in writing as to the nature of such conduct and its effect on Seller's
performance. Pending direction from Buyer's Materiel Representative,
Seller shall take no action to implement any such change.
10.2 Obsolescence
Claims for obsolete or surplus material and work-in-process created by
change orders issued pursuant to this Section shall be subject to the
procedures set forth in Section 12.1, "Termination-Convenience," except
that Seller may not submit a claim for obsolete or surplus material
resulting from the issuance of one or more change orders unless and
until the aggregate value of all such claims of Seller equal or exceed
Two Thousand Five Hundred Dollars ($2,500), whereupon the entire amount
of such unpaid claim or claims shall become due and payable under this
Agreement. Payment for obsolete or surplus materials shall be made by
check deposited as first class mail in the United States Postal Service
to the address designated by Seller in Section 21.1, "Addresses."
Payment will be made on the tenth (loth) day of the month following the
month of the obsolescence claim settlement.
10.3 Model Mix
In the event any Derivative aircraft(s) is introduced by Buyer, Buyer
may (but is not obligated to) direct Seller within the scope of the
applicable Order and in accordance with the provisions of Section 10.0,
"Changes," to supply Buyer's requirements for Products for such
Derivative aircraft(s) which correspond to those Products being
produced under the applicable Order.
<PAGE>
11.0 PRODUCT ASSURANCE
Buyer's acceptance of any Product does not alter or affect the
obligations of Seller or the rights of Buyer and its customers under
the document referenced in the Section identified as "Product
Assurance," in the Special Business Provisions or as provided by law.
12.0 TERMINATION/CANCELLATION
12.1 Termination-Convenience
Buyer may terminate an Order in whole or in part for convenience in
accordance with the provisions of FAR 52.249-2, and such clause is
incorporated herein by this reference subject to the following
modifications. In FAR 52.249-2 "Government" and "Contracting Officer"
shall mean Buyer, "Contractor" shall mean Seller and "this Contract"
and "the Contract" shall mean such Order. All references to one year in
paragraph (d) of such clause are changed to six (6) months, and all
references to a "Disputes" clause are deleted. Any termination
settlement proposal submitted by Seller shall be limited to work
covered by such Order.
12.2 Cancellation - Default
Buyer may cancel the whole or any part of an Order for default in
accordance with the provisions of FAR 52.249-8, which is incorporated
herein by this reference subject to the following modifications. In FAR
52.249-8 "Government" and "Contracting Officer," except in paragraph
(c), shall mean Buyer, "Contractor" shall mean Seller, "this Contract"
and "the Contract" shall mean such Order, and all references to a
"Disputes" clause are deleted. If the parties fail to agree pursuant to
paragraph (f) of FAR 52.249-8 on the amount to be paid for
manufacturing materials referred to in paragraph (e) of FAR 52-249-8,
the amount shall be the reasonable value thereof, but not to exceed
that portion of the Order price which is reasonably allocable to such
materials.
12.3 Excusable Delay
If delivery of any Product cannot be made within one (1) month after
the delivery date stated in the applicable Order due to a delay for
which Seller would not be liable for excess costs under FAR 52.249-8
(c) (an "excusable delay"), Buyer may, at anytime after Buyer becomes
aware of such delay, cancel such Order with respect to any or all
Products in accordance with FAR 52.249-8 as modified in Section 12.2
above, but without any liability on Buyer's part except to pay the
Order price for delivered and accepted Products.
<PAGE>
12.4 Other
Buyer may give written notice to Seller to cancel the whole or any part
of an Order in the event of: (a) the suspension of Seller's business;
(b) the insolvency of Seller; (c) the institution of reorganization,
arrangement or liquidation proceedings by or against Seller; (d) the
appointment of a trustee or receiver for Seller's property or business;
(e) an assignment for the benefit or creditors of Seller, or (f)
Seller's trustee in bankruptcy or Seller as debtor in possession not
assuming such Order pursuant to a Federal Bankruptcy Court's approval
within sixty (60) days after the bankruptcy petition was filed. Such
cancellation shall be for default and the rights and obligations of the
parties shall be determined as provided in Section 12.2, "Cancellation
- Default."
12.5 Seller Termination
Promptly after Seller receives an Order and all applicable
specifications, engineering drawings and the tools (or specifications
for such tools if Seller is to manufacture or re-work the tools) needed
to produce the Products specified in the Order, if Seller determines
that any Product cannot physically be produced in accordance with the
applicable Order by using those tools and machines in its possession
then Seller may request Buyer's consent to cancel such order without
liability on Seller's part. Said consent shall not be unreasonably
withheld or delayed.
13.0 RESPONSIBILITY FOR PROPERTY
On delivery to Seller or manufacture or acquisition by it of any
materials, parts, tooling or other property, title to any of which is
in Buyer, Seller shall assume the risk of and shall be responsible for
any loss thereof or damage thereto. In accordance with the provisions
of an Order, but in any event on completion thereof, Seller shall
return such property to Buyer in the condition in which it was received
except for reasonable wear and tear and except to the extent that such
property has been incorporated in Products delivered under such Order
or has been consumed in the normal performance of work under such
Order.
<PAGE>
14.0 LIMITATION OF SELLER'S RIGHT TO ENCUMBER ASSETS
Seller warrants to Buyer that it has good title to all inventory,
work-in-process, tooling and materials to be supplied by Seller in the
performance of its obligations under any Order ("Inventory"), and that
pursuant to the provisions of such Order, it will transfer to Buyer
title to such Inventory, whether transferred separately or as part of
any Product delivered under the Order, free of any liens, charges,
encumbrances or rights of others. Seller further agrees that it shall
not sell, assign, lease, transfer possession of, grant a security
interest in, allow to be attached or seized on execution or otherwise,
allow a financing statement describing the Inventory to be filed in
favor of anyone other than Buyer, or in any other way dispose of or
encumber any item of Inventory or any part thereof without the prior
written approval of Buyer.
15.0 PROPRIETARY INFORMATION AND ITEMS
Each party hereto agrees to keep confidential and not disclose to any
other person, corporation, or business organization all confidential,
proprietary, and/or trade secret information received from the other
party in connection with any Order (hereinafter Proprietary
Information). Each party hereto further agrees to use Proprietary
Information only for purposes necessary to the performance of an Order,
provided that Buyer shall also have the right to use and disclose
Proprietary Information for any purpose necessary to the testing,
certification, use, sale, or support of any item delivered under an
Order or any airplane including such an item, and provided further that
any such disclosure by Buyer shall, whenever appropriate, include a
restrictive legend suitable to the particular circumstances. For
purposes of this Section, Proprietary Information shall:
(a) not include information already in the public domain, or known to
(as evidence by written records) and under the unrestricted
control of the receiving party, when first received from the
other party;
(b) lose its status as Proprietary Information if, and as of the date
when, it becomes part of the public domain through no wrongful or
negligent act of the receiving party, is received by the
receiving party without restriction from another who had the
right to so disclose it, or is developed by the receiving party
entirely independently of any disclosure from the other party;
and
<PAGE>
(c) include only (i) information disclosed in written or other
physically tangible form with an appropriate restrictive legend
and (ii) information disclosed orally where the receiving party
is notified of the proprietary nature of the information prior to
such disclosure and the proprietary status of the orally
disclosed information is confirmed to the receiving party by the
other party within ten (10) working days of such disclosure in a
writing which identified the person(s) making the disclosure and
the place and date thereof, lists the names of the receiving
party's employee(s) receiving such disclosure, and describes the
information so disclosed.
All documents and other tangible media (excluding Products) containing
or conveying Proprietary Information and transferred in connection with
an Order, together with any copies thereof, are and remain the property
of the transmitting party and shall, except to the extent that they are
needed by Buyer for the purpose of testing, certifying, using, selling,
or supporting an item delivered under an Order or an airplane
containing such an item, be promptly returned, or at the option of the
transmitting party destroyed, upon the written request of the
transmitting party. Neither the existence of this Agreement nor the
disclosure of Proprietary Information or any other information
hereunder shall be construed as granting expressly, by implication, by
estoppel, or otherwise a license under any invention or patent.-now or
hereafter owned or controlled by the transmitting party. No disclosure
or receipt of Proprietary Information or any other information by
either party under this Agreement will constitute or be construed as a
representation, warranty, assurance, guarantee or inducement by either
party to the other with respect to any infringement of the patent
rights of another.
The obligations of each of the parties hereto with respect to
Proprietary Information disclosed hereunder prior to the completion,
termination, or cancellation of this Agreement shall not, except as
expressly set forth herein, be affected by such completion,
termination, or cancellation.
Notwithstanding the restrictions on disclosure set forth hereinabove,
either party to this Agreement may disclose Proprietary Information to
its lower tier subcontractors as necessary in connection with Orders,
provided that each such subcontractor first assumes by written
agreement all of the obligations imposed on a receiving party under
this Agreement relative to such Proprietary Information.
<PAGE>
16.0 COMPLIANCE WITH LAWS
Contractor shall be responsible for complying with all laws, including,
but not limited to, any statute, rule, regulation, judgment, decree,
order, or permit applicable to its performance under this Contract and
agrees to indemnify and to hold harmless Boeing from any failure by
Contractor to comply with any provisions of such laws. Contractor
further agrees (1) to notify Boeing of any obligation under this
contract which is or may be prohibited under applicable law, at the
earliest opportunity but in all events sufficiently in advance of
Contractor's performance of such obligation so as to enable the
identification of alternative methods of performance, (2) to notify
Boeing at the earliest possible opportunity if Contractor's performance
of any aspect of its obligations under the Contract will subject Boeing
to liability under applicable laws, and (3) to notify Boeing at the
earliest possible opportunity of any aspect of its performance which
becomes subject to additional regulation after the date of execution of
this Contract or which Contractor reasonably believes will become
subject to additional regulation during the period of this Contract.
17.0 INFRINGEMENT
Seller shall indemnify, defend, and save Buyer and Customers harmless
from all claims, suits, actions, awards (including but not limited to
awards based on intentional infringement of patents known to Seller at
the time of such infringement and exceeding actual damages and/or
including attorneys' fees and costs), liabilities, damages, costs and
attorneys' fees related to the actual or alleged infringement of any
United States or foreign intellectual property right (including but not
limited to any right in a patent, copyright, industrial design or
semiconductor mask work, or based on misappropriation or wrongful use
of information or documents) and arising out of the manufacture, sale
or use of Products by Buyer or Customers. Buyer and/or Customers shall
duly notify Seller of any such claim, suit or action; and Seller shall,
at its own expense, fully defend such claim, suit or action on behalf
of Buyer and/or Customers. Seller shall have no obligation under this
section with regard to any infringement arising from: (i) Seller's
compliance with formal specifications issued by Buyer where
infringement could not be avoided in complying with such specifications
or (ii) use or sale of Products in combination with other items when
such infringement would not have occurred from the use or sale of those
Products solely for the purpose for which they were designed or sold by
Seller. For purposes of this section only, the term Customer shall not
include the United States Government; and the term Buyer shall include
The Boeing Company (Boeing) and all Boeing subsidiaries and all
officers, agents, and employees of Boeing or any Boeing subsidiaries.
<PAGE>
18.0 BUYER'S RIGHTS IN SELLER'S INVENTIONS
As a part of this Order and without any additional compensation to
Seller, Buyer shall own all right, title, and interest in and to all
inventions, discoveries, and improvements (hereinafter "Inventions"),
whether or not patentable, which are conceived, developed, or first
reduced to practice by Seller's agents, employees, or independent
contractors (hereinafter "Personnel") on behalf of Seller, either alone
or with others, provided such Inventions relate directly to the subject
matter with which Seller's work for Buyer hereunder is concerned and
are made while Seller's Personnel are assigned to perform services
under this Order, and irrespective of whether or not such Inventions
are conceived, developed, or first reduced to practice during working
hours. Seller and Seller's Personnel shall (1) disclose such Inventions
to Buyer promptly and in written detail, (2) assist Buyer in obtaining
patent protection for all such Inventions in the United States and any
foreign countries specified by Buyer, (3) assign all patent rights in
such Inventions to Buyer or its designee forthwith and without charge,
and (4) execute all instruments and render all such assistance as may
reasonably be required in order to protect the rights of Buyer or its
designee in such inventions. Seller shall also require its Personnel
who are to perform services under this Order to execute appropriate
agreements which obligate such Seller Personnel to Buyer with respect
to such Inventions to the same extent that Seller is obligated to Buyer
under this paragraph, and copies of such agreements shall be furnished
to Buyer upon request.
19.0 BUYER'S RIGHTS IN SELLER'S WORK PRODUCT
Upon payment of equitable compensation to Seller, Buyer shall own all
right, title and interest in and to all work product generated by
Seller in the performance of this Order including, without limitation,
all designs, drawings, data, models, prototypes, reports,
specifications, and computer programs. Subject to the foregoing, copies
of such work product shall be made available to Buyer upon request at
any time, and all tangible embodiments of such work product shall, at
the option of Buyer, be delivered to Buyer upon the completion or
termination of this Order.
20.0 BUYER'S RIGHTS IN SELLER'S PATENTS, COPYRIGHTS, TRADE SECRETS, AND
TOOLING
Seller hereby grants to Buyer an irrevocable, nonexclusive, free,
paid-up license to practice and/or use, and license others to practice
and/or use on Buyer's behalf, all of Seller's patents, copyrights,
trade secrets (including, without limitation, designs, processes,
drawings, technical data and tooling), and tooling (hereinafter
"Licensed Property") related to the development, production,
maintenance or repair of Products. Buyer hereafter retains all its
rights to use Licensed Property, but Buyer hereby covenants not to
exercise such rights except in connection with the making, having made,
using and selling of Products or products of the same kind, and then
only in the event of any of the following:
<PAGE>
a. Seller discontinues or suspends business operations or the
production of any or all of the Products;
b. Seller is acquired by or transfers any or all of its rights to
manufacture any Product to any third party, without first
obtaining written consent from Buyer, said consent shall not be
unreasonably withheld or delayed;
c. Buyer cancels this Agreement or any Order for cause;
d. Seller breaches this Agreement or any Order;
e. Seller fails to deliver Products in accordance with this
Agreement or any Order;
f. in Buyers judgement it becomes necessary, in order for Seller to
comply with the terms of this Agreement or any Order, for Buyer
to provide support to Seller (in the form of design,
manufacturing, or on-site personnel assistance) substantially in
excess of that which Buyer normally provides to its suppliers;
g. Seller's trustee in bankruptcy (or Seller as debtor in
possession) fails to assume this Agreement and all Orders by
formal entry of an order in the bankruptcy court within sixty
(60) days after entry of an order for relief in a bankruptcy case
of the Seller, and/or Buyer elects to retain its rights to
Licensed Property pursuant to section 365(n)(1)(B) of the United
States Bankruptcy Code (the "Bankruptcy Code"), 11 U.S.C.
101-1330;
h. Seller is at any time insolvent (whether measured under a balance
sheet test or by the failure to pay debts as they come due) or
the subject of any insolvency or debt assignment proceeding under
state or nonbankruptcy law; or
i. Seller voluntarily becomes a debtor in any case under the
Bankruptcy Code or, in the event an involuntary bankruptcy
petition is filed against Seller, such petition is not dismissed
within thirty (30) days,
As a part of the license granted under this section, Seller shall, at
the written request of Buyer and at no additional cost to Buyer,
promptly deliver to Buyer any and all Licensed Property considered by
Buyer to be necessary to satisfy Buyer's production requirements for
Products and products of the same kind.
<PAGE>
21.0 NOTICES
21.1 Addresses
Notices and other communications shall be given in writing by personal
delivery, United States mail, telex, Teletype, telegram, facsimile, or
cable addressed to the respective party as follows:
To Buyer: BOEING COMMERCIAL AIRPLANE GROUP MATERIEL
DIVISION
P.O. Box 3707
Seattle, Washington 98124-2207
Attention: Buyer:
Mail Stop:
To Seller: Leonard's Metals Inc.
3030 Highway 94
St. Charles, MO 63301
Attention:Contracts
21.2 Effective Date
The date on which any such communication is received by the addressee
is the effective date of such communication.
21.3 Approval or Consent
With respect to all matters subject to the approval or consent of
either party, such approval or consent shall be requested in writing
and is not effective until given in writing. With respect to Buyer,
authority to grant approval or consent is limited to Buyer's Materiel
Representative.
22.0 PUBLICITY
Seller may not, and shall require that its subcontractors and suppliers
of any tier may not, cause or permit to be released any publicity,
advertisement, news release, public announcement, or denial or
confirmation of the same, in whatever form, regarding any aspect of any
Order without Buyer's prior written approval.
<PAGE>
23.0 FACILITIES
Seller shall bear all risks of providing adequate facilities and
equipment to perform each Order in accordance with the terms thereof.
If any contemplated use of government or other facilities or equipment
is not permitted by the government or is not available for any other
reason, Seller shall be responsible for arranging for equivalent
facilities and equipment at no cost to Buyer. Any failure to do so does
not excuse any deficiencies in Seller's performance or affect Buyer's
right to cancel under Section 12.2, "Cancellation- Default," or under
any provision of law.
24.0 SUBCONTRACTING
Seller may not procure any Product, as defined in the applicable Order,
from a third party in a completed or a substantially completed form
without Buyer's prior written consent.
No raw material may be incorporated in a Product (a) unless procured
from a Buyer approved source or (b) unless Buyer has surveyed and
qualified Seller's receiving inspection personnel and laboratories to
test the specified raw materials. Seller may request in writing, that
Buyer survey and qualify additional sources of raw materials. No waiver
of survey and qualification requirements will be effective unless
granted by Buyer's Engineering and Quality Control Departments,
Utilization of a Buyer-approved raw material source does not constitute
a waiver of Seller's responsibility to meet all specification
requirements.
25.0 NOTICE OF LABOR DISPUTES
Seller shall immediately notify Buyer of any actual or potential labor
dispute that may disrupt the timely performance of an Order. Seller
shall include the substance of this Section, including this sentence,
in any subcontract relating to an Order if a labor dispute involving
the subcontractor would have the potential to delay the timely
performance of such Order, Each subcontractor, however, shall only be
required to give the necessary notice and information to its next
higher-tier subcontractor.
26.0 ASSIGNMENT
Each order shall inure to the benefit of and be binding on each of the
parties hereto and their respective successors and assigns, provided
however, that no assignment of any rights or delegation of any duties
under such order is binding on Buyer unless Buyer's written consent has
first been obtained. Notwithstanding the above, Seller may assign
claims for monies due or to become due under any Order provided that
Buyer may recoup or setoff any amounts covered by any such assignment
against any indebtedness of Seller to Buyer, whether arising before or
after the date of the assignment or the date of this Agreement, and
whether arising out of any such Order or any other agreement between
the parties.
<PAGE>
Buyer may settle all claims arising out of any Order, including
termination claims, directly with Seller. Buyer may unilaterally assign
any rights or title to property under the Order to any wholly-owned
subsidiary of The Boeing Company.
27.0 RELIANCE
Seller acknowledges that Seller is an expert in all phases of the work
involved in producing and supporting the Products, including but not
limited to the designing, testing, developing, manufacturing,
improving, overhauling and servicing of the Products. Seller agrees
that Buyer and Buyer's customers may rely on Seller as an expert, and
Seller will not deny any responsibility or obligation hereunder to
Buyer or Buyer's customers on the grounds that Buyer or Buyer's
customers provided recommendations or assistance in any phase of the
work involved in producing or supporting the Products, including but
not limited to Buyer's acceptance of specifications, test data or the
Products, except where (i) Seller has given Buyer written notice that
Seller objects to a particular requirement and states the specific
reasons for such objection, and (ii) Buyer, in its sole discretion,
determines that the objection is valid, and not withstanding such
validity, requests Seller to go forward with the requirement. If the
Product fails to conform to the Order for the reasons stated in the
Seller's written objection, Seller' shall not be in default under the
terms of this Agreement as a result of such failure.
28.0 NON-WAIVER
The failure of either party at any time to enforce any provision of an
Order does not constitute a waiver of such provision or prejudice such
party's right to enforce such provision at any subsequent time.
29.0 HEADINGS
Article and Section headings used in this Agreement are for convenient
reference only and do not affect the interpretation of the Agreement.
30.0 PARTIAL INVALIDITY
If any provision of any Order is or becomes void or unenforceable by
force or operation of law, the other provisions shall remain valid and
enforceable.
<PAGE>
31.0 APPLICABLE LAW; JURISDICTION
Each Order, including all matters of construction, validity and
performance, shall in all respects be governed by, and construed and
enforced in accordance with, the law of the State of Washington as
applicable to contracts entered into and to be performed wholly within
such State between citizens of such State, without reference to any
rules governing conflicts of law. Seller hereby irrevocably consents to
and submits itself to the jurisdiction of the Superior Court for King
County, State of Washington and to the jurisdiction of the United
States District Court for the Western District of Washington for the
purpose of any suit, action or other judicial proceeding arising out of
or connected with any Order or the performance or subject matter
thereof, Seller hereby waives and agrees not to assert by way of
motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that (a) Seller is not personally subject to the
jurisdiction of the above-named courts, (b) the suit, action or
proceeding is brought in an inconvenient forum or (c) the venue of the
suit, action or proceeding is improper.
32.0 AMENDMENT
Oral statements and understandings are not valid or binding. Except for
the provisions of Section 10.0, "Changes," of this Agreement and
Section 5.0, "Changes," of the Special Business Provisions, any Order
may not be changed or modified except by
a writing signed by both parties.
33.0 LIMITATION
Seller may not (except to provide an inventory of Products to support
delivery acceleration and to satisfy reasonable replacement and Spares
requirements) manufacture or fabricate Products or procure any goods in
advance of the reasonable flow time required to comply with the
delivery schedule in the applicable Order. Notwithstanding any other
provision of an Order, Seller is not entitled to any equitable
adjustment or other modification of such Order for any manufacture,
fabrication, or procurement of Products not in conformity with the
requirements of the Order, unless Buyer's written consent has first
been obtained. Nothing in this Section shall be construed as relieving
seller of any of its obligations under the order.
34.0 TAXES
34.1 Inclusion of Taxes in Price
Subject to the provisions of Section 33.4 herein, and unless otherwise
provided herein, all taxes, including but not limited to federal, state
and local income taxes, value added taxes, gross receipt taxes,
property taxes, and custom duties taxes are deemed to be included in
the Order price, except applicable sales or use taxes on sales to Buyer
("Sales Taxes") for which Buyer has not supplied a valid exemption
certificate and personal property taxes.
<PAGE>
34.2 Litigation
In the event that any state or local taxing authority has claimed or
does claim payment for Sales Taxes, property or other/taxes, (other
than income) not included in the invoice price for the Order, Seller
shall promptly notify Buyer, and Seller shall take such action as Buyer
may direct to pay or protest such taxes (including all penalties,
interest and other additions to such taxes) or to defend against such
claim. The actual and direct expenses (including all professional fees
and expenses incurred by Seller), without the addition of profit and
overhead, of such defense and the amount of such taxes (including all
penalties, interest and other additions to such taxes) as ultimately
determined as due and payable shall be paid directly by Buyer or
reimbursed to Seller. If Seller or Buyer is successful in defending
such claim, the amount of such taxes recovered by Seller, which had
previously been paid by Seller and reimbursed by Buyer or paid directly
by Buyer, shall be refunded to Buyer.
34.3 Rebates
If any taxes paid by Buyer are subject to rebate or reimbursement,
Seller shall take the necessary actions to secure such rebates or
reimbursement and shall promptly refund to Buyer any amount recovered
less the actual and direct expenses of obtaining such rebate or
reimbursements.
34.4 Payment of Taxes on Tooling
Any taxes applicable to the tooling being acquired by Buyer under this
Order will be paid by Seller to the appropriate government taxing
authority except that Buyer shall reimburse Seller for all personal
property taxes applicable to the Tooling after receipt by Buyer of
Seller's invoice for such taxes from Seller for the amount of tax
imposed by the state or local taxing authority.
35.0 FOREIGN PROCUREMENT OFFSET
With respect to work covered by the Order, Seller shall use its best
efforts to cooperate with Buyer in the fulfillment of any foreign
offset program obligation that Buyer may have accepted as a condition
of the sale of Buyer's product. In the event that Seller solicits bids
and/or proposals for, or procures or offers to procure any goods or
services relating to the work covered by an Order form any source
outside of the United States, Buyer shall be entitled, to the exclusion
of all others, to all industrial benefits and other "offset" credits
which may result from such solicitations, procurements or offers to
procure. Seller agrees to take any actions that may be required on its
part to assure that Buyer receives such credits. Seller further agrees
to report to Buyer any such foreign procurement activity if and when
required by the Section identified as "Foreign Procurement Report," of
the Special Business Provisions, as revised from time to time by Buyer.
<PAGE>
36.0 ENTIRE AGREEMENT/ORDER OF PRECEDENCE
36.1 Entire Agreement
The Order sets forth the entire agreement, and supersedes any and all
other agreements, understandings and communications between Buyer and
Seller related to the subject matter of an Order.
36.2 Incorporated by Reference
In addition to the documents previously incorporated herein by
reference, the documents listed below are by this reference made a part
of this Agreement:
A. Engineering Drawing by Part Number and Related Outside
Production Specification Plan (SPCO),
B. Any other exhibits or documents agreed to by the parties
to be a part of this Agreement,
36.3 Order of Precedence
In the event of a conflict or inconsistency between any of the terms of
the following documents, the following order of precedence shall
control:
A. Special Business Provisions (Excluding E below)
B. General Terms Agreement (Excluding the documents listed in
D and F below)
C. Order (Excluding references to A and B above)
D. Engineering Drawing by Part Number and Related Outside
Production Specification Plan (SPCO),
E. Administrative Agreement (If Required)
F. Any other exhibits or documents the parties agree shall be
part of the Agreement.
36.4 Disclaimer
Unless otherwise specified on the face of the applicable Order, any
CATIA Dataset or translation thereof (each or collectively "Data)
furnished by The Boeing Company is furnished as an accommodation to
Seller. It is the Seller's responsibility to compare such Data to the
comparable two dimensional computer aided design drawing to confirm the
accuracy of the Data.
<PAGE>
BUYER HEREBY DISCLAIMS, AND SELLER HEREBY WAIVES, ALL WARRANTIES AND
LIABILITIES OF BUYER AND ALL CLAIMS AND REMEDIES OF SELLER, EXPRESS OR
IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY DEFECT IN ANY
CATIA DATASET OR TRANSLATION THEREOF, INCLUDING, WITHOUT LIMITATION,
ANY (A) IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE OR FOR A
PARTICULAR PURPOSE, (B) ANY IMPLIED WARRANTY ARISING FROM COURSE OF
DEALING OR PERFORMANCE OR USAGE OF TRADE, (C) RECOVERY BASED UPON TORT,
WHETHER OR NOT ARISING FROM BUYER'S NEGLIGENCE, AND (D) ANY RECOVERY
BASED UPON DAMAGED PROPERTY, OR OTHERWISE BASED UPON DAMAGED PROPERTY,
OR OTHERWISE BASED UPON LOSS OF USE OR PROFIT OR OTHER INCIDENTAL OR
CONSEQUENTIAL DAMAGES.
EXECUTED in duplicate as of the date and year first written above by the duly
authorized representatives of the parties.
THE BOEING COMPANY LEONARD'S METAL, INC.
by and through its division
Boeing Commercial Airplane Group
/s/ Stan W. Rose /s/ Ronald S. Saks
Name: Stan W. Rose Name: Ronald S. Saks
Title: Manager Title: President
Date: 3-12-93 Date: 3-8-93
<PAGE>
SPECIAL BUSINESS PROVISIONS
between
THE BOEING COMPANY
and
LEONARD'S METALS, INC.
Number DP-PLR-1131A
<PAGE>
TABLE OF CONTENTS
1.0 Definitions........................................................ 2
2.0 Purchase order note................................................ 2
3.0 Prices............................................................. 3
3.1 Firm Fixed Prices.................................................. 3
3.2 Manufacturing Configuration Baseline............................... 3
3.3 Packaging.......................................................... 3
3.4 Tool Storage....................................................... 3
4.0 Purchase Order Issuance............................................ 4
5.0 Changes............................................................ 4
5.1 Changes At No Cost................................................. 4
5.2 Changes Subject to An Equitable Adjustment......................... 5
5.3 Changes to the Statement of Work................................... 6
5.4 Computation of Equitable Adjustment................................ 6
5.5 Planning Schedule.................................................. 6
6.0 Termination Liability.............................................. 6
7.0 Expenditure Authorization.......................................... 7
8.0 Payment............................................................ 7
8.1 Recurring Costs.................................................... 7
8.2 Non-Recurring Costs................................................ 7
9.0 Product Assurance.................................................. 7
9.1 Governing Document................................................. 7
10.0 Cost Performance Visibility........................................ 8
11.0 Grant Of License................................................... 8
11.1 Licensed Property.................................................. 8
11.2 Consideration...................................................... 8
2
<PAGE>
TABLE OF CONTENTS
(Continued)
11.3 Title Transfer..................................................... 8
12.0 Spares and Shortflow Production Pricing............................ 8
12.1 Aircraft On Ground (AOG)/Critical Spares, Short Flow............... 9
12.2 Expedite Spare (Class 1) and Short Flow Production................. 9
12.3 Special Handling................................................... 9
13.0 Buyer Furnished Material (where applicable)........................ 10
14.0 Foreign Procurement Report......................................... 10
15.0 Status Reports..................................................... 10
Attachment 1 Work Statement and Pricing 14
Attachment 2 Planning Schedule 15
Attachment 3 Foreign Procurement Report 16
Attachment 4 Rates and Factors 17
Attachment 5 Termination Liability Curve 18
Attachment 6 Incremental Lot Release 19
Schedule Plan
3
<PAGE>
SPECIAL BUSINESS PROVISIONS
THESE SPECIAL BUSINESS PROVISIONS ("SBP") are entered into as of August 30, 1990
by Leonard's Metals, Inc. a Missouri corporation with its principal office in
St. Charles, Missouri ("Seller"), and Boeing Commercial Airplane Group, a
division of The Boeing Company, a Delaware corporation with its principal office
in Seattle, Washington ("Buyer").
RECITALS
A. Buyer and Seller entered into a General Terms Agreement (the
"Agreement") dated August 30, 1990 for the sale by Seller and purchase
by Buyer of Products.
B. Buyer and Seller desire to enter into another agreement to include
these Special Business Provisions relating to the sale by Seller and
purchase by Buyer of the Products.
Now, therefore, in consideration of the mutual covenants set forth herein, the
parties agree as follows:
SPECIAL BUSINESS PROVISIONS
1.0 DEFINITIONS
The definitions used herein shall be the same as used in the Agreement.
In addition, the term "Rate Tool Capacity" shall mean the quantity of
tooling required to support a production rate not to exceed 21 shipsets
per month on the 737, 10 shipsets per month on the 747, 14 shipsets per
month on the 757, 10 shipsets per month on the 767, 7 shipsets per
month on the 777, and the term "Initial Order" shall mean the order as
it first exists, prior to Amendment or Change.
2.0 PURCHASE ORDER NOTE
The following note shall be contained in any Order to which these
Special Business Provisions are applicable:
This Order is subject to and incorporates by this reference the Special
Business Provisions DP-PLR-1131A between The Boeing Company and
Leonard's Metals, Inc. dated August 30, 1990.
4
<PAGE>
Each Order bearing such note shall be governed by and be deemed to
include the provisions of these Special Business Provisions.
3.0 PRICES
3.1 Firm Fixed Prices
Except as otherwise provided herein, the prices and period of
performance of Products to be delivered under this contract are listed
in Attachment 11111 which by this reference are incorporated herein and
are firm fixed prices in United States dollars, F.0.B. Seller's Plant.
In addition, the pricing for all "curtain track" and "hammer form"
Products reflect a minimum buy quantity for all orders excluding AOG,
The minimum order buy quantity for "curtain track" Products is five (5)
each. The minimum buy quantity for "hammer form" Products is ten (10)
each.
3.2 Manufacturing Configuration Baseline
Unit pricing for each part number shown in Attachment reflects the
latest revisions of the Engineering Drawings and outside Production
Specification Plans (OPSP's) at the time of the signing of these
Special Business Provisions.
3.3 Packaging
The prices shown in Attachment 1 do include packaging costs. Packaging
shall be furnished by the Seller. If necessary, Seller may repair or
furnish additional packaging upon approval by Buyer of Seller's price
proposal for such repair or additional packaging. Separate purchase
orders shall be released by Buyer to cover such expense (if
applicable).
3.4 Tool Storage
Seller shall be entitled to a tool storage fee of Six Hundred Dollars
($600.00) for each Hammer Die used on packages 08-115, 08-120 and
08-122 and stored at Seller"s facility in which Buyer fails to issue an
Order for Products utilizing said die(s) on or before December 31,
1993. In addition, Seller shall be entitled to a tool storage fee as
detailed above for each Hammer Die used on the aforementioned packages
and stored at Seller's facility in which Buyer fails to issue an Order
utilizing said die(s) during the period January 1, 1994 through
December 31, 1998.
5
<PAGE>
4.0 PURCHASE ORDER ISSUANCE
Buyer and Seller agree that, in addition to other provisions of the
order and in consideration of the prices set forth under Section 3.1,
"Firm Fixed Prices," Buyer shall issue purchase orders for the Products
listed in Attachment I'll' from time to time to Seller for Buyer's
requirements, to be shipped at any scheduled rate of delivery, as
determined by Buyer, but not to exceed the Rate Tool Capacity, and
Seller shall sell to Buyer Buyer's requirements of such products,
provided that, without limitation on Buyer's right to determine its
requirements, Buyer shall not be obligated to issue any purchase orders
for any given Product if:
A. Any of Buyer's customers specify an alternate product;
B. Such Product is, in Buyer's reasonable judgment, not
technologically competitive at any time. "Technologically
competitive" shall be defined as significant changes to Product
design, including materials, specifications or manufacturing
processes which result in a reduced price or weight.
C. Buyer gives reasonable notice to Seller of a change in any of
Buyer's aircraft which will result in Buyer's no longer requiring
such Product for such aircraft;
D. Seller has materially defaulted in any of its obligations under
any order, provided that Buyer has given Seller written notice of
default and Seller has not cured said default within 10 days
after receipt of Buyer's notice specifying the default; or
E. Buyer reasonably determines that Seller cannot support Buyer"s
requirements for Products in the amounts and within the delivery
schedules Buyer requires.
5.0 CHANGES
5.1 Changes At No Cost
Not withstanding the provision for an equitable adjustment in Section
10.0, "Changes," of the Agreement, Buyer may make the changes set forth
in subsections 5.1.1, 5.1.2, and 5.1.3 without cost or change in the
unit price stated in the applicable order.
5.1.1 Changes in the delivery schedule, including firing order and rate
changes, if (a) the delivery date of the Product under such order is on
or before the last date of the applicable period of performance as
identified in Attachment "1" and (b) Buyer provides Seller with written
notice of the changes.
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<PAGE>
A. At least four (4) months prior to the first day of the month in
which any acceleration in the delivery schedule is to take
effect; and/or
B. At least four (4) months prior to the first day of the month in
which any deceleration in the delivery schedule is to take
effect.
5.1.2 Changes in the Tooling required to support delivery schedule
adjustments, including but not limited to production rate changes, that
are in accordance with the Rate Tool Capacity.
5.1.3 Engineering change to incorporate Seller initiated production facility
requirements to facilitate or improve Seller's manufacturing processes.
5.2 Changes Subject to An Equitable Adjustment
An equitable adjustment in the price of any Product shall be made in
accordance with Section 10.0, "Changes," of the Agreement if Buyer
makes a change in the delivery schedule of such product under an order
and:
A. Such Product, although originally scheduled for delivery during
the period of performance for the applicable package under such
order as identified in Attachment "1", is delivered after the
period of performance in accordance with such Order as changed;
or
B. Such products monthly rate exceeds the Rate Tool Capacity as
stated in Section 1.0; or
C. Such change does not meet the notice requirements of Section
5.1.1 above; and,
Seller submits to Buyer a written request for an equitable adjustment within 180
days of receipt of the written change notice.
For purposes of this Section, the amount of the price adjustment for each
product shall be determined by multiplying the original unit price plus any
negotiated changes which are incorporated into the individual product price,
excluding items such as amortization of tooling, amortization of schedule
slides, amortization of set-up charges, etc. by three tenths of one percent (.3
of 1%) then multiplying that factor by the cumulative balance of the number of
products previously scheduled in each successive month that falls outside the
changes at no cost periods set forth in Section 5.1.1 above. No price adjustment
shall be made for that portion of any delivery schedule change which falls
inside the changes at no cost periods set for in Section 5.1.1.
7
<PAGE>
5.3 Changes to the Statement of Work
Buyer may direct Seller within the scope of the applicable order and in
accordance with the provisions of Section 10.0, "Changes," of the
Agreement to increase or decrease the work to be performed by the
Seller in the manufacture of any Product. The equitable adjustment, if
any, to be paid by Buyer to Seller for such change shall be computed in
accordance with the provisions of Section 5.4.
5.4 Computation of Equitable Adjustment
The Rates and Factors set forth in Attachment "4", which by this
reference is incorporated herein, shall be used to determine the
equitable adjustment, if any, (including equitable adjustments, if any,
in the prices of Products to be incorporated in Derivative Aircraft),
to be paid by Buyer pursuant to Section 10.0, "Changes," of the
Agreement.
5.5 Planning Schedule
The planning schedule, attached hereto as Attachment 11211 and by this
reference incorporated herein, is a schedule to be used for planning
production following the initial purchase order release. Such planning
schedule shall not constitute a limitation on Buyers right to issue
purchase orders to Seller for greater or lesser quantities or to
specify different delivery dates as necessary to meet Buyers
requirements for the products listed on Attachment "1". Such planning
schedule shall be subject to adjustment from time to time. Any such
adjustment shall not be deemed to be a change under Section 10.0,
"Changes," of the Agreement.
6.0 TERMINATION LIABILITY
When required by Buyer, Seller shall submit a time-phased Termination
Liability Curve per Attachment 11511 attached hereto and by this
reference incorporated herein. Notwithstanding any other provisions of
this Agreement, Buyer's termination liability pursuant to Section 12 of
the Agreement shall not exceed the amount established by the
Termination Liability Curve for the date of termination, reduced by the
amount of all payments made by Buyer for delivered Products, tooling or
other goods or services furnished by the Seller pursuant to the Order
or made by Buyer in settlement of any other claim made by Seller or any
other party in connection with the performance of the order.
8
<PAGE>
At any point in time, whether or not Buyer requires Seller to submit a
Termination Liability Curve, Buyer's termination liability shall be
limited to the maximum value of scheduled production deliveries for
twelve (12) months.
7.0 EXPENDITURE AUTHORIZATION
When requested by Buyer, Seller shall submit a Lot Release Schedule
Plan for approval, Seller's Lot Release Schedule Plan is included as
Attachment 11611 hereto and is by this reference incorporated herein.
Buyer's written authorization must be obtained prior to release of any
lots. Expenditures incurred by Seller exceeding those authorized by the
Lot Release Schedule shall be at Seller's risk and expense.
8.0 PAYMENT
8.1 Recurring Costs
Payment shall be net thirty (30) days, Payment due dates, including
discount periods, shall be computed from (a) the date of receipt of the
Product, (b) the date of receipt of a correct invoice or (c) the
scheduled delivery date of such Product, whichever is last, up to and
including the date Buyer's check is mailed. Unless freight and other
charges are itemized, any discount shall be taken on the full amount of
the invoice. All payments are subject to adjustment for shortages,
credits and rejections.
8.2 Non-Recurring Costs
The total non-recurring price shall be paid by Buyer within the term
discount period or thirty (30) calendar days (whichever is later) after
receipt of both acceptable Products by Buyer and receipt of an
acceptable invoice accompanied by a properly prepared Certified Tool
List as specified in the M31-24 Document, "Boeing Supplier Tooling
Manual." Invoices received with incorrect, improperly prepared or
incomplete certified tool lists will be returned for correction prior
to payment. Invoices shall be dated concurrent with, or subsequent to,
shipment of the Products.
9.0 PRODUCT ASSURANCE
9.1 Governing Document
Seller acknowledges that Buyer and the owner or operator of each
aircraft manufactured by Buyer incorporating the Products must be able
to rely on each Product performing as specified and that Seller will
provide the required support services. Accordingly, the provisions of
the Boeing Document M6-1124-3, "Boeing Designed, Sub-Contracted
Products Manufacturers Warranty" are incorporated herein and by this
reference are made a part hereof.
9
<PAGE>
10.0 COST PERFORMANCE VISIBILITY
Seller's Program Manager shall be responsible to provide all necessary
cost support data, source documents for direct and indirect costs, and
assistance at the Seller's facility for cost performance reviews
performed by Buyers pursuant to any order referencing these Special
Business Provisions. Copies of such data are to be made available
within 72 hours of any request by Buyer. This data is required in
addition to the cost data provided pursuant to Section 9.0 of the
Agreement. All such information so obtained shall be treated as
confidential in accordance with Section 15.0 of the Agreement.
11.0 GRANT OF LICENSE
11.1 Licensed Property
For purposes of this Section, "Licensed Property" shall be deemed to
mean all patents (including divisions, continuations or substitutions
thereof), designs, specifications processes, tooling drawings,
technical data and other information used in the development or
production of Products.
11.2 Consideration
In consideration for Buyer's agreement to pay and subsequent payment of
certain non-recurring tooling, design, development and certification
costs for the Products. Seller hereby grants to Buyer a present,
royalty-free, nonexclusive license to use Licensed Property to make,
have made, use and sell Products. Buyer shall have the right to
exercise said license at no additional cost to Buyer: (a) upon
termination of this Order for any reason; or (b) at any time after five
years from the date of this order.
11.3 Title Transfer
At any time following the exercise of the license granted herein, Buyer
shall have the right to require Seller at no additional cost to Buyer
to transfer to Buyer the title to and possession of all tooling,
fixtures, die and jigs used by Seller or Seller's subcontractors in the
development or production of Products.
12.0 SPARES AND SHORTFLOW PRODUCTION PRICING
Except as set forth in subsections 12.1 and 12.2 below, the price for
Spare(s) shall be the same as the production price for the Products as
listed on Attachment "1" in effect at the time the Spare(s) are
ordered. POA parts shall be priced so that the sum of the prices for
all POA parts of an End Item Assembly equals the 10 applicable
recurring portion of the price of the End Item Assembly.
<PAGE>
12.1 Aircraft On Ground (AOG)/Critical Spares, Short Flow
Production Requirements less than or equal to 4 Weeks Leadtime
The AOG is the highest priority category utilized by Buyer for spare
parts procurement. This classification will be assigned part
requirements for actual grounded aircraft. The Seller will provide
delivery commitments within one (1) hour after receipt of the
requirements. The Critical priority classification is assigned spares
requirements which are urgently needed by a customer or Buyer although
no actual AOG condition exists, an AOG condition is imminent or a work
stoppage may result from this Critical condition. The Seller will
provide delivery commitments within one (1) working day after receipt
of the requirements.
The Seller is required to support AOG/Critical Spares on a twenty-four
(24) hour day basis, seven (7) day week and with maximum use of
overtime. Premium transportation is authorized. The price for Aircraft
On Ground (AOG)/Critical Spares and short flow production requirements
as defined herein shall be the price for such Products listed on
Attachment "1" in effect when such Spares are ordered multiplied by a
factor of 1.07 plus outside processing costs. For Hammer Form parts,
Seller shall be entitled to an additional $250.00/lot expedite fee. In
addition, Seller shall be entitled to a $200.00/lot charge to pour a
lead top, as required.
12.2 Expedite Spare (Class 1) and Short Flow Production
Requirements with Leadtime of Greater than 4 Weeks but Less
Than or Equal to 8 Weeks
The Expedite Spare classification is used to identify spares
requirements that require delivery in less than normal reorder lead
time (ROLT). Manufacturing efforts will be based on a two (2) shift day
basis, six (6) day week. The price for Expedite Spares and short flow
production requirement, as defined herein, shall be the price for such
Products listed on Attachment "1" in effect when such Spares are
ordered multiplied by a factor of 1.05 plus outside processing costs.
Expedite action will be taken only if necessary to meet Buyer's
required date.
12.3 Special Handling
The price for all effort associated with the production handling and
delivery of Spare(s) is deemed to be included in the price for such
Spare(s). When Buyer directs delivery of Spare Parts to an F.O.B. point
other than Seller's plant, however, Buyer shall reimburse Seller for
shipping charges, including insurance, paid by Seller from the plant to
the designated F.O.B. point. Such charges shall be shown separately on
all invoices.
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<PAGE>
13.0 BUYER FURNISHED MATERIAL (WHERE APPLICABLE)
It is the responsibility of the Seller to provide notice to the Buyer
of required on-dock dates for all raw material to ensure production
continuity, Seller's notice shall provide Buyer with sufficient time to
allow Buyer to competitively bid the raw material if so desired.
Material furnished to Supplier shall be administered per the Bonded
Stores Agreement between the parties. Updates on the status of all
Buyer furnished raw material shall be submitted quarterly by the Seller
to Buyer.
14.0 FOREIGN PROCUREMENT REPORT
The Foreign Procurement Report to Buyer required by Section 35.0,
"Foreign Procurement offset," of the Agreement is to be provided on the
Foreign Procurement Report form, Attachment "3" hereto, in accordance
with instructions provided therein. Such document is by this reference
made a part hereof. The semi-annual reporting periods shall be January
1 to June 30 and July 1 to December 31. The reports shall be submitted
on the 1st of August and the 1st of February respectively.
15.0 STATUS REPORTS
Seller shall update and submit, as a minimum, monthly status reports
using a method mutually agreed upon by the Buyer and Seller. Seller
shall also submit monthly status reports using Boeing's Vendor
Follow-Up Report.
For all first run programs, Seller shall provide to Buyer a milestone
chart identifying the following:
(a) Raw material schedule, including;
(i) purchase order number and date,
(ii) order quantity and delivery schedule
(b) Planning and Programming start and completion;
(c) Tooling manufacture start and completion;
(d) Machining start and completion by operation;
(e) outside processing by operation and subcontractor;
(f) First article completion date; and,
(g) Production lot release plan.
12
<PAGE>
EXECUTED in duplicate as of the date and year first set forth above by the duly
authorized representatives of the parties.
THE BOEING COMPANY LEONARD'S METALS, INC.
By and Through its Division
Boeing Commercial Airplane Group
/s/ Stan W. Rose /s/ Ronald S. Saks
Name: Stan W. Rose Name: Ronald S. Saks
Title: Manager Title: President
Date: 3-12-93 Date: 3-8-93
13
<PAGE>
ATTACHMENT "1" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
WORK STATEMENT AND PRICING
The price and period of performance for Products to be delivered under this
contract shall be as follows:
NOTE: ALL PRODUCTS, CORRESPONDING PRICING AND THE APPLICABLE PERIOD OF
PERFORMANCE FOR SAID PRODUCTS, TO BE PURCHASED BY THE SHEET METAL/OFFLOAD GROUP
ARE IDENTIFIED AND MAINTAINED IN A SHEET METAL PRICING CATALOG IDENTIFIED AS
LEONARD'S METALS, INC. ATTACHMENT TO SBP DP-PLR-1131A WHICH IS HEREBY
INCORPORATED AND MADE A PART HEREOF BY THIS REFERENCE. SAID CATALOG SHALL BE
AMENDED AS DEEMED NECESSARY BY THE PARTIES BUT NO LESS THAN SEMIANNUALLY. ALL
PRICING IN THE AFOREMENTIONED CATALOG IS FIRM FIXED PRICE FOR DELIVERIES THROUGH
THE APPLICABLE TIME FRAME, EXCEPT AS NOTED HEREIN IN SECTION 3.0 "PRICES".
PLEASE NOTE: THE EXTENDED AMOUNTS SHOWN IN THIS ATTACHMENT ARE BASED UPON
ESTIMATED USAGE RATES AND ARE USED AS A GUIDE ONLY. ANY ESTIMATE OF PRESENT OR
FUTURE REQUIREMENTS PROVIDED TO SELLER BY BUYER IS NOT TO BE CONSIDERED AS A
COMMITMENT OF BUYER'S ACTUAL PURCHASE REQUIREMENTS. EXTENDED AMOUNTS ARE NOT
GUARANTEED TO BE ACTUALLY AWARDED, IN WHOLE OR IN PART, BY BUYER TO SELLER.
14
<PAGE>
ATTACHMENT "2" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
PLANNING SCHEDULE
The following Airplane model mix and rate are forecasted for year 1992-1996.
Model Mix 1992 1993 1994 1995 1996
737 14 14 17 17 17
747 5 5 5 5 5
757 8.5 8.5 8.5 7.0 7.0
767 5 5 5 5 5
777 1 2 3 5 5
TOTAL 33.5 34.5 38.5 39.0 39.0
15
<PAGE>
ATTACHMENT "3" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
FOREIGN PROCUREMENT REPORT FORM
(Seller to Submit)
(Reference Section 14.O)
16
<PAGE>
ATTACHMENT "4" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
RATES AND FACTORS
The following Rates and Factors, which are reflective of the proposed values
identified in Attachment "1" of this document, shall contribute to the
determination of equitable pricing for engineering changes, derivative aircraft,
and option or follow-on pricing.
Tool Fab
Production & Rework
Direct Labor Rate $ 8.00/HR $13.00/HR
Manufacturing Burden $33.11/HR $33.11/HR
G&A (Gen. Admin. Exp.) $10.07/HR $10.07/HR
Profit $ 5.82/HR $ 6.82/HR
TOTAL $57.00 $63.00
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<PAGE>
ATTACHMENT "5" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
TERMINATION LIABILITY CURVE
(Seller to Submit)
(Reference Section 6.0)
In the event of termination or cancellation pursuant to Article 12.0 of the
Agreement, Buyer shall not be obligated to pay Seller more than the Cumulative
total amounts set forth below less payments previously made, for the
month/quarter in which the termination notice is issued, as the amounts shall be
amended from time to time.
($000 Omitted)
Nonrecurring Nonrecurring
Year/Quarter Cost Cost Total
- ------------ ---- ---- -----
_____ First $ $
_____ Second
_____ Third
_____ Fourth
_____ First $ $
_____ Second
_____ Third
_____ Fourth
_____ First $ $
_____ Second
_____ Third
_____ Fourth
TOTAL $____________ $_____________
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ATTACHMENT "6" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
INCREMENTAL LOT RELEASE SCHEDULE PLAN
(Seller to Submit)
(Reference Section 9.0)
A Authorization Summary
Non-recurring releases authorized in conjunction with the execution
of the Contract are as summarized below. The non-recurring Price
represents the baseline value to be used to determine change pricing
adjustment per section 5.2 "Changes Subject to an Equitable
Adjustment."
To Support
Production Authorization Dollar
Item Rate Of Date Amount
Contractor Use ____S/S per Execution of ______
Tooling month Contract
Common Use Tools ______
Forging Dies ______
Other Non-Recurring ______
Work
Total Non-Recurring
Baseline Value ______
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<PAGE>
ATTACHMENT "6" TO
SPECIAL BUSINESS PROVISIONS
(REQUIREMENTS)
Recurring releases authorized in conjunction with execution of this Contract are
herein summarized in shipset quantities.
Material Quantity S/S
Metallic Raw Material
Non-Metallic Raw Material
Purchased Parts
Extrusions
Fabrication
Detail Parts
Assembly
B. Lead Times
Lead times for material, fabrication and assembly authorizations are as
tabulated below in months prior to delivery of the first Shipset
affected.
Material Months
Metallic Raw Material TBD
Non-Metallic Raw Material TBD
Castings/Forgings TBD
Purchased Parts TBD
Extrusions TBD
Fabrication
Detail Parts TBD
Assembly TBD
Rate Tooling
(Greater than the Baseline Shipsets per Month) TBD
20
<PAGE>
REVISIONS
REV.
SYM DESCRIPTION DATE APPROVAL
1 INCORPORATE NEW CONTRACT 09-15-92
LANGUAGE L-71 (03-13-91)
TO SHEET METAL OFFLOAD
CONTRACTS
21
P.O. NO.:
DATE:
MASTER ORDER AGREEMENT
PAGE 1 OF 3
THIS MASTER ORDER AGREEMENT, TOGETHER WITH PROVISIONS OF EXHIBITS A, B, C, D,
AND E ATTACHED HERETO AND INCORPORATED HEREIN, CONSTITUTES THE TERMS AND
CONDITIONS GOVERNING THE SALE AND PURCHASE OF ARTICLES BETWEEN LEONARD'S METAL,
INC. - ST. CHARLES, MISSOURI, SELLER, AND ROCKWELL INTERNATIONAL CORPORATION,
NORTH AMERICAN AIRCRAFT, TULSA FACILITY, BUYER.
1. THE TERM OF THIS AGREEMENT SHALL COMMENCE ON _______ AND EXPIRE ON
_________, AND MAY BE RENEWED UPON MUTUAL AGREEMENT.
2. DURING THE TERM OF THIS MASTER ORDER AGREEMENT, BUYER MAY PURCHASE FROM
SELLER ARTICLES AT THE PRICES SET FORTH AND DESCRIBED IN EXHIBIT "D". THE
PURCHASE OF SAID ARTICLES WILL BE BY SEPARATE RELEASING PURCHASE ORDERS
AND SHALL INCORPORATE BY REFERENCE THE TERMS AND CONDITIONS OF THIS
MASTER ORDER AGREEMENT. SELLER SHALL FURNISH ARTICLES IN THE MANNER,
QUANTITIES, AND TIMES SET FORTH IN BUYER'S SEPARATE PURCHASE ORDER(S).
3. AT THE OPTION OF BUYER, SELLER MAY BE REQUESTED TO SHIP CERTAIN ITEMS BY
OTHER THAN THE TRANSPORTATION STATED ON THE FACEPLATE.
4. BUYER AND SELLER RECOGNIZE AND AGREE THAT BUYER'S NEEDS MAY FLUCTUATE.
SELLER AGREES THAT BUYER HAS MADE NO REPRESENTATION, WARRANTY, GUARANTEE
OR COMMITMENT THAT BUYER WILL PURCHASE ANY TOTAL QUANTITY OR MINIMUM
QUANTITY OF THE PRODUCTS LISTED.
5. SELLER SHALL MAKE DELIVERIES IN ACCORDANCE WITH THE GUARANTEED LEAD-TIMES
SPECIFIED IN EXHIBIT D AND ADHERE TO BUYER'S DELIVERY SCHEDULE FOR EACH
RELEASE. SELLER SHALL NOT DELIVER EARLIER THAN CONTRACT SCHEDULE WITHOUT
BUYER'S WRITTEN AUTHORIZATION AS AUTHORIZED BY EACH RELEASE OR CHANGE
NOTICE.
6. BUYER DIRECTED SCHEDULE CHANGES WHICH EXTEND THE DELIVERY BEYOND AND ARE
INITIATED PRIOR TO SELLER'S GUARANTEED LEAD-TIME AS DEFINED BY EXHIBIT
`E', 3RD COLUMN, SECOND INCREMENT, SHALL BE IMPLEMENTED BY THE SELLER AT
NO ADDITIONAL COST TO THE BUYER. ANY SCHEDULE ADJUSTMENTS TO WORK IN
PROCESS SHALL BE SET OUT FOR NEGOTIATION IN ACCORDANCE TO THE CHANGES
CLAUSE OF BUYER'S FORM 70-C-33, PARAGRAPH 12.
BUYER DIRECTED SCHEDULE CHANGES WHICH COMPRESS THE REQUIRED DELIVERY
EARLIER THAN THE SELLER'S GUARANTEED LEAD-TIME AS DEFINED BY EXHIBIT `E',
3RD COLUMN, SECOND INCREMENT, SHALL BE SUBJECT TO AN EQUITABLE ADJUSTMENT
IN ACCORDANCE WITH THE CHANGES CLAUSE OF BUYER'S FORM 70-C-33, PARAGRAPH
12.
<PAGE>
7. ANY PART NUMBER NOT IDENTIFIED ON EXHIBIT `D' OR EXHIBIT `D-1' AND
DECLARED BY BUYER AS AN A.O.G./SPARE, SELLER'S UNIT PRICING WILL BE
SUBJECT TO NEGOTIATION BASED UPON STANDARD UNIT PRICING, PLUS ANY
EXPEDITE AND/OR SMALL QUANTITY SET-UP CHARGE IN ACCORDANCE WITH THE
CHANGES CLAUSE OF BUYER'S FORM 70-C-33, PARAGRAPH 12. SAID PART NUMBER,
NEGOTIATED PRICES AND LEAD-TIMES SHALL BE ADDED TO EXHIBIT `D-1' AND MADE
A PART OF THE MASTER ORDER AGREEMENT. THEREAFTER, ANY PURCHASE ORDER
RELEASE TO THE MASTER ORDER AGREEMENT FOR A CONFIGURATION LISTED ON
EXHIBIT `D-1' SHALL BE PRICED AT THE PREMIUM PRICE STATED THEREIN.
FOR ANY PURCHASE ORDER RELEASE OF A GIVEN CONFIGURATION LISTED ON EXHIBIT
`D' AND DECLARE BY BUYER AS AN A.O.G/SPARE, SELLER'S UNIT PRICING SHALL
BE PRICED IN ACCORDANCE WITH AN EXHIBIT `D' AND ADDITIONAL CONSIDERATION
FURTHER DEFINED AS FOLLOWS:
FOR ANY NEW PURCHASE ORDER RELEASE PURCHASED WITH LESS THAN SELLER'S
GUARANTEED LEAD-TIME AS DEFINED BY EXHIBIT `E', 3RD COLUMN, THE SELLER
WILL BE ALLOWED ADDITIONAL CONSIDERATION OF 5% TO THE APPLICABLE UNIT
PRICE AS DEFINED BY EXHIBIT `D' FOR THE MANUFACTURE AND SPECIAL HANDLING
A REQUIRED TO MEET BUYER'S SCHEDULE.
ANY PURCHASE ORDER RELEASE MARKED AS AN AOG WITH A COMPRESSED DELIVERY
SCHEDULE SHALL BE ENTITLED TO ADDITIONAL CONSIDERATION OF 10% TO THE
APPLICABLE UNIT PRICE AS DEFINED BY EXHIBIT `D'. "AIRCRAFT-ON-GROUND'
(AOG) IS DEFINED AS A PART CLASSIFIED AS A HIGH PRIORITY ITEM WITH A BEST
EFFORT DELIVERY REQUIREMENT IN ORDER TO RETURN AN AIRCRAFT TO AIRBORNE
CAPABILITY. NOTWITHSTANDING THE CONTEXT OF THIS PROVISION, ANY
EXTRAORDINARY CHARGES INCLUSIVE OF SET-UP AND OTHER SMALL QUANTITY LOT
CHARGES LIMITED TO OUTSIDE PROCESSING SHALL BE SET OUT FOR NEGOTIATION IN
ACCORDANCE WITH THE CHANGES CLAUSE OF BUYER'S FORM 70-C-33, PARAGRAPH 12.
8. AUTHORIZED REPRESENTATIVES OF ROCKWELL INTERNATIONAL, OR ITS CUSTOMER
SHALL HAVE THE RIGHT TO VISIT THE SELLER'S PLANT DURING THE PERFORMANCE
OF THIS CONTRACT FOR THE PURPOSE OF MAKING ANY NECESSARY INSPECTIONS OR
OBTAINING ANY REQUIRED INFORMATION. SUCH VISITS SHALL BE COORDINATED WITH
THE SELLER TO MINIMIZE INTERFERENCE.
9. ALL PROCUREMENT OF MATERIAL AND/OR SPECIAL PROCESSING MUST BE PURCHASED
FROM OR ACCOMPLISHED AT A SOURCE LISTED IN THE MOST CURRENT BOEING
DOCUMENT D1-4426, AND/OR IDENTIFIED IN THE BOEING COMPANY QUALIFIED
PRODUCTS LIST. SELLER SHALL SO CERTIFY BY COMPLETING THE BUYER FURNISHED
CERTIFICATE OF CONFORMANCE (REFERENCE FORM 470-B-13-3) ATTACHED TO THE
SUBCONTRACT PARTS REVISION AUTHORIZATION TRANSMITTAL (SPRAT) AND RETURN
TO THE BUYER WITH SHIPMENT.
10. SUPPLIER MUST MAINTAIN AN APPROVED QUALITY SYSTEM IN ACCORDANCE WITH
BUYER'S SPECIFICATION ST0802GT0008.
11. ALL SHIPPING DOCUMENTS AND INVOICES SHALL REFER TO PART NUMBER, MOA
NUMBER, PURCHASE ORDER RELEASE NUMBER, ITEM NUMBER AND (WHEN APPLICABLE),
TRACEABILITY NUMBER(S). THE CERTIFICATE OF CONFORMANCE (REFERENCE FORM
470-B-13-3) AND A COP OF THE COMPLETED CONFIGURATION CONTROL DOCUMENT,
FLYSHEET 9, SHALL BE SUBMITTED AS PART OF THE SHIPPING DOCUMENTS.
<PAGE>
12. SUPPLEMENTAL REQUIREMENTS FOR IMPLEMENTATION OF TOTAL QUALITY MANAGEMENT
PHILOSOPHIES AND USE OF STATISTICAL PROCESS CONTROL, CODE 30.
THE SELLER SHALL PROVIDE A PRELIMINARY DETAILED SCHEDULE FOR
IMPLEMENTATION OF TOTAL QUALITY MANAGEMENT (TQM) PHILOSOPHIES AND USE OF
STATISTICAL PROCESS CONTROL (SPC) TECHNIQUES TO ASSURE CONTINUOUS
IMPROVEMENT IN PROCESSES AFFECTING PROCURED ARTICLES AND SERVICES.
AN EXAMPLE SCHEDULE IMPLEMENTATION PLAN AND GUIDELINES FOR TQM AND SPC
ARE DEFINED IN TOTAL QUALITY SYSTEM SPECIFICATION (TQSS) TQ0511-005.
BUYER'S APPROVAL OF SELLER IMPLEMENTATION PLAN FOR TQM AND SPC IS
REQUIRED.
THE IMPLEMENTATION PLAN IS ALSO A CONDITION FOR CERTIFICATION TO LEVELS
III, IV, AND V, AS SET FORTH BY BUYERS SUPPLIER CERTIFICATION PROGRAM.
FAILURE TO COMPLY WITH THE SCHEDULE REQUIREMENTS AS DEFINED IN SELLER'S
IMPLEMENTATION PLAN MAY BE CAUSE FOR CONTRACTUAL DEFAULT AND/OR
CERTIFICATION REVOCATION. CERTIFICATION IS REQUIRED FOR CONTINUED
PROCUREMENT ACTIVITY.
SELLER AND/OR SELLER'S SUPPLIER'S CONTROLLING KEY CHARACTERISTICS SHALL
COMPLY WITH SECTION 2 OF SPECIFICATION TQ0511--005.
<PAGE>
EXHIBIT "A" - TERMS & CONDITIONS
THIS ORDER IS SUBJECT TO THE FOLLOWING PROVISIONS: (AS OF 4/1/84)
(WESTERN REGION)
1. This order constitutes Buyer's offer to purchase the materials, services
and articles, all of which are herein called "articles," described
elsewhere
2. SHIPPING INSTRUCTIONS: (a) On date of shipment, send original bill of
lading, airbill or express receipt reflecting this order number to
Buyer's Traffic Department and one copy of Notice of Shipment to Buyer's
Purchasing Department. (b) Do no insure or declare value on shipments
beyond F.O.B. point. When a shipment is subject to freight rates
dependent upon value, annotate the bill of lading, airbill or express
receipt to show that the shipment is released at the maximum value which
applies to the lowest rate provided in applicable tariffs. If the value
of any one shipment exceeds $200,000 notify Buyer's Traffic Department by
collect wire in advance of shipment. Consolidate all shipments to be
forwarded on one day. (c) Articles furnished in excess of the quantity
specified or in excess of any allowable overage will be retained by Buyer
at no additional cost, unless Seller notifies Buyer within 45 days after
shipment that it desires the return thereof. Seller will reimburse Buyer
for the full cost of returning such overshipment or a minimum charge of
$50.00 whichever is higher. No notification will be given to Seller of
any overshipment unless the value thereof exceeds $150.00. (d) Mail
original and two duplicate invoices to Buyer's Accounting Department when
articles are shipped. STATE SHIPPING POINT ON ALL INVOICES. Each case or
parcel and accompanying packaging list of contents must show Buyer's
order number. If no packaging list accompanies the shipment, Buyer's
count will be conclusive on Seller.
3. PACKAGING AND EXTRAS: No charges will be allowed for transportation,
packaging, packing or returnable containers unless stated in this order.
All shipments must be packaged and must conform with Buyer's packaging
specification referred to elsewhere in this order, if any, so as to
permit efficient handling and to provide protection in shipment, and if
tendered to a common carrier. Damage to any articles resulting from
improper packaging will be charged to Seller.
4. SPECIFICATIONS: All articles ordered to Government or Buyer's
specifications will comply with such specifications current as of the
date of this order unless otherwise specified by Buyer.
5. WARRANTY: Unless otherwise agreed to in writing by the parties, Seller
warrants that articles ordered to specifications will conform thereto and
to any drawings, samples or other description furnished or adopted by
Buyer, or, if not ordered to specifications, will be fit and sufficient
for the purpose intended, and that all articles will be merchantable, of
good material and workmanship, and free from defect. Such warranties,
together with Seller's service warranties and guarantees, if any, shall
survive inspection, test, acceptance of, and payment for the articles and
shall run to Buyer, its successors, assigns and customers. Except for
latent defects, fraud or such gross mistakes of Seller as amount to
fraud, notice of any defect or nonconformity must be given by the Buyer
to the Seller within one (1) year after delivery, or one (1) year after
receipt of satisfactory qualification test reports, if required,
hereunder, whichever is later. Buyer may, at its option, either return
for credit or refund or require prompt correction or replacement of the
defective or nonconforming article or part thereof. Return to Seller of
any defective or nonconforming article and delivery to Buyer of any
corrected or replaced shall be at Seller's expense. Defective or
nonconforming articles shall not be corrected or replaced unless
specified on Buyer's written order. Articles required to be corrected or
replaced shall be subject to th4e provisions of this clause and the
clause hereof entitled "Inspection" in the same manner and to the same
extent as articles originally delivered under this order, but only as to
the corrected or replaced part or parts thereof.
6. INSPECTION: All articles shall be subject to inspection and test at all
times and places, including the period of manufacture, by Buyer and, if
this order is placed under a Government contract, the Government. If any
inspection or test is made on Seller's premises, Seller, without
additional charge, shall provide all reasonable facilities and assistance
for the safety and convenience of Buyer and Government inspectors. Such
inspections and tests shall be performed in such a manner as not unduly
to delay the work. All articles re also subject to final inspection and
acceptance at Buyer's plant notwithstanding any payments or other prior
inspections. Such final inspection shall be made within a reasonable time
after delivery.
<PAGE>
7. RELEASE OF NEWS INFORMATION AND ADVERTISING: Seller shall not, without
the prior written consent of Buyer: (a) make any news release, public
announcement, denial or confirmation of all or any part of the subject
matter of this order, or any phase of any program hereunder; or (b) in
any manner advertise or publish the fact that Buyer has placed this
order.
8. TERMINATION: Buyer shall have the right to terminate this order or any
part thereof at any time: (a) Without Cause-- In case of termination by
Buyer of all or any part of this order without cause, any termination
claim must be submitted to Buyer within sixty (60) days after the
effective date of termination. The provisions of this subparagraph shall
not limit or affect the right of Buyer to terminate this order for cause
and shall not apply to a termination for cause. (b) For Cause-- If Seller
fails to make any delivery in accordance with the agreed delivery date or
schedule or otherwise fails to observe or comply with any of the other
instructions, terms, conditions or warranties applicable to this order or
fails to make progress so s to endanger performance of this order or in
the event of any proceedings by or against Seller in bankruptcy or
insolvency or appointment of a receiver or trustee or an assignment for
the benefit of creditors, Buyer may, in addition to any other right or
remedy the benefit of creditors, Buyer may, in addition to any other
right or remedy provided by this order or by law, terminate all or any
part of this order by telegraphic or other written notice to Seller
without any liability by Buyer to Seller on account thereof. Buyer may
require a financial statement from Seller at any time during the term of
this order for the purpose of determining Seller's financial
responsibility. In the event of termination for cause. Buyer may produce
or purchase or otherwise acquire articles elsewhere on such terms or in
such manner as Buyer may deem appropriate and Seller shall be liable to
Buyer for any excess cost or other expenses incurred by Buyer.
9. PATENT INDEMNITY: Seller hereby indemnifies Buyer, its successors,
assigns, agents customers and users of the articles against loss, damage,
or liability, including costs and expenses, including attorney's fees,
which may be incurred on account of any suit, claim, judgment or demand
involving infringement or alleged infringement of any patent rights in
the manufacture, use or disposition of any articles supplied hereunder,
provided Buyer shall notify Seller of any suit 8instituted against it
and, to the full extent of its ability to do so, shall permit Seller to
defend the same to make settlement in respect thereof. Buyer does not
grant indemnity to Seller for infringement of any patent, trademark,
copyright or data rights.
10. EXCUSABLE DELAYS: Neither party shall be liable for damages for delay in
delivery arising out of causes beyond its reasonable control and without
its fault or negligence, including, but not limited to, acts of god or of
the public enemy, acts of the Government in either its sovereign or
contractual capacity, fires, floods, epidemics, quarantine restrictions,
strikes, freight embargoes, and unusually severe weather. If the delay is
caused by the delay of a subcontractor of Seller and if such delay arises
out of causes beyond the reasonable control of both Seller and the
subcontractor, and without the fault or negligence of either of them,
Seller shall not be liable to Buyer in damages unless the articles or
services to be furnished by the subcontractor were obtainable from other
sources in sufficient time to permit the Seller to meet the required
delivery schedule. Seller will notify Buyer in writing within ten (10)
days after the beginning of any such cause.
11. ASSIGNMENT: Neither this order nor any rights or obligations herein may
be assigned by Seller nor may Seller subcontract in whole, or
substantially in whole, the performance of its duties hereunder without,
in either case, Buyer's prior written consent. The terms and conditions
of this order shall bind any permitted successors and assigns of Seller.
Any consent by Buyer to assignment shall not be deemed to waive Buyer's
right to recoupment and / or set off of claims arising out of this or any
other transactions with Seller, its divisions, affiliates or
subsidiaries, or to settle or adjust matters with Seller without notice
to permitted successors and assigns.
<PAGE>
12. CHANGES: Buyer may at any time, by a written notice, make changes in the
specifications, designs or drawings, samples or other description to
which the articles are to conform, methods of shipment and packaging, or
place of delivery. If any such change causes an increase or decrease in
the cost of, or the time required for, the performance of any part of the
work under this order, whether changed or not changed by any such order,
an equitable adjustment shall be made in the price or delivery schedule,
or both, and this order modified in writing accordingly. Any claim by
Seller for an adjustment must be made in writing within thirty (30) days
of the receipt of any such notice, provided, however, that Buyer may, in
its discretion, receive and act upon any such claim so made at any time
prior to final payment under this order. Nothing in this clause shall
excuse the Seller from proceeding without delay to perform this order as
changed.
13. INFORMATION: (a) Drawings, data, design, inventions, computer software
and other technical information supplied by Buyer shall remain Buyer's
property and shall be held in confidence by Seller. Such information
shall not be reproduced, used or disclosed to others by Seller without
Buyer's prior written consent, and shall be returned to Buyer upon
completion by Seller of its obligations under this order or upon demand.
(b) Any information which Seller may disclose to Buyer with respect to
the design, manufacture, sale or use of the articles covered by this
order shall be deemed to have been disclosed as part of the consideration
for this order, and Seller shall not assert any claim against Buyer by
reason of Buyer's use thereof.
14. BUYER'S PROPERTY: (a) All property used by Seller in connection with this
order which is owned, furnished, charged to or paid for by Buyer
including, but not limited to, materials, tools, dies, jigs, molds,
patterns, fixtures, equipment, drawings and other technical information,
specifications, and any replacement thereof, shall be and remain the
property of Buyer subject to removal and inspection by Buyer at any time
without cost or expense to Buyer and Buyer shall have free access to
Seller's premises for the purpose of inspecting or removing such
property. All such property shall be identified and marked as Buyer's
property, used only for this order and adequately insured by Seller at
its expense for Buyer's protection. Seller shall assume all liability for
and maintain and repair such property and return the same to Buyer in its
original condition, reasonable wear and tear excepted, and when such
property is no longer required hereunder, Seller shall furnish Buyer with
a list thereof and shall comply with any Buyer disposition instructions
applicable thereto. Buyer shall not be obligated to pay any invoices for
tooling until the first article produced therefrom shall have been
received and accepted. Notwithstanding the foregoing, upon written notice
to Buyer and to the extent such use will not interfere with Seller's
performance of this or other orders from Buyer in effect at the time
Seller enters into a direct contract with the U. S. Government, Seller
shall have the right to use Buyer's property in the manufacture of end
items for direct sale to the U. S. Government to the extent the
Government has the right under its prime contracts with Buyer to
authorize such use by Seller, provided that, to the extent practicable,
Seller prominently identifies each such end item as being manufactured by
Seller for direct sale to the U. S. Government. (b) Materials, excluding
Government Property, furnished by Buyer on other than a charge basis in
connection with this order shall be deemed to be held by Seller as bailee
thereof. Seller agrees to pay Buyer's replacement cost for all such
material spoiled or otherwise not satisfactorily accounted for over and
above 2% thereof allowable for scrap loss.
<PAGE>
P.O. NO.:
DATE:
EXHIBIT "B"
ADDITIONAL PROVISIONS
PAGE 1 OF 2
IN ADDITION OF BUYER'S STANDARD PROVISION FORM 70-C-33, THE FOLLOWING FLYSHEETS
AND CLAUSE CODES WILL APPLY WHEN IDENTIFIED ON EACH PURCHASE ORDER RELEASE TO
THIS MASTER ORDER AGREEMENT.
FLYSHEETS CLAUSE CODES
AA 001
TU06 015
T-001 016
T-002 025
T-012 026
081
082
085
100
101
109
258
01 BASELINE CONFIGURATION SHALL BE CONTROLLED BY THE FLYSHEET 9 AND THE
SPRAT (SUBCONTRACTED PARTS - REVISION, AUTHORIZATION, AND TRANSMITTAL),
REVISION DATED AS NOTED, WHICH ARE ATTACHED AND MADE A PART HEREOF. ALL
SUBSEQUENT CONFIGURATION CHANGES SHALL BE CONTROLLED BY DCT (DESIGN
CHANGE TRANSMITTAL) AND/OR CHANGE NOTICE TO THE PURCHASE ORDER.
15 CERTIFIED SPECIAL PROCESS SPECIFICATIONS AND/OR QUALIFIED PRODUCTS LISTED
ON THE ATTACHED SPRAT MUST BE ACCOMPLISHED AT, AND/OR PROCURED FROM, A
SOURCE CURRENTLY APPROVED BY THE BOEING COMPANY (REF-DI-4426), AND/OR
IDENTIFIED IN THE BOEING COMPANY QUALIFIED PRODUCTS LIST. SELLER WILL
CERTIFY SAME BY COMPLETING THE BUYER FURNISHED CERTIFICATE OF CONFORMANCE
WHEN ATTACHED TO THE SPRAT AND RETURNING TO BUYER WITH SHIPMENT.
16 "EXCEPT AS OTHERWISE APPROVED BY THE BUYER, SHIPMENTS SHALL CONSIST OF
FULL DELIVERY INCREMENT QUANTITIES AS IDENTIFIED BY EACH PURCHASE ORDER
RELEASE.
25 SELLER TO FURNISH BUYER ON THE 1ST OF EACH MONTH THREE (3) COPIES OF
MILESTONE REPORTS IN CHART FORM DELINEATING SIGNIFICANT EVENTS AND
PROGRESS OF SELLER'S TOTAL EFFORT UNDER THIS PURCHASE ORDER. REPORTS MUST
INCLUDE, AS A MINIMUM, INFORMATION RELATIVE TO MATERIAL AVAILABILITY,
START AND COMPLETION DATES OF FABRICATION, ASSEMBLY, TEST, AND DELIVERY
SCHEDULE OF COMPLETED ARTICLE(S). MILESTONES DEPICTING POINTS OF DECISION
AND ACTION WHICH MUST B TAKEN BY BUYER MUST ALSO BE INCLUDED.
<PAGE>
26 BUYER WILL NOT BE LIABLE FOR WORK SELLER PLACES IN PROCESS IN ADVANCE OF
THE QUOTED LEAD-TIME.
81 THIS PURCHASE ORDER IS A RELEASE UNDER THE PROVISIONS OF THE MASTER ORDER
AGREEMENT (MOA) REFERENCED ABOVE.
82 ALL SHIPPING DOCUMENTS SHALL BE IDENTIFIED WITH PART NUMBER, MASTER ORDER
AGREEMENT NUMBER, PURCHASE ORDER NUMBER (S). A COMPLETED COPY OF THE
"CERTIFICATE OF CONFORMANCE" (REF.: FORM 470-B-13-3) AND COMPLETED COPY
OF THE "CONFIGURATION CONTROL DOCUMENT" (FLYSHEET 9 OF DCT) SHALL BE
SUBMITTED AS PART OF THE SHIPPING DOCUMENT.
85 SELLER SHALL PROVIDE WEEKLY PROGRESS STATUS REPORTS THROUGH FIRST ARTICLE
OF ACCEPTANCE. THEREAFTER, SELLER TO FURNISH BUYER ON THE 1ST DAY OF EACH
MONTH THREE (3) COPIES OF MILESTONE REPORTS IN CHART FORM DELINEATING
SIGNIFICANT EVENTS AND PROGRESS FOR SELLER'S TOTAL EFFORT UNDER THIS
PURCHASE ORDER. REPORTS MUST INCLUDE, AS A MINIMUM, INFORMATION RELATIVE
TO MATERIAL AVAILABILITY, START AND COMPLETION DATES OF PRIMARY
FABRICATION, OPERATIONS, AND DELIVERY SCHEDULE OF COMPLETED ARTICLE(S).
MILESTONES DEPICTING POINTS OF DECISION AND ACTION WHICH MUST BE TAKEN BY
BUYER MUST ALSO BE INCLUDED.
100 ALL SHIPPING DOCUMENTS SHALL BE IDENTIFIED WITH PART NUMBER, PURCHASE
ORDER, ITEM NUMBER AND, WHEN APPLICABLE TRACEABILITY NUMBERS. ALSO,
CERTIFICATION OF COMPLIANCE SHALL ACCOMPANY EACH SHIPMENT BU MAKING A
COPY OF THE LATEST APPLICABLE FLYSHEET 9 OR DCT, COMPLETING THE
CONFIGURATION CERTIFICATION SIGN-OFF INFORMATION BLOCK AND ATTACHING IT
OT THE SHIPPING DOCUMENT.
101 ALL FORMS/DOCUMENTS REQUIRING SUBMITTAL TO BUYER SHALL BE TYPED OR
LEGIBLY HANDWRITTEN USING BLACK INK.
109 ...................SHIPMENT TOLERANCE....................................
SHIPMENT(S) RECEIVED AND ACCEPTED BY BUYER FOR ANY LINE ITEM ON THIS
PURCHASE ORDER THAT MEET(S) THE TOTAL QUANTITY ORDERED INCLUSIVE OF ANY
QUANTITY TOLERANCE SET FORTH ON THE FIRST PAGE OF THIS PURCHASE ORDER
WILL BE CONSIDERED COMPLETE. ANY SHIPMENTS RECEIVED THEREAFTER WILL BE
RETURNED AT THE SELLER'S EXPENSE.
258 SELLER SHALL REQUEST INTERIM SOURCE INSPECTIONS FOR ITEMS THAT THE
DRAWING OR CONFIGURATION REQUIRED DIMENSIONAL OR FINISH VERIFICATION
PRIOR TO PROCESSING OR ASSEMBLY.
<PAGE>
P.O. NO.:
DATE:
EXHIBIT "C"
QUALITY ASSURANCE PROVISIONS
PAGE 1 OF 1
THE BUYER'S PROCUREMENT QUALITY ASSURANCE CODES SHALL APPLY WHEN IDENTIFIED IN
EACH RESPECTIVE PURCHASE ORDER RELEASE AND ARE INCORPORATED HEREIN.
CODE 2 - COMPANY SOURCE INSPECTION
3 - RECORDS OF INSPECTIONS AND TESTS
5 - FIRST ARTICLE INSPECTION
9 - PHYSICAL AND CHEMICAL TEST REPORTS
IDENTIFIED TO SPECIFIC LOTS
20C - ST0802GT0002-SUPPLIER INSPECTION SYSTEM
20G - ST0802GT0009-SOFTWARE QUALITY ASSURANCE
REQUIREMENTS FOR SUBCONTRACTORS AND
SUPPLIERS
30 - REQUIREMENTS FOR IMPLEMENTATION OF TOTAL
QUALITY MANAGEMENT PHILOSOPHIES AND USE
OF STATISTICAL PROCESS CONTROL, REF. FORM T
TULQ7-92 REVISION DATED 02-11-93
35 - SUPPLEMENTAL REQUIREMENTS FOR APPROVAL,
CONTROL AND USE OF COMPUTER
SOFTWARE/FIRMWARE
<PAGE>
P.O.:
DATE:
EXHIBIT F
ADDITIONAL PROVISIONS
LEONARD'S METAL, INC.
A. TOOLING
1. Notwithstanding Provision 14 set forth on Form 70-C-33 and
Flysheet AA, Seller agrees to store, in a weather protected
area, additional Buyer-furnished tooling for similar parts that
may be required to support "AOG", spares and other requirements.
Seller shall provide traceability for said tools. Such tooling
shall be identified within 60 days of contract award.
2. Tool proof shall be predicated on first article acceptance. In
the event that Buyer's furnished tooling fails to produce an
acceptable part, Seller shall immediately notify Buyer. In the
event Buyer elects for Seller to rework said tooling a price
shall be mutually agreed to between Buyer and Seller in
accordance with the changes clause of Buyer's Form 70-C-33,
paragraph 12. Conversely, upon completion of first article
inspection and acceptance of tooling, Seller agrees to provide
normal maintenance and repair at Seller's expense up to a
$200.00 cost threshold per tool and incident for the term of
this contract. In the event a tool become unserviceable during
the performance period of this contract and the replacement or
rework value exceeds $200, Buyer and Seller will negotiate a
mutually agreed to price in accordance with the changes clause
of Buyer's Form 70-C-33, paragraph 12. Notwithstanding the
provisions of this paragraph, Seller shall not rework or replace
any tools without prior written authorization from Buyer.
B. PRICING - ADD ON REQUIREMENTS
1. Seller shall furnish all material supporting production parts.
Material shall, when available, be purchased from Buyers
residual inventory at the prices as stated against Buyers
Manufacturing Order(s). Pricing shall be based on the sizes as
shown on each Manufacturing Order and any exceptions shall e
stipulated in Seller's proposal. Upon depletion of Buyer's
inventory, Seller agrees to make purchase of said material from
sources to be identified upon contract award at pre-agreed
prices. In either case, for proposal purposes, the specified
pricing against said Manufacturing Orders shall remain
unchanged. Notwithstanding the contexts of this provision, an
equitable adjustment will be made for any deviations on the raw
material call-outs between the manufacturing order and as
defined by Seller's manufacturing process.
2. Pricing as shown on Manufacturing Orders represent inventory
pricing for material issues from Buyer's inventory. Subsequent
to Buyer's inventory depletion, material pricing shall be
adjusted to coincide with pricing in effect at Buyer specified
sources under pre-negotiated unit pricing.
3. Seller shall furnish Buyer a material requirement forecast as
required at Buyer's request to facilitate Seller in the purchase
or material against said pre-negotiated pricing arrangements.
<PAGE>
4. In the event said production rates fall below two shipsets per
month or exceeds seven shipsets per month, Buyer and Seller will
negotiate a mutually agreed to adjustment in accordance with the
changes clause of Buyer's Form 70-C-33, paragraph 12.
5. Seller recognizes and agrees that Buyer's first delivery
requirements, as specified under the Purchase Order delivery
release, may require less than normal lead-time. Seller agrees to
provide such articles in time to support Buyer's specified
delivery schedules at no increase to the base price for normal
lead-time except for extraordinary internal expedite costs, and
minimum lot charges, special handling, and expedite charges for
outside processing.
C. PROGRAM SUPPORT
1. 24 HOUR SUPPORT
Seller shall provide 24 hour detail parts fabrication support
for any emergency requirement identified by Buyer. The names and
phone numbers of key personnel who may be contacted twenty-four
hours a day, seven days a week and holidays shall be provided to
Buyer and maintained by Seller throughout the life of this
contract.
2. Seller further agrees to provide Buyer with adequate facility
space for Buyer's resident representatives during the transition
and start up of this project. Said representatives are not
expected to exceed four individuals, in number, for a period of
time, up to six months after receipt of order.
D. MILESTONE REPORTING
SELLER SHALL PROVIDE WEEKLY PROGRESS STATUS REPORTS THOUGH FIRST
ARTICLE ACCEPTANCE. THEREAFTER, SELLER TO FURNISH BUYER ON THE 1ST DAY
OF EACH MONTH THREE (3) COPIES OF MILESTONE REPORTS IN CHART FORM
DELINEATING SIGNIFICANT EVENTS AND PROGRESS FOR SELLER'S TOTAL EFFORT
UNDER THIS PURCHASE ORDER. REPORTS MUST INCLUDE, AS A MINIMUM,
INFORMATION RELATIVE TO MATERIAL AVAILABILITY, START AND COMPLETION
DATES OF PRIMARY FABRICATION, OPERATIONS, AND DELIVERY SCHEDULE OF
COMPLETED ARTICLE(S). MILESTONES DEPICTING POINTS OF DECISION AND
ACTION WHICH MUST BE TAKEN BY BUYER MUST ALSO BE INCLUDED.
E. EDI SCHEDULING
1. In addition to the requirements set forth in this proposal, at
buyer's option, seller will cooperate with the Buyer to develop
the capability to receive Requirements Planning information
through the use of Electronic Data Interchange, ANSI AXC X12
formats. Seller will use the requirements planning information
to schedule shipments to Rockwell International on an as needed
basis and will release parts according to the agreed upon
release cycle. Seller will notify buyer of schedule support and
shipment of parts using EDI as shipments occur. At buyer's
option, bar coding may be used to aid in shipment
identification.
<PAGE>
F. PRODUCTION RELEASES
1. Seller is hereby authorized to manufacture parts 6 months in
advance of stipulated purchase order delivery schedules.
Notwithstanding the context of this provision, Seller shall
inventory said parts and ship in strict compliance to Buyer's
purchase order schedules further defined as no less than four
shipsets every other month.
<PAGE>
MASTER ORDER AGREEMENT
This Master Order Agreement, along with the provisions of attachments, exhibits,
forms, flysheets, and codes contained in Attachment "L" attached hereto and
incorporated herein, constitutes the terms and conditions governing the sale and
purchase of specific articles between LEONARD'S METAL, INCORPORATED, SELLER, and
ROCKWELL INTERNATIONAL CORPORATION, NORTH AMERICAN AIRCRAFT, TULSA FACILITY,
3330 NORTH MINGO ROAD, TULSA, OKLAHOMA 74116-1211, U.S.A., BUYER, commences on
the day that both Buyer and Seller have signed and dated the agreement.
1. During the term of this Master Order Agreement, Buyer may purchase from
Seller 250 shipsets of production articles at billing prices set forth and
described in Exhibit "A", certain spare parts and/or replacement articles;
and other non-recurring products and services at prices set forth in
Exhibit "A". The purchase of said articles and authorization to procure
long lead materials will be by separate releasing purchase orders and
shall incorporate by reference the terms and conditions of this Master
Order Agreement.
2. This agreement shall not expire until six months following the delivery of
the last anticipated production article, which is identified in Clause 1
above and may be renewed/extended upon mutual agreement.
3. Buyer and Seller recognize and agree that Buyer's needs may fluctuate
between 5 and 21 shipsets per month at rate. Seller agrees that Buyer has
made no representation, warranty, guarantee or commitment that Buyer will
purchase any total quantity or minimum quantity of the products listed.
Buyer will not be liable for product Seller places in fabrication and/or
assembly in advance of the standard leadtime (as defined by Exhibit "B")
other than its long lead materials which have been authorized at that
point in time.
4. Seller shall fabricate and deliver those items in accordance with the
specifications and schedules included in the releasing purchase orders to
standard commercial practices and where applicable other specifications
identified within the technical requirements documentation or other
attachments which are part of this agreement.
5. Seller shall furnish all material, tooling, and processing required to
support production of the parts, except as noted, if any.
Basic tooling should support at least a 7-shipment-per-month rate. Rate
tools "A", if required, should produce an additional 7 shipsets per month;
and rate tools "B", if required, should produce an additional 7 shipsets
per month, for a total of 21 shipsets per month. Rate tooling "A" and "B"
shall be provided by Seller only upon written authorizations from
Rockwell.
6. Seller shall develop production plans and schedules for production
articles based on Attachment "F", however, firm delivery schedules will be
contained in the release purchase order for said production articles.
Production plans and schedules will include plans for the incremental
purchase of material and the fabrication of specific numbers of production
articles in accordance with predetermined lead times ("incremental release
schedules"). The anticipated incremental release schedules for long lead
material releasing purchase orders are forecasted in Attachment "R".
Release of firm delivery schedules will be based on the standard leadtimes
of Exhibit "B".
7. From time to time, and as problems arise, Seller shall provide, at no cost
to Buyer, timely on-site service at both Buyer's facility and/or Buyer's
Customer's facility to participate in joint team studies to effect
resolution of Seller's fabricated parts on Buyer's assembly.
8. Buyer-directed schedule decelerations shall be implemented by the Seller
at no additional cost to Buyer.
Buyer-directed schedule accelerations which compress the required delivery
earlier than the Seller's standard leadtime as defined by Exhibit "B",
second column, shall be subject to an equitable adjustment in accordance
with the Changes Clause 12 as stated in Flysheet T-001, "Boeing Commercial
Aircraft Special Provisions", Paragraph B.
9. Seller shall provide 24-hour detail parts fabrication support for any
emergency requirement identified by Buyer.
10. Seller's pricing for additional non-recurring support, production articles
and/or spare parts not identified on Exhibit "A" and declared by Buyer as
an AOG/Spare, will be negotiated, based upon similar standard unit
pricing/costs, plus any expedite and/or unamortized set-up charges in
accordance with the Buyer's Changes Clause 12 as stated in Flysheet T-001,
"Boeing Commercial Aircraft Special Provisions", Paragraph B.
11. If at any time after March 31, 2000, the delivery schedule shall increase
to eighteen (18) shipsets per month or greater for more than three (3)
consecutive months or decrease to five (5) shipsets per month or less for
more than three (3) consecutive months, then the shipset average billing
price (as shown in Exhibit "A") for those shipsets delivered during the
period in which such production cycle occurs will be decreased or
increased in accordance with the following, starting with the first month
in which such increase or decrease cycle occurs.
Eighteen (18) per month or greater production rate: Unit price decrease
equals two percent (2%) of price shown in Exhibit "A". Five (5) per month
or less production rate: Unit price increase equals ten percent (10%) of
price shown in Exhibit "A".
12. Price adjustments for non-schedule related issues are subject to the
following.
Substantial Engineering or manufacturing changes:
If Buyer and Seller mutually agree that there is a substantial change to
any production article due in part to a change in manufacturing
procedures, manufacturing technology, process specifications, material
type or changes pursuant to Clause 18 of this Master Order Agreement
titled "Supplements and Modifications", the Buyer and Seller will mutually
agree on price adjustment(s) based on the cost detail (proposal) provided
by the Seller for the changes to the Statement of Work and or terms and
conditions in accordance with the Buyer's Changes Clause 12 as stated in
Flysheet T-001, "Boeing Commercial Aircraft Special Provisions", Paragraph
B.
Price adjustments at First Article Inspection at Boeing of Rockwell's
first shipset and airplane certification:
Price adjustment proposals (written) for the above price adjustments much
be received within 30 days of the above noted event (Buyer's first article
delivery/inspection at Boeing or airplane certification).
Buyer and Seller shall review the then current statement of work to
identify any changes made to the Statement of Work since its inception and
price adjustments will be mutually agreed upon as described above in
accordance with the Buyer's Changes Clause 12 as stated in Flysheet T-001,
"Boeing Commercial Aircraft Special Provisions", Paragraph B.
Within thirty (30) days after airplane certification, Buyer and Seller
shall again review the then current statement of work to identify any
changes incorporated since the time of first article inspection and price
adjustments will be mutually agreed upon as described above in accordance
with the Buyer's Changes Clause 12 as stated in Flysheet T-001, "Boeing
Commercial Aircraft Special Provisions", Paragraph B.
Included in the negotiated price is one-half of one percent (0.5%) for
tool maintenance.
Within sixty days after Seller's delivery of Shipset 125, Buyer and Seller
shall review the actual recurring aluminum material escalation experience
during the preceding years of this agreement (i.e., for Shipsets 1-125) to
determine if the negotiated price (negotiated 19 May 1995) should be
adjusted for escalation on Shipsets 126-250. The then current DRIPPI3353NS
index will be used as the reference index for the escalation actuals and
projections review. Such a review would pertain only to the negotiated
baseline for the ALUMINUM SHEET, PLATE, FOIL material recurring price and
shall be in accordance with the Buyer's Changes Clause 12 as stated in
Flysheet T-001, "Boeing Commercial Aircraft Special Provisions", Paragraph
B. The aluminum escalation adjustment, if determined to be required shall
be applied to Shipsets 126-250 only. Aluminum escalation adjustment shall
not be applied to shipsets 1-125. The negotiated baseline aluminum
mid-point escalation percentage for the full 250 shipset period of
performance was 8% and will be used as reference point for the excalation
review between Buyer and Seller.
<PAGE>
The prices set forth in Exhibit "A" shall be adjusted with respect to any
change described in Clause 18 of this Master Order Agreement titled
"Supplements and Modifications", or as described above which is made after
airplane certification, but only if such change satisfies the following
criteria:
NON-RECURRING
The non-recurring price (either debit or credit) for any change
exceeds one-half of one percent (0.5%) of the sum of the then
current non-recurring prices set forth in Exhibit "A".
RECURRING
The amount resulting from dividing the recurring price (either
debit or credit) for any change by the number of shipsets
affected by such change exceeds one percent (1%) of the then
current shipset billing price set forth in Exhibit "A".
14. Seller shall, subject to the terms of Buyer's "Changes" clause, promptly
comply with the provisions of applicable documents identified within and
made a part of this Master Order Agreement or referenced within the
technical documentation, either as Rockwell or Boeing controlled
documents, and any revisions thereto, as each document may be amended from
time to time.
15. Seller shall provide weekly progress status reports through first article
acceptance. Thereafter, Seller to furnish Buyer on the first day of each
month three (3) copies of milestone reports in chart form delineating
significant events and progress for Seller's total effort under this
purchase order. Reports must include, as a minimum, information relative
to material leadtime availability, current material inventory, start and
completion dates of primary fabrication, work in process (WIP),
operational issues (if any), finished goods inventory, and delivery
schedule of completed article(s). Milestones depicting points of decision
and action which must be taken by Buyer to insure timely delivery must
also be depicted on the reports. The Seller shall depict slipped milestone
dates on milestone schedule as slips and a recovery date placed next to
the slipped milestone line on the schedule. The Seller shall promptly
communicate milestone schedule slips and delays to Buyer, complete with a
recovery plan.
16. At Buyer's option, Seller will cooperate with the Buyer to develop the
capability to receive contract change notices and other information, such
as requirements planning/schedule information through the use of
Electronic Data Interchange (EDI), ANSI ASC x12 or UN/EDIFACT formats.
Seller will use the schedule/planning information as it would other
controlled change documentation, to schedule release of parts according to
the agreed terms and conditions of this Master Order agreement. Seller may
also be requested to provide to the Buyer the required monthly status
information, invoices, and other information as the Buyer and Seller may
agree to establish as EDI transactions.
17. At Buyer's option, bar coded information may also be required to aid in
part number and/or shipment identification.
<PAGE>
18. Supplements and Modifications: Buyer and Seller acknowledge that this
Master Order Agreement does not, as of the date hereof, fully and finally
determine all of the terms of the rights, obligations and liabilities of
Seller and that, notwithstanding the absence of all of such terms, Seller
and Rockwell intend to make a contract hereby and intend to be bound by
the terms hereof (including those yet to be determined). With respect to
such terms which are not yet fully determined, Rockwell shall, from time
to time, from and after the execution and delivery of this Master Order
Agreement, specify such terms by notice given by Rockwell to Seller
pursuant to this Master Order Agreement, and all such terms shall be
binding upon Seller. Such specification of terms shall be made by Rockwell
in its sole discretion, exercised in good faith and in a commercially
reasonable manner. With respect to the commercial reasonableness of any
such specific term, Seller acknowledges that the market for the sale of
new commercial jet transport is extremely competitive and requires from
manufacturers and suppliers the commitment of very substantial resources
and may require the expenditure of substantial resources, and will likely
require extraordinary effort. Accordingly, any specification of terms
hereof by Rockwell, as provided for above, shall not be deemed to be
commercially unreasonable solely because such term requires Seller to
expend substantial sums or to undertake extraordinary efforts to meet the
program requirements specified by Rockwell. By way of example, and not as
a limitation of the foregoing, Seller may be required in order to support
program requirements to increase its production rate to keep pace with
Rockwell's development or production schedule for program airplanes and
derivatives as determined by Rockwell from time to time with reference to
actual and anticipated market demand for program airplanes and
derivatives.
Without limiting the foregoing, nothing in this Paragraph 18 is intended
by the parties to affect the provisions of Clause 12 or 13 of, or any
provisions contained in, this Master Order Agreement or the rights or
obligations of either party with respect to any adjustment or change to,
or the payment of, prices, whether or not arising from the further
determination of the terms of this Master Order Agreement or the
expenditure of substantial sums or the undertaking of extraordinary
efforts by the Seller.
19. Investment Tax Credit and Depreciation: For U.S. Federal income tax
purposes, Rockwell's Customer, The Boeing Company, shall be entitled to
claim all tax credit and depreciation with respect to all Tooling and
other eligible property under this subcontract based on its equitable
interest in such property and regardless of the fact that it may not have
legal ownership or legal title in the Tooling and other eligible property
in which Boeing has an equitable interest.
(SELLER) (BUYER)
LEONARD'S METAL, INC. ROCKWELL NTERNATIONAL CORPORATION
NAME: /s/ Ted Kretschmar NAME: /s/ J.A. Kraster
TITLE: Program Manager TITLE: Material Advisor
DATE: September 26, 1995 DATE: 31 August 1995
<PAGE>
LMI PUTS AND TAKES
Rockwell 11/23/96 Position
In response to LMI 11/22/96 Letter
Negotiated Pricing is Based upon Shipset Value of $29,196.40. Using $29,196.40
as a baseline, the pricing to be placed in the Change Notice and shown below
{(a), (b), (c), (d)} is adjusted to pay LMI more money earlier in the contract
to cover upfront costs.
It is important to note that the total value of $20,735,880.00 remains the same,
but the distribution of the dollars is different. In other words, if there were
to be negotiations due to a design change the shipset baseline price for #5 is
$16,921.04, #6 is $12,275.36, for a total of $29,196.40. Individual part number
prices in 9/27/96 price breakdown from the baseline for the individual part
numbers.
If no additional changes occurred to the baseline and the follow-on shipsets
were awarded to LMI, the baseline value for #6 for Shipset 1001 would be
$12,275.38. The baseline value for $5 for Shipset 501 would be $16,921.04.
The reader should not use the prices under (a), (b), (c), (d) to establish the
baseline price. These are to accommodate payment terms agreed upon during
negotiations.
Shipset Qty Per Shipset Total
----------- ----------- -----
(a) #5, 1-250 18,820.07 4,705,017.50
(b) #6, 1-250 14,212.78 3,553,195.00
--------- ------------
33,032.85 8,258,212.50
(c) #5, 251-500 15,022.01 3,755,502.50
(d) #6, 251-1000 11,629.55 8,722,165.00
--------- ------------
26,651.56 12,477,667.50
8,258,212.50
12,477,667.50
$20,735,880.00
#5,501-1000 16,921.04 8,460,520.00
Pkg. #35,
1-1000 Recurring: Unit Prices to be corrected to reflect 9/22/85
negotiation. Then reduce unit price by 1.5% for increased
quantities to 1000 ships.
Pkg. #48,
1-1000 Recurring: Reduce unit price by 1.5% for increased quantities
to 1000 ships.
Non-Recurring: LMI to absorb $3,749.62 claim in 11/22/96
position letter as part of the negotiated settlement.
Rockwell retains the right to withdraw this offer in its entirety if LMI rejects
any part of the offer.
Rockwell Position 11/23/96 (Response to LMI Position 11/22/96)
Payment Terms:
Net 60 days (delete deferred payments from $5, #6, #35, #48)
In addition to the invoices submitted to Rockwell Accounts Payable, LMI
will provide a duplicate copy of invoices to Rockwell buyer to assist
in promoting prompt payments and troubleshooting of receiving
rejections which cause payment delays.
A monthly status system of tracking payments will be established
immediately to give "early warning" for unpaid invoices. The monthly
status log of invoices and payment status will be reviewed by Rockwell
and LMI every month. LMI will be responsible for updating status each
month and submitting it to Rockwell for review and troubleshooting. The
LMI status log will include date of status, invoice numbers, shipper
numbers, P.O. number, Line Item Nos., invoice amount, date of invoice,
reasons payment delay, actions being taken to resolve payment delay,
date paid.
the details of this log and its management will be worked out
separately from these negotiations. The description above is only
intended to outline a concept. Rockwell desires to allow invoice
management to be part of day-to-day administration and not something
that holds up these negotiations from concluding asap.
Finance Charge (4% at the price time):
LMI to retain 4% finance3 charges monies. LMI exceptions to any of the
terms and conditions outlined in this Rockwell offer will cause this
allowance to be re-evaluated by Rockwell.
Flysheet Aluminum Escalation
Rockwell/Leonard's Metal Escalation Terms and Conditions
The following summarizes the terms and conditions of the escalation clause
agreed upon by Rockwell and Leonard's Metals during the 23 November 1996
negotiations for Packages #5, #6, #48 and #35. Escalation for the first 500
shipsets for all four packages is already incorporated into the baseline pricing
and not subject to any additional escalation as provided herein for shipsets
501-1000.
LMI will assume up to 16% escalation increase to baseline aluminum prices
negotiated for #5 and #6 on 11/23/96. #48 and #35 aluminum baseline is the
9/22/95 aluminum prices and LMI will absorb up to 16% escalation increase. Any
escalation increases above 16% are to be calculated in accordance with this
flysheet and are to paid by Rockwell.
Rockwell will pay delta over 16% for the period of performance for #501-#750,
#751-#1000.
LMI agrees to notify Rockwell in a timely manner ("timely manner" means "in time
to assess if ordering long-lead versus waiting six months before #501 or #751)
of any anticipated or potential price increases. This cooperative on-going
assessment of pricing will allow both LMI and Rockwell to management escalation
so that impacts to the program cost are either eliminated or are at least
maintained at affordable prices. LMI is under obligation to provide adequate
notification to Rockwell so we can work out a mutually agreeable plan to control
increases to the baseline price.
Packages #5 and #6: The baseline for material prices are contained in the
individual part prices used by Rockwell to develop the $29,198.40 shipset price
for packages #5 and #6. Refer to Flysheet Escalation - Matrix 5/6 for individual
baseline material prices.
#5 $16,921.04
#6 $12,275.36
$29,196.40
Packages #35 and #48: The baselines for material prices are contained in the
individual part prices negotiated on 22 September 1995. Refer to Flysheet
Escalation - Matrix 35 and Flysheet Escalation - Matrix 48 for individual
baseline material prices.
Rockwell is not responsible for additional charges for material ordered late by
LMI which may cause expediting charges or additional, unplanned charges for
escalation.
ADDITIONAL AMENDMENTS TO MASTER ORDER AGREEMENT DATED 3-5-96
(Per discussions with Company)
1. The following is added to the last two paragraphs of Clause 12:
"; to be applied on a per tool basis."
2. First paragraph in Clause 8 is deleted.
3. The following is added to the beginning of Clause 11:
"Buyer-directed schedule decelerations or accelerations should be
implemented by the Seller at no additional cost to Buyer, except as noted
below:" 4. Clause nos. 14, 15, 16, 17, 18 and 18 are renumbered as 13,
14,15,16,17 and 18 respectively.
Boeing Commercial Airplane Group CONTRACT: _______________
Wichita Division Changed
P. O. Box 7730 05-18-1998
Wichita, KS 67277-7730
Contract Delivery Address
LEONARD METAL INCORPORATED Boeing Commercial Airplane Group
3030 NORTH HIGHWAY 94 4555 East MacArthur, Gate 14E
P.O. BOX 900 Warehouse #1, Bldg. #3-230J
ST. CHARLES, MO 63302 Wichita, KS 67210
Ref.: S1 HAAS & RIVAS
Contract Description LTA MODEL _______________
This contract is Buyer's offer to Seller and acceptance is limited to its
provisions without addition, deletion, or other modifications. Delivery of any
goods by Seller shall conclusively evidence such acceptance.
NOTICE: All material, parts and/or assemblies ordered herein shall be to the
latest respective applicable engineering drawing and/or specifications unless
specific revision numbers or drawing issues are shown in the item description on
this purchase order. Manufacturing Data - Until three years after final payment,
Seller shall keep on file actual test data and records reflecting that all
materials and finished items were controlled and tested in accordance with and
met the specifications. Such records shall be subject to Buyer examination.
Unless so noted elsewhere, all correspondence will reference the Boeing Contract
Number and be addressed to the Buyer shown below:
Buyer : HAAS, TERRY
Mailstop : K18-34
Phone : 316-523-4377
Fax : 316-523-5300
This Contract is to cover BCAG-WD Requirements for a period effective 01-01-1998
and expiring 12-31-2007.
<TABLE>
<CAPTION>
CONTRACT NOTES:
<S> <C>
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
04-30-98 REASON FOR CHANGE: ADD ITEMS 68-71 PART NUMBERS PLACED
DUE TO COMMONALITY TIM LIPKE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS CONTRACT REPLACES ONE OR MORE OF THE FOLLOWING NON-LONG TERM CONTRACTS BETWEEN LEONARD'S METALS OF ST. CHARLES, MO.
AND BCAG-WD OF WICHITA, KS.
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
60211, 60273, 60374, 60391, 60430, 60591, 60592, 60599, 60670, 60686,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
60838, 60883, 60901, 60944, 61040, 61146, 61147, 61272, 61408, 61414,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
61420, 61429, 61449, 61521, 61548, 61550, 61552, 61555, 61699, 61700,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
61701, 61702, 61703, 61797, 61798, 61930, 61997, 61998, 62001, 62004,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
62016, 62017, 62089, 62090, 62124, 62199, 62216, 62223, 62259, 62335,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
62336, 62337, 62422, 62423, 62424, 62449, 62475, 62490, 62522, 62529,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
62670, 62672, 62739, 62740, 62741, 62801, 62897, 63086, 63087, 63088,
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
63089, 63416
- ---------- --------- --------- -------- --------- --------- --------- --------- --------- --------
TLH 12-05-97
SPECIAL NOTE:
</TABLE>
<PAGE>
The quantities in this contract are for provided as a planing tool and are "best
guess" requirements based upon current proposed build rates through 12-31-2007,
and do NOT represent actual requirements. Actual requirements will be provided
to the supplier via the purchase order. (tlh 12-05-97).
NOTE 1
Notes 035, 112, 305A, 306B, 310B, 311A, 311B, 311C, 312A, 333B, 349, 355A, 363A,
412A, 417C, 420A, 429, 502, 505B, 510 apply to this order per Supplemental
Purchase Order Note sheet (form P5288, Rev. 1/97), which apply to and are
incorporated into this order by reference, as though set out in full text.
NOTE 2 - DEFINITIONS
Whenever used in this document the following terms shall have the following
meanings:
1. "ORDER" shall mean any purchase order issued by Boeing and accepted
by the Seller in accordance with the applicable terms and conditions.
2. "MAIN ITEM" shall mean any item identified on an Order by the
position number 001 through 899.
3. "SPECIAL ITEM" shall mean any item identified on an Order by the
position number 900 through 999.
4. "TERMS OF PAYMENT" are shown on each purchase order. CONTRACT
INVOICES
MAIN ITEMS: Seller shall not invoice Boeing for Main Items. Boeing
shall pay for Main Items in accordance with the provisions of the section below,
entitled "Payment - Main Items."
SPECIAL ITEMS: Seller shall issue a separate invoice for each Order. Seller
shall invoice Boeing for all Special Items and for all compensation for tax to
which the Seller may be entitled under the provisions of the applicable Order.
Boeing shall pay for such items in accordance with the provisions of the section
below, entitled "Payment - Special Items."
PAYMENT
MAIN ITEMS: For Main items, payment will be made only after receipt of the
item(s). Boeing payment date, including any discount periods, will be calculated
from the date received at Boeing or other shipping destination as may be
specifically designated by Boeing, applying the "Terms of Payment" from the
applicable Order, or the date scheduled for delivery of such Main Item(s) to
Boeing under the terms of the applicable Order, whichever is later. Payment will
be deemed to have occurred on the date the Boeing check is mailed or otherwise
tendered.
SPECIAL ITEMS AND TAXES: For Special Items and Taxes, Boeing payment dates,
including any discount periods, will be calculated from the date of a correct
invoice for such Special Item or Tax, applying the "Terms of Payment" from the
applicable Order. Notwithstanding the foregoing, Boeing shall not be obligated
to pay for any Special Item or Tax earlier than the later of (1) the receipt of
the Main Item giving rise to such Special Item or Tax, or (2) the date such Main
Item is scheduled for delivery to Boeing or other shipping destination as may be
specifically designated by Boeing. Payment will be deemed to have occurred on
the date the Boeing check is mailed or otherwise tendered.
OVERPAYMENT: Seller shall promptly repay to Buyer any amounts paid in
excess of amounts due Seller.
NOTE 3
Boeing Purchase Order Terms and Conditions (form P252-1, Rev. 1/97,
page 1) apply to and are incorporated into this order by reference, as though
set out in full text.
NOTE 4 - ISSUANCE OF PURCHASE ORDER(S)
All purchases of items under this contract shall be made only upon B+uyer's
standard purchase order(s) for which the Seller will acknowledge by written
acceptance. Seller shall honor purchase orders released against this agreement
that are consistent with its provisions. Any rejection of a purchase order by
Seller due to inconsistency with this reagreement shall specify the reason(s)
for rejection and any changes or additions that would make the purchase order
acceptable to Seller. Purchase order(s) shall contain a description of the
product(s) ordered, a reference to the applicable specifications and drawings,
quantities and prices, date/time of delivery, terms, place of delivery, and any
special conditions.
The subsequent placed orders are Buyer's offer to Seller, and acceptance of them
is strictly limited to their terms. Buyer shall not be bound by and specifically
objects to any term or condition whatsoever that is different from or in
addition to, the provision of this contract. Seller's commencement of
performance or acceptance of orders placed under this contract in any manner
shall conclusively evidence acceptance of the contract as written.
Purchase order(s) issued shall be subject to and incorporated by reference the
provisions of the contract in substantially the following form:
"THIS PURCHASE ORDER IS SUBJECT TO CONTRACT NUMBER 64001 DATED 1220-97."
Whether or not referenced, such provisions shall apply with full force and
effect; and in the event of inconsistencies, the provisions delineated herein
shall govern.
NOTE 5 - QUALITY AND PRICE
This is an indefinite-quantity contract for the items and prices listed, and
effective for the period stated herein. Seller shall furnish the items listed in
such quantities as may be ordered by Buyer from time to time.
Quantities listed are estimated quantities based on current production
build-rates and minimal spaces activity. Buyer assumes no responsibility for
estimated usage. Usage figures supplied to Seller by the Buyer are not to be
considered as actual requirements. Such information is supplied only as a guide
to assist Seller in internal planning. Buyer reserves the right to procure these
items in less than or excess of quantities indicated under the same terms and
conditions listed herein. Actual usage requirements are not valid justification
for price increase(s).
Seller represents and warrants to Buyer that discounts offered fairly reflect
manufacturing, selling, or delivery cost savings resulting from this quantity
sale, and that such discounts are reasonably available to all other purchasers.
NOTE 6
During the term of the agreement, Seller agrees to sell and Buyer agrees to buy
from Seller its entire requirements for the terms listed herein at the prices
set forth herein. Usage figures supplied to Seller by the Buyer are not to be
considered as an indication of actual requirements. Such information was
supplied only as a guide to assist Seller in internal planning. In the event the
Seller is unable to supply the items listed at the time or in the quantities or
quality required by Buyer, Seller agrees that the Buyer may obtain items from
other suppliers.
NOTE 7 - LIMITATION
Seller may not manufacture or fabricate products or procure any goods in advance
of the reasonable flow-time required to comply with the delivery schedule in the
applicable Order. Notwithstanding any other provision of an Order, Seller is not
entitled to any equitable adjustment or other modification of such Order for any
manufacture, fabrication, or procurement of products not in conformity with the
requirements of the Order, unless Buyer's written consent has first been
obtained. Nothing in this section shall be construed as relieving Seller of any
of its obligations under the Order.
NOTE 8 - COMPLIANCE WITH ENVIROMENTAL LAWS
Seller shall be responsible for complying with all laws including, but not
limited to, any statute, rule, regulation, judgment, decree, order, or permit
applicable to its performance under this agreement. Seller further agrees (1) to
notify Buyer of any obligation under this agreement which is prohibited under
applicable environmental law(s) at the earliest opportunity, but in all events
sufficiently in advance of Seller's performance of such obligation, so as to
enable the identification of alternative methods of performance, and (2) to
notify Buyer at the earliest possible opportunity of any aspect of its
performance which becomes subject to additional environmental regulation(s) or
which Seller reasonably believes will become subject to additional regulation(s)
during the performance of this agreement.
NOTE 9 - CONTRACT REVIEW
At the Buyer's request Seller shall provide, at Buyer's facility or at a place
designated by the Buyer, a review explaining the status of an order, actions
taken or planned to be taken relating to an order, and any other relevant
information. Nothing herein may be construed as a waiver of the Buyer's rights
to proceed against Seller because of any delinquency.
NOTE 10 - SOURCE INSPECTION
If an order contains a notation that "100% Source Inspection" is required, the
products shall not be packed for shipment until they have been submitted to the
Buyer's Quality Assurance representative for inspection. Both the packing list
and Seller's invoice must reflect evidence of this inspection.
NOTE 11 - CAPACITY REPORTING REQUIREMENT
Seller shall furnish, periodically or as requested, the capacity ratings (%) on
the equipment to be utilized in the manufacturing process of the items listed
herein.
NOTE 12 - TOOLING
Tooling may be supplied by the Buyer and shall be utilized by Seller to the
fullest extent possible to manufacture products listed herein. Any minor tools
including, but not limited to, shop aids, fixtures and inspection gauges, or
minor rework of Boeing-supplied tooling necessary to produce a quality product
shall be provided by Seller at no charge. Any questions as to what constitutes
"minor tools" shall be referred to the Buyer for determination, minor is defined
as requiring four (4) hours or less.
NOTE 13
Zero shipping tolerances will apply to the purchase orders issued against this
contract. Any deviation will be resolved between the buyer and the seller.
NOTE 14
REFERENCE QUOTATION JR RIVAS LTA LETTER.
NOTE 15
TOTAL NON-RECURRING FOR THIS CONTRACT IS NOT APPLICABLE, ALL
NON-RECURRING WILL BE IDENTIFIED SEPARATELY ON PURCHASE ORDERS.
NOTE 16
All tooling will be made in accordance with Boeing Document D33200 (Replacing
M31-24).
NOTE 17 - PROGRAM MANAGEMENT
If required by the Buyer, the Seller shall provide and maintain the following
program management data:
A. THE Seller shall furnish to the Buyer - WITHIN thirty (30) CALENDAR
DAYS AFTER CONTRACT AWARD - either written or verbal notification of the
following activities:
1. Tool design completion
2. Tooling material ordered
3. Machine programming start
4. Machine programming completion
5. Tooling completion
6. Raw material ordered
7. Raw material received
8. Fabrication started
9. Fabrication completion
10. Inspection completion
11. Shipment
B. Schedule milestones/Gantt-type charts shall be prepared on a time-phase
basis, illustrating activities/events and the sequence of work
necessary to manufacture the requirement, and provided to the Buyer
WITHIN thirty (30) DAYS AFTER PURCHASE ORDER ADWARD. The schedule shall
illustrate the interdependencies between elements and events to the
level of detail necessary to identify the interaction of significant
activities.
1. The schedule shall be representative of the Seller's TOTAL
program effort and shall reflect a true summary of other
detailed networks, schedules, etc., employed in-plant by the
Seller.
2. The schedule milestone shall include, but not be limited to, the
elements identified in (A) above.
3. In the event of schedule slippage of five (5) calendar days or more,
a detailed recovery plan shall be sent to the Buyer WITHIN 24 HOURS.
4. THE Seller shall analyze the process/schedule to determine
problem areas and corrective action required. The analysis and
corrective action shall be reported to the Buyer. On-site
Buyer representatives or Buyers may maintain status on a more
frequent basis during critical schedule periods.
5. Schedule milestone charts shall be updated and submitted to the
Buyer on a weekly basis or as defined by the Buyer.
NOTE 18 - PRICING.
1. This agreement is a fixed price contract except for raw
material costs and outside costs, including, but not limited
to; heat treat, age, chem-mill, paint and process. These costs
will be substantiated by using existing base prices for all
part numbers already covered. All new part numbers will have a
base price established using Leonard's Metal, Inc (LMI)
estimate or LMI's first buy experience. Requests for
adjustment will submitted at the end of each year, for review
and payment.
SPECIAL CONTRACT LANGUAGE
A. LEFT BLANK.
B. FIRM FIXED PRICING FOR LONG TERM CONTRACT
This Contract shall be in effect for (10 YEARS), beginning (01-01-98 AND ending
(12-31-2007DATE). During the entire term of this Contract, pricing shall be
fixed with scheduled pricing review, evaluation and negotiation to be conducted
every two (2) YEARS. Seller and Boeing shall review and evaluate Seller's costs
as scheduled below and enter into good faith negotiations to determine firm
fixed pricing for each pricing interval, as determined by the total package
bases, as defined by this contract;
REVIEW PERIOD I: APRIL 1999 REVIEW PERIOD II: APRIL 2001
REVIEW PERIOD III: APRIL 2003 REVIEW PERIOD IV: APRIL 2005
REVIEW PERIOD V: APRIL 2007
B1. COST OR PRICING DATA
In support of this Contract, Seller shall submit appropriate cost or pricing
data as defined in WMFM 270 (attached hereto and incorporated herein by
reference) and/or suitable format as provided by the supplier. Said data shall
be provided to Boeing on or before (DATE). Refusal to comply with this
requirement will be cause for termination of the Contract for default as
provided by the termination clause of Boeing Form P252T-1, Rev. 1/97.
C. CONTINUOUS IMPROVEMENT INITIATIVES
During the term of this Contract, Seller agrees to enter into continuous
improvement initiatives with Boeing which affect the manufacturing and assembly
process at Sellers facilities and Seller's subcontractor's facilities. Either
Seller or Boeing may identify continuous improvement initiatives. An action
plan, for each initiative, shall be established and monitored by both parties
during the term of this Contract. Any cost reductions which result from
continuous improvement initiatives shall be shared between Seller and Boeing.
The percentage of sharing shall be negotiated and implemented as part of the
action plan prior to initiation of the process improvements.
D. LEFT BLANK. TLH 03-09-98.
E. LEFT BLANK. TLH 03-09-98.
F. CRITICAL MANUFACTURING REORDER LEAD TIME (CMROLT)
Critical Manufacturing Reorder lead-time shall be identified by Position and
Part Number for the items listed herein. As defined in this Contract, CMROLT
shall include administrative and manufacturing (including queue, setup, run and
move) lead times. CMROLT is the minimum number of calendar days, prior to
delivery date, that Boeing can issue a purchase order release for a line item
delivery quantity against a contract.
The CMROLT defined herein shall be fixed by the Seller, and may only be revised
upon written notice to the Boeing Contract Administrator.
CMROLT will not include raw material acquisition time. Raw material acquisition
time shall be accounted for outside of the ROLT through Boeing's forecast tool
(see Paragraph
G. FORECAST TOOL
Projected requirements shall be determined on a 12-24 month rolling basis, and
shall be based upon estimated program build rates for Model airplanes. Boeing
shall provide Seller the forecast tool on a monthly basis for Seller's use in
areas including, but not limited to, ordering raw material and resource/capacity
planning to protect Boeing's required schedules.
To assist Seller's production control system, the first eighteen (18) months of
the forecast shall be considered firm requirements and such quantities shall be
released by purchase order CMROLT away from Boeing's required on dock date. Any
changes in quantity or schedule shall be subject to the "Changes" clause of form
252T-1, Rev. 1/97.
The remaining monthly quantities of the forecast shall be defined as it
"unreleased quantities" and shall be considered as an estimate to secure long
lead raw material. Any additional performance authorization, over and beyond
material ordering, shall be clearly defined in writing between Boeing and
Seller. Boeing may make changes in quantity and/or schedule of the unreleased
quantities without liability, with the exception of long lead raw material
ordering.
H. CAPACITY REPORTING
Seller shall provide documentation detailing its production capacity,
(quarterly/annually), for the term of this Contract. Said documentation, for
each process required to manufacture the items listed herein, shall include but
not be limited to the following:
1. Current maximum production capacity;
2. Current production level as a percent of maximum;
3. Projected production level for a minimum of eighteen months in
the future as a percent of maximum;
4. Current and projected levels of production required to support
this Contract as a percent of maximum.
I. MINIMUMIMAXIMUM RELEASE QUANTITY BY ITEM
The minimum and/or maximum release quantity for each item under this Contract
shall be mutually agreed upon by both parties and shall be identified by
Position and Part Number for the items listed herein.
J. PRODUCT DERIVATIVES
During the term of this Contract, Boeing may, but is not obligated, to direct
Seller to supply Boeing's requirements for derivative Products which correspond
to those Products being produced under this Agreement. Seller hereby agrees to
utilize similar pricing for said derivative Products for incorporation into this
Contract.
K. LEFT BLANK TLH 03-09-98.
L. RESPONSIBILITY FOR PERFORMANCE
Boeing issuance of this Contract is based in part on reliance upon Seller's
ability, expertise and awareness of the intended use of the Goods, and Seller's
continuing compliance with all applicable laws and regulations during the
performance of this Contract. Further, Seller shall not, by contract, operation
of law, or otherwise, assign any of its rights or interest of its duties or
obligation under this Contract, or subcontract all or substantially all of its
performance of this Contract to one or more third parties, without Boeing's
prior written consent. In no event shall Seller assign any of its rights or
interest of its duties or obligation under this Contract, or subcontract any of
its performance of this Contract to one or more foreign suppliers, without
Boeing's prior written consent. No assignment, delegation or subcontracting by
Seller with or without Boeing's consent shall relieve Seller of any of its
obligations under this Contract or prejudice any of Boeing's rights against
Seller whether arising before or after the date of the assignment, including but
not limited to set off or recoupment.
M. LIMITATION OF LIABILITY
Seller shall not manufacture or fabricate items or procure raw material or any
goods in advance of the reasonable flow-time (reorder lead-time defined as raw
material acquisition, administrative, manufacturing including queue, setup, run
and move) required to comply with the delivery schedule of any subsequent
Purchase Order(s). Notwithstanding any other provision of this Contract, Seller
is not entitled to any equitable adjustment or other modification of any
subsequent Purchase Order(s) for any manufacture, fabrication, or procurement of
products not in conformity with the requirements of this Contract without first
obtaining written consent of the Contract Administrator. Nothing in this Section
shall be construed as relieving Seller of any of its obligations under this
Contract or any subsequent Purchase Order(s).
N. VALUE ENGINEERING
Seller may submit proposals to the Contract Administrator to change drawings,
designs, specifications or other requirements that decrease Seller's performance
costs, or result in a cost reduction to Boeing for installation, operation,
maintenance or production of the items. Any cost reduction from this Change
shall result in a Contract item price reduction in an amount equal to the
savings portion attributable to Boeing. Boeing and Seller shall share in the
savings as follows:
50% TO SELLER 50% TO BCAG-WD
Each party shall be responsible for its own implementation costs, including but
not limited to nonrecurring costs.
0. GENERAL TERMS AGREEMENT/SPECIAL BUSINESS PROVISIONS Buyer and Seller shall
negotiate the terms and conditions of The Boeing Company General Terms Agreement
(GTA) and Special Business Provisions (SBP) prior to December 31, 1998. The
above not withstanding, this Contract, as written, is the entire agreement
between the parties.
P. NONRECURRING VALUE The non-recurring costs associated with
production of parts under this Contract shall be identified by Position, Part
Number, Dollar Value and Type for each item listed herein. (Tool Design/Fab
hours)
Q. NON-DISCLOSURE AGREEMENT
The Parties have agreed that the terms and conditions of this Contract shall not
be disclosed by either party in any form, to any third party or entity, unless a
suitable non-disclosure agreement is signed by the Buyer, Seller and the
receiving party.
R. ATA QUALIFICATION
The Statement of Work and the period of performance under this Contract, for all
parts with Advanced Technology Assembly (ATA) requirements, is contingent upon
Seller obtaining and maintaining ATA qualification for the term of this
Contract. Seller's failure to comply with the requirements of its ATA
qualification plan for the term of this Agreement will be grounds for
cancellation of ATA item requirements.
S. QUALITY ASSURANCE SAMPLING PLAN
Within ONE HUNDRED AND EIGHTY (180) days of the effective date of this Contract,
Seller shall submit a Quality Assurance Sampling Plan to Boeing for sampling
(less than 100 percent inspection) for all parts with Advanced Technology
Assembly (ATA) requirements. Upon Boeing approval and Seller implementation of
the Sampling Plan, Seller shall evaluate its internal processes for cost
reductions to be passed through to Boeing under this Contract and any subsequent
purchase orders.
Seller and Boeing agree to review cost elements affected by the Sampling Plan,
and negotiate a mutually agreeable cost reduction and implementation date of
such cost reduction.
T. FAA CONFORMITY FAA
Conformity is required for line item(s) at Seller's facility after final
inspection by Supplier and acceptance by the Boeing Source Representative. This
conformity process will be performed on part(s). After acceptance, Seller is
required to contact the Boeing Wichita Procurement Quality Assurance (PQA) FAA
Focal. Seller will also complete FAA 8130-9 Form and present FAA 8130-9 Form to
the FAA or designee upon arrival at Supplier's facility to complete the FAA
Conformity. The FAA or its designee will provide Supplier the FAA 8130-3 Form
and one (1) copy of FAA 8130-9 Form. Seller shall include the First Article
Inspection Report with the part(s) being shipped to Boeing.
U. LEFT BLANK TLH 03-09-98.
U. APPLICABLE LAW
This Contract shall be governed by the laws of the State of Kansas, USA.
Supplier: 398580 Contract: _____________ Date: 05-18-1998
Pos. De- Discnt
scription Item/Price Group Quantity Un. Price Un. [%] Tax
[List of Items designated per contract].
Forwarding Agent : A53 Ship 150 lbs. via United Parcel Service (UPS)
collect (acct. # 693723) or consignee billing
(acct. # 665Ell) ship 150 lbs. 5,000 lbs.
via C F Motorfreight, collect.
Terms of Del. : FOB Origin Freight Collect
Terms of Pmt. : 1/2% 10 Days, Net 30
Federal Excise Tax applicable to The Boeing Company on articles ordered must be
shown as a separate item on invoices. Unless specified taxable above, articles
ordered are exempt from state sales or use taxes. Kansas Registration
Certification No. 2-0327.
Unless so noted elsewhere, all other correspondence except invoices, will
reference the Boeing Contract number and be addressed to the Buyer and Mailstop
shown above. Send invoices on "900" position items to Attn: Payment Services
Mailstop K09-35, Boeing Wichita, P.O. Box 7701, Wichita, KS, 67277-7701.
Boeing Commercial Airplane Group CONTRACT: __________
Wichita Division Changed
P.O. Box 7730 Wichita, KS 67277-7730 05-18-1998
Pos. De- Discnt
scription Item/Price Group Quantity Un. Price Un. [%] Tax
Accepted By: Boeing Commercial Airplane Group
Wichita Division
For: Date: P.O. Box 7730 Wichita, KS 67277-7730
-------------- -------------
SELLERS NAME
Buyer: HAAS, TERRY
Mailstop: K18-34
GRUMMAN AEROSPACE CORPORATION
GENERAL CONDITIONS
(FIXED PRICE - NON-GOVERNMENT)
FOR THE G-IV/F100 PROGRAM
1. GENERAL
(a) This purchase order is a complete and exclusive statement of
terms and supersedes all prior agreements.
(b) The order of precedence is: First, the Schedule; Second, the
General Conditions; Third, other provisions of this order;
Fourth, the specifications; and Fifth, drawings, samples and
other referenced descriptions and technical documents.
(c) The term "supplies" as used herein includes goods, services,
reports, data and other property ordered or deliverable
hereunder, and any provision hereof or of the law pertaining to
goods or Supplies shall apply to all things so defined.
(d) The rights and remedies set forth herein are in addition to and
may modify but are not in substitution for those provided in law
and equity. This purchase order shall be governed by and
construed according to the laws of the State of New York.
(e) Any amounts owing to Grumman by Seller may be set off against
amounts otherwise due to Seller under this or any other Grumman
purchase order.
(f) The Seller warrants that the unit prices of the item(s) covered
hereby are as low as those currently charged by the Seller to any
other customer purchasing the same item(s) in like or smaller
quantities under similar conditions. The Seller agrees to
reimburse Grumman promptly in the amount of the difference
between the lower price charged any other customer and the price
charged Grumman.
2. PAYMENTS
Invoices received from the fifth to the nineteenth of the month are
payable on the fourteenth of the following month, and those received
from the twentieth to the fourth of the following month are payable on
date prior to the end of said following month. Discount periods shall
be computed from the date invoices are received. An invoice is deemed
"received" on the date of receipt of a correct invoice or acceptance of
all conforming supplies then due, whichever is later.
3. INSPECTION AND WARRANTY
A. Inspection
(1) At all reasonable times, including the period of
manufacture, Grumman and its customer may inspect and
test all supplies (which term throughout this clause
includes, without limitation, raw material, components,
intermediate assemblies and end products) and may inspect
the involved plants of Seller and Seller's
subcontractors. Reasonable facilities and assistance for
safe and convenient inspection and test shall be provided
without cost to Grumman or its customer.
(2) The inspection and test by Grumman of any supplies or
lots thereof does not relieve the Seller from any
responsibility regarding defects or other failures to
meet the purchase order requirements which may be
discovered prior to acceptance. Except to the extent
provided by the Warranty or other provisions of this
purchase order or by applicable law, acceptance shall be
conclusive except as regards latent defects, fraud or
such gross mistakes as amount to fraud.
(3) Seller and Seller's subcontractors shall establish and
maintain a Quality Control system acceptable to Grumman
and its customers. This system shall be in accordance
with the general intent of the Federal Aviation
Regulations, Part 21, Subpart g, as interpreted by
Gulfstream Quality Control Requirements SQCD-0001, dated
25 October 1978, Appendix E. Grumman and its customers
may, at any reasonable time prior to and during
performance and with reasonable assistance from Seller,
and Seller's subcontractors, inspect such system. Seller,
at no additional expense to Grumman or its customers,
shall promptly comply with any reasonable written
directives to correct deficiencies.
B. Warranty
(1) Notwithstanding inspection and acceptance by Grumman of
supplies furnished under this purchase order or any
provision of this purchase order concerning the
conclusiveness thereof, Seller warrants that all supplies
furnished under this purchase order will be free from
defects in material, workmanship and design, the
workmanship shall be suitable for their intended use in
the G-IV and F100 aircraft environment, and will conform
in all respects with the specifications and all other
requirements of this purchase order.
(2) Grumman shall give notice to Seller of any Breach of
Warranty hereunder within forty-three (43) months from
the date of delivery to Grumman's customer of the
aircraft into which the supplies are incorporated, or the
accumulation of 3,500 hours of flying time, or thirty-six
(36) months after outfitting of the aircraft end item in
which the supplies have been incorporated, whichever
first occurs.
(3) In the event of a Breach of Warranty hereunder, Grumman
may either: (a) require the prompt correction or
replacement of defective or otherwise non-conforming
supplies or parts thereof; or (b) retain such supplies
whereupon the price thereof shall be reduced by an amount
equitable under the circumstances; or (c) correct or
replace such supplies with similar supplies, by contract
or otherwise, and charge to Seller the cost occasioned to
Grumman thereby.
(4) In the event of any Breach of Warranty hereunder,
transportation charges and other incidental expenses, and
responsibility for supplies under redelivery at Grumman
or other destination, shall be borne by Seller.
(5) Any supplies or parts thereof corrected or furnished in
replacement pursuant to this clause shall also be subject
to all the provisions of this clause to the same extent
as supplies initially delivered. The warranty with
respect to such supplies or parts thereof shall be equal
in duration to that set forth in 2 above and shall run
from the date of delivery of such corrected or replaced
supplies.
C. Effect of Grumman Approvals
Grumman approval of Seller-generated designs, drawings, or other
technical documents shall in no way relieve Seller of its
obligations under this or any other clause of this purchase
order.
4. CHANGES
(a) Grumman may at any time, by a written order, and without notice
to the sureties, if any, make changes within the general scope of
this purchase order in any one or more of the following:
(1) drawings, designs, specifications, and other technical
documents; (2) method of shipment or packing; (3) place
of delivery; (4) quantity of supplies; (5) delivery
schedule; (6) place of inspection; and (7) place of
acceptance.
(b) If any such change causes an increase or decrease in the cost of,
or the time required for, the performance of any part of the work
under this purchase order, whether changed or not changed by any
such Change Order, an equitable adjustment shall be made in the
price and/or delivery schedule and the purchase order amended
accordingly. Any claim by Seller for adjustment under this clause
must be made in an amount stated within thirty (30) days from
receipt by Seller of the order effecting the change. Failure to
agree to any adjustment shall be a dispute within the meaning of
the "Disputes" clause hereof. However, Seller shall not be
excused from proceeding with the purchase order as changed.
(c) Grumman may limit changes to work for which the equitable price
adjustment will not exceed specified amounts and Seller shall not
be obligated to proceed with work in excess thereof.
5. CANCELLATION (DEFAULT TERMINATION)
(a) Grumman may, at its election, cancel this purchase order in whole
or in part by giving notice of default to Seller; (a) if Seller
refuses or fails to deliver the supplies or any installment
thereof strictly within the time specified, (b) if Seller fails
to comply strictly with any provision of or repudiates this
purchase order, or (c) if Seller becomes insolvent or subject to
proceedings under any law relating to bankruptcy, insolvency or
the relief of debtors.
(b) Upon cancellation (1) Seller's liability to Grumman shall include
(without limitation) the cost of effecting cover, by purchase or
otherwise, and 92) Grumman may require Seller to transfer title
and deliver as directed all property produced, procured or
allocated by Seller for the cancelled portion hereof in return
for the lesser of (a) its reasonable market value, or (b) its
cost to Seller.
(c) Delay or non-delivery shall not be excused unless (i) it arises
solely as a result of unforeseeable causes beyond the control and
without the fault of both Seller and its subcontractors at any
tier, and (ii) Seller gives written notice to Grumman of both the
delay or non-delivery and the cause thereof within seven (7) days
after Seller has actual knowledge that such occurrences will or
may result in delay or non-delivery and (iii) Seller exerts every
possible effort to mitigate the effect of same on Grumman. Seller
shall have the responsibility to provide reasonable proof that
any delay or non-delivery is an excusable delay within the
meaning of this paragraph. If it fails to furnish such proof,
such delay or non-delivery shall not be deemed excusable.
(d) Seller shall continue the performance hereunder to the extent not
cancelled.
6. TERMINATION FOR CONVENIENCE
(a) The performance of work under this purchase order may be
terminated by Grumman in whole or from time to time in part, by
notice to Seller.
(b) In the event or such termination, Grumman shall pay to Seller its
reasonable costs, incurred in the performance of work prior to
termination plus the reasonable costs of settling and paying
claims arising out of termination of subcontracts hereunder, all
determined in accordance with sound accounting practices and
principles consistently applied, and a reasonable allowance for
profit earned thereon; provided, however, that Seller shall not
be entitled to any anticipatory profits with respect to the
terminated portion of the work hereunder.
(c) In no event shall the total sum payable to the Seller in the
event of termination exceed the total purchase order price as
reduced by the amount of payments otherwise made, and as further
reduced by the purchase order price of work not terminated. If it
appears that Seller would have sustained a loss on the entire
purchase order had it been completed, no profit shall be payable
hereunder and an appropriate adjustment shall be made reducing
the amount otherwise payable hereunder to reflect the indicated
rate of loss.
(d) Seller shall provide Grumman with accurate and sufficient
information to support all termination claims hereunder. In the
event of either partial or total termination, such parts of
Seller's books and records and its plants that may e engaged in
the performance of this purchase order shall be subject to
inspection and audit by Grumman and its customer to the extent
necessary to verify any Seller claims for both recurring and
non-recurring costs.
7. INVENTION RIGHTS AND DATA
Seller shall make prompt written disclosure to Grumman of, and shall
transfer to Grumman all rights, title and interest in and to, all
inventions and discoveries related to work performed hereunder which
are conceived or first reduced to practice in the course of or under
this purchase order. Further, it is agreed that in addition to said
inventions and discoveries, Grumman shall also become the owner of all
the conceptions and technical information generated by the Seller in
the performance of this purchase order, all of which will be deemed
proprietary information belonging to Grumman and will not be disclosed
by the Seller to any person without written consent of Grumman.
8. PATENT INDEMNITY
Unless the supplies are made to a detailed design of Grumman, Seller
shall at its expense defend and indemnify Grumman and its customers
against any claim of patent infringement provided timely notice of such
claim be given Seller.
9. REPRODUCTION RIGHTS
If the supplies are made to a detailed design of Grumman or in
accordance with specifications or other data furnished by Grumman, all
rights to reproduction, use or sale thereof are reserved to Grumman.
10. NON-DELEGATION OF PERFORMANCE
No substantial part of Seller's obligation shall be performed by others
without Grumman's consent. No breach hereof shall vest rights against
Grumman in a third party.
11. GRUMMAN-FURNISHED PROPERTY
(a) Grumman shall deliver to the Seller, for use only in connection
with this purchase order, the property described in the Schedule
or specifications (herein referred to as "Grumman-Furnished
Property"), at the times and locations stated therein. If the
Grumman-Furnished Property is not so delivered to the Seller, and
if Grumman determines that the facts warrant such action, Grumman
shall, upon timely written request made by Seller, equitably
adjust any affected provision of this purchase order pursuant to
the procedures of the "Changes" clause hereof.
(b) Title to Grumman-Furnished Property shall remain in Grumman, and
shall not be affected by the incorporation or attachment thereof
to any property not owned by Grumman, nor shall such Grumman
property, or any part thereof, be or become a fixture or lose its
identity as personalty by reason of affixation to any realty.
(c) Seller shall maintain adequate property control records of
Grumman-Furnished property in accordance with sound industrial
practice.
(d) Unless otherwise provided in this purchase order the Seller, upon
delivery to him of any Grumman-Furnished Property, assumes the
risk of, and shall be responsible for, any loss thereof or damage
thereto except for reasonable wear and tear, and except to the
extent that such property is consumed in the performance of this
purchase order.
(e) Seller shall, upon completion of this purchase order, prepare for
shipment, delivery F.O.B. destination, or dispose of all
Grumman-Furnished Property not consumed in the performance of
this purchase order or not theretofore delivered to Grumman, as
may be directed or authorized by Grumman. The net proceeds of any
such disposal shall be credited to the purchase order price or
paid in such other manner as Grumman may direct.
(f) Title to all jigs, dies, fixtures, moles, patterns, taps, gauges
and items of tooling, the full cost of which is charged to this
purchase order, shall vest in Grumman upon delivery of such items
to Seller or, as to items that are in Seller's possession prior
to the effective date of this purchase order, upon commencement
of the use of such item in performance of this purchase order,
and shall in all respects be treated as Grumman-Furnished
Property pursuant to paragraphs (b) through (e) above.
12. INDEMNITY BY SELLERS ENTERING GRUMMAN PREMISES
If Seller enters the premises of Grumman or its customer, Seller shall
indemnify and hold harmless Grumman, its officers, agents and employees
from any loss or liability by reason of property damage, personal
injury or death arising out of Seller's presence thereon, except when
arising solely out of Grumman's fault or negligence. Seller shall
maintain adequate Workmen's Compensation, public liability, property
damage and automobile liability insurance and will, upon request,
provide a certificate of insurance.
13. DISPUTES
Seller may litigate any dispute arising hereunder or in connection
herewith in a court of competent jurisdiction. Pending settlement by
agreement or a final judgment, Seller shall proceed diligently with the
performance hereof according to Grumman's decision and direction.
<PAGE>
GENERAL CONDITIONS
Grumman Aerospace Corporation
1. GENERAL
A. This purchase order is a complete and exclusive statement of terms
and supersedes all prior agreements.
B. The order of precedence is: First, the Schedule; Second, the General
Conditions; Third, other provisions of this order; Fourth, the specifications;
and fifth, drawings, samples and other referenced descriptions and technical
documents.
C. Any communication, purchase order, agreement, amendment, change or
stop work order, extension or acceleration, cancellation or termination notice,
course of performance or course of dealing, supplementing, modifying, rescinding
or waiving any of Grumman's rights or obligations shall be void unless executed
or ratified in writing in order that Grumman shall be bound only by such
writings and not by construction, implication, or apparent authority.
D. The term "DAR" means the Defense Acquisition Regulation, formerly
designated as the Armed Services Procurement Regulation (ASPR). All DAR clauses
are those extant on the effective date of this purchase order. As used in said
DAR clauses, the terms "Government," "Contracting Officer" and similar words
shall [except as used in DAR 7-302.23 and 7-104.9(a)] include Grumman, the term
"Contractor" shall mean "Seller" and the term "contract" shall mean this
purchase order.
E. Commercial (non-Government) purchase orders are subject to all DAR
clauses for their successors) referenced herein except those contained in
Article XIII below.
F. The term "supplies" as used herein includes goods, services,
reports, data and other property ordered or deliverable hereunder, and any
provision hereof or of the law pertaining to goods or supplies shall apply to
all things so defined.
G. The rights and remedies set forth in this purchase order are in
addition to and may modify but are not in substitution for those provided in law
and equity. This purchase order shall be governed by and construed according to
the laws of the State of New York.
H. Any amounts owing to Grumman by Seller may be set off against
amounts otherwise due to Seller under this or any other Grumman purchase order.
I. The Seller warrants that the unit prices of the item(s) covered
hereby are as low as those currently charged by the Seller to any other customer
purchasing the same item(s) in like or similar quantities under similar
conditions. The Seller agrees to reimburse Grumman promptly in the amount of the
difference between the lower price charged any other customer and the price
charged Grumman.
II. PAYMENTS
Invoices reserved from the fifth to the nineteenth of the month are
payable on the fourteenth of the following month, and those received from the
twentieth to the fourth of the following month are payable one day prior to the
end of said following month. Discount periods shall be computed from the date
invoices are received. An invoice is deemed "received" on the date of receipt of
a correct invoice or acceptance of all conforming supplies then due, whichever
is later.
III. INSPECTION AND WARRANTY
A. Inspection
DAR 7-103.5(a) Inspection applies. The reference in paragraph
(b) thereof to the "Default" clause shall be deemed to refer to Article VI,
paragraph A "Cancellation (default termination)" below.
B. Warranty
(1) Notwithstanding inspection and acceptance by Grumman of
supplies furnished under this purchase order or any provision of this purchase
order concerning the conclusiveness thereof, Seller warrants that all supplies
furnished under this purchase order will be free from defects in material,
workmanship and design, and will confirm in all respects with the specifications
and all other requirements of this purchase order.
(2) Grumman shall give notice to Seller of any breach of
warranty hereunder within seven (7) months after delivery to and acceptance by
Grumman's customer or twenty-four (24) months after delivery to Grumman,
whichever first occurs.
(3) In the event of a breach of warranty hereunder, Grumman
may either: (a) require the prompt correction or replacement of defective or
otherwise nonconforming supplies or parts thereof; or (b) retain such supplies,
whereupon the price thereof shall be reduced by an amount equitable under the
circumstances; or (c) correct or replace such supplies with similar supplies, by
contract or otherwise, and charge to Seller the cost occasioned to Grumman
thereby.
(4) In the event of any breach of warranty hereunder,
transportation charges and other incidental expenses, and responsibility for
supplies until redelivery at Grumman or other destination, shall be borne by
Seller.
(5) Any supplies or parts thereof corrected or furnished in
replacement pursuant to this clause shall also be subject to all the provisions
of this clause to the same extent as supplies initially delivered. The warranty
with respect to such supplies or parts thereof shall be equal in duration to
that set forth in (2) above and shall run from the date of delivery of such
corrected or replaced supplies.
C. Effect of Grumman Approvals
Grumman approval of Seller-generated designs, drawings, or
other technical documents shall in no way relieve Seller of its obligations
under this or any other clause of this Purchase Order.
IV. CHANGES
A. Grumman may at any time, by a written order, and without notice to
the sureties, if any, make changes within the general scope of the purchase
order in any one or more of the following: (1) drawings, designs,
specifications, and other technical documents; (2) method of shipment or
packing; (3) place of delivery; (4) quantity of supplies (increase only); (5)
delivery schedule; (6) place of inspection; and (7) place of acceptance.
B. If any such change causes an increase or decrease in the cost of, or
the time required for, the performance of any part of the work under this
purchase order, whether changed or not changed by any such change order, an
equitable adjustment shall be made in the price and/or delivery schedule and the
purchase order amended accordingly. Any claim by Seller for adjustment under
this clause must be made in an amount stated within 30 days from receipt by
Seller of the order effecting the change. Where the cost of property made
obsolete or excess as a result of a change is included in Seller's claim,
Grumman may prescribe the manner of disposition of such property. Failure to
agree to any adjustment shall be a dispute within the meaning of the "Disputes"
clause hereof. However, Seller shall not be excused from proceeding with the
purchase order as changed.
C. Grumman may limit changes to work for which the equitable price
adjustment will not exceed specified amounts and Seller shall not be obligated
to proceed with work in excess thereof.
V. INTERRUPTION OF WORK
DAR 7-105.3(c) Stop Work Order applies.
VI. CANCELLATION AND TERMINATION
A. Cancellation (default termination)
(1) Grumman may, at its election, cancel this purchase order
in whole or in part by giving notice of default to Seller: (a) if Seller refuses
or fails to deliver the supplies or any installment thereof strictly within the
time specified, (b) if Seller fails to comply strictly with any provision of or
repudiates this purchase order, or (c) if Seller becomes insolvent or subject to
proceedings under any law relating to bankruptcy, insolvency or the relief of
debtors.
(2) Upon cancellation Seller's liability to Grumman shall
include (without limitation) the cost of effecting cover, by purchase or
otherwise, and Grumman may require Seller to transfer title and deliver as
directed all property produced, procured or allocated by Seller for the
cancelled portion hereof.
(3) Delay or nondelivery shall not be excused unless (a) it
arises solely as a result of unforeseeable causes beyond the control and without
the fault or negligence of both Seller and its subcontractors at any tier, and
(b) Seller gives timely notice to Grumman of both the delay or nondelivery and
the cause thereof and exerts every possible effort to mitigate the effect of
same on Grumman.
(4) Grumman's liability to Seller after cancellation shall be
limited to the sum of the agreed price of accepted supplies (equitably reduced
if they are non-conforming) and, should Grumman, pursuant to (2) above, require
the delivery of property, the smallest of (a) its reasonable market value, (b)
its cost to Seller, or (c) the approximate amount the settlement would have been
had the cancellation been a termination pursuant to B. below.
B. Termination (for convenience)
DAR 8-706, Termination applies.
C. General
Upon cancellation or termination Grumman may require that
Seller assign instead of terminate its purchase orders and subcontracts
hereunder to the extent and in such manner as Grumman may direct. Seller shall
continue the performance hereof to the extent not cancelled or terminated.
VII. PATENT INDEMNITY
Unless the supplies are made to a detailed design of Grumman, Seller
shall at its expense defend and indemnify Grumman and its customers against any
claim of patent infringement provided timely notice of such claim can be given
Seller.
VIII. REPRODUCTION RIGHTS
If the supplies have been either originated or designed by Grumman or
in accordance with specifications or other data furnished by Grumman, all rights
to reproduction, use or sale thereof are reserved to Grumman; provided, however,
that if this purchase order is placed under Government contract, Seller may
produce such supplies for direct sale to the Government when any such sale will
not interfere with Seller's performance of this purchase order, and Seller
permanently identifies such supplies as having been manufactured by Seller for
direct sale to the Government.
IX. NONDELEGATION OF PERFORMANCE
No substantial part of Seller's obligation shall be performed by others
without Grumman's consent. No breach hereof shall vest rights against Grumman in
a third party.
X. PROPERTY, SPECIAL TOOLING AND TEST EQUIPMENT
A. The clause contained in DAR 7-104.24(a), Government Property,
applies.
B. If special tooling, the cost of which is charged hereto, is not
elsewhere acquired herein, DAR 7-104.25 Special Tooling applies. If special test
equipment is acquired hereby without specifying the items, DAR 7-104.25 Special
Test Equipment applies, except that "30" becomes "45" in subparagraph (b).
XI. INDEMNITY BY SELLERS ENTERING GRUMMAN PREMISES
If Seller enters the premises of Grumman or its customer, Seller shall
indemnify and hold harmless Grumman, its officers, agents and employees from any
loss or liability by reason of property damage, personal injury or death arising
out of Seller's presence thereon, except when arising solely out of Grumman's
fault or negligence. Seller shall maintain adequate Workmen's Compensation,
public liability, property damage and automobile liability insurance and will,
upon request, provide a certificate of insurance.
XII. DISPUTES
Either party may litigate any dispute arising under or related to this
purchase order in a court of competent jurisdiction. Pending settlement of any
dispute by agreement or a final judgment, Seller shall proceed diligently with
the performance hereof according to Grumman's decision and direction.
XIII. GOVERNMENT CONTRACTS
If this is a Government subcontract, the following provisions apply:
A. DAR CLAUSES OR THEIR SUCCESSORS
7-103.15 (Certain Communist Areas); 7-103.16 (Contract Work Hours and
Safety Standards Act-Overtime Compensation); 7-103.17 (Walsh-Healey Public
Contracts Act); 7-103.189(a) (Equal Opportunity); 7-103.23 (Notice and
Assistance Regarding Patent and Copyright Infringement); 7-103.26 (Pricing of
Adjustments); 7-103.27 (Affirmative Action for Disabled Veterans and Veterans of
the Vietnam Era); 7-103.28 (Affirmative Action for Handicapped Workers);
7-103.29 (Clean Air and Water); 7-104.4 (Notice to the Government of Labor
Disputes); 7-104.6 (Filing of Patent Applications); 7-104.9(a) (Rights in
Technical Data and Computer Software); 7-104.9(h) (Technical Data - Withholding
of Payment); 7-104.9(l) (Identification of Technical Data); 7-104.9(m) (Deferred
Ordering of Technical Data or Computer Software); 7-104.9(p) (Restrictive
Markings on Technical Data); 7-104.11(a) (Excess Profit); 7-104.12 (Military
Security Requirements); 7-104.14(a) (Utilization of Small Business and Small
Disadvantaged Business Concerns); 7-104.15 (Examination of Records by
Comptroller General); 7-104.20(a) (Utilization of Labor Surplus Area Concerns);
7-104.32 (Duty-Free Entry - Qualifying Country End Products and Supplies);
7-104.37 (Required Source for Jewel Bearings and Related Items); 7-104.38
(Required Sources for Miniature and Instrument Ball Bearings); 7-104.41(a)
(Audit by Department of Defense); 7-104.42(a) (Subcontractor Cost or Pricing
Data) if this purchase order is expected to exceed $100,000; 7-104.46 (Required
Sources for Precision Components for Mechanical Time Devices); 7-104.48 (new
Material); 7-104.49 (Government Surplus); 7-104.78 (Geographic Distribution of
Defense Subcontract Dollars); 7-104.81 (Accident Reporting and Investigation
Involving Aircraft, Missiles and Space Launch Vehicles); 7-104.89 (Engineering
Change Proposals); 7-104.93(a) (Preference for Domestic Specialty metals [Major
Programs]); 7-302.23 (Patent Rights) as contained in the controlling Government
contract.
In addition, if this purchase order exceeds $500,000: 7-104.14(b)
(Subcontracting Plan for Small Business and Small Disadvantaged Business
Concerns (Negotiated); 7-104.209b) (Labor Surplus Area Subcontracting Program).
B. ADDITIONAL DAR CLAUSES AND OTHER CONDITIONS
Additional DAR clauses and other conditions as are made mandatory under
Grumman's prime contract may be incorporated into this purchase order at a later
date. The Seller agrees to negotiate promptly with Grumman for the inclusion of
such additional clauses and other conditions.
C. LIMITATION OF LIABILITY
(Applicable only if the controlling Government contract contains the
DAR 7-104.45(a), Limitation of Liability clause.)
(1) Except for remedies expressly provided elsewhere in this
order, Seller shall not be liable for loss of or damage to property of the
Government (excluding the supplies delivered under this purchase order even if
and when same become property of the Government) occurring after acceptance by
the Government of the end-items into which the supplies delivered under this
purchase order become incorporated and resulting from any defects or
deficiencies in such supplies.
(2) The foregoing limitations shall not apply when the defects
or deficiencies in such supplies, the Grumman acceptance of such supplies, or
the government acceptance of the end-items into which such supplies are
incorporated, resulted from willful misconduct or lack of good faith on the part
of any of Seller's directors or officers, or on the part of any of his managers,
superintendents, or other equivalent representatives, who have supervision or
direction of:
(i) all or substantially all of Seller's business; or (ii) all
or substantially all of Seller's operations at any one plant or separate
location, in which this purchase order is being performed; or (iii) a separate
and complete major industrial operation in connection with the performance of
this purchase order.
(3) Notwithstanding paragraph (1) above, if Seller carries
insurance or has established a reserve for self-insurance covering liability for
damages or losses suffered by the Government either through purchase or use of
the purchase order supplies to be delivered to Grumman under this purchase order
or through purchase or use of the end items incorporating such supplies to be
delivered by Grumman to the Government, Seller shall be liable to the
Government, through Grumman, to the extent of such insurance or reserve for
self-insurance for damages or losses to property of the Government, Seller shall
be liable to the Government, through Grumman, to the extent of such insurance or
reserve for self-insurance for damages or losses to property of the Government
occurring after acceptance by the Government of the end-items into which the
supplies delivered under this purchase order become incorporated and resulting
from any defects or deficiencies in such supplies.
(4) The substance of this clause, including this paragraph (4)
suitably altered to reflect the relationship of the contracting parties, shall
be included in all subcontracts hereunder.
D. PRIORITIES
When a priority symbol (e.g. DO-A1) appears on the face page
hereof, Seller is required to follow the provisions of DMS Req. 1 and of all
other applicable regulations and orders of BDSA in obtaining controlled
materials and other products and materials needed to fulfill this purchase
order.
E. EEO CLAUSE IN SECTION 202 OF EXECUTIVE ORDER 11246
The Equal Employment Opportunity clause in Section 202,
Paragraphs 1 through 7 of Executive Order 11246, as amended, relative to equal
employment opportunity and the implementing Rules and Regulations of the Office
of Federal Contracts Compliance are incorporated herein by specific reference.
F. CONTRACT DISPUTES ACT OF 1978
If Grumman determines that a claim submitted by Seller may
become part of a Grumman claim against the Government that is subject to the
Contract Disputes Act of 1978, P.L. 95-563, 41 U.S.C. ss.601-613, Seller shall,
on request, provide Grumman with a written certification, in such form and
detail as Grumman may require, stating that the Seller's claim is made in good
faith, the supporting data are accurate and complete to the best of Seller's
knowledge and belief, and the amount requested accurately reflects the purchase
order adjustment for which the Seller believes Grumman is liable.
Notwithstanding any other provision of this purchase order, Seller agrees to
indemnify and hold Grumman harmless against any loss or damage suffered by
Grumman as a result of any breach of or discrepancy in any such certification.
<PAGE>
GRUMMAN AEROSPACE CORPORATION
ADDITIONAL CONDITIONS (F.P.)
WING STUB/LOWER 45 PROGRAM
BOEING MODEL 767 COMMERCIAL AIRCRAFT
All of the additional conditions set forth below form a part of this purchase
order. Any conflict between any of the applicable conditions contained in this
attachment and those appearing on the reverse side of the first page of this
purchase order shall be resolved in favor of the conditions contained in this
attachment.
I. CHANGES TO "GENERAL CONDITIONS", FORM GAC 305, REV. 12, DATED 3/81
A. Article I, delete paragraph E and substitute the following:
D. All DAR clauses are extant on the effective date hereof.
As used in said DAR clauses, the terms "Government",
"Contracting Officer" and similar words shall mean
Grumman and/or Boeing, as consistent with the context,
the term "Contractor" shall include Seller and the term
"contract" shall mean this purchase order.
B. The following changes are made in paragraph B of Article III:
1. Subparagraph (2) is revised to read as follows:
"(2) Grumman shall give notice to Seller of any breach of
warranty hereunder within forty (40) months after
delivery to Grumman's customer of production items
or spare parts and within forty-six (46) months
after delivery to Grumman's customer of all other
supplies."
2. The following is added to subparagraph (3):
"When Grumman requires correction of Seller supplies at
Seller's facility, same shall be completed within a
period of ten working days or less from receipt of the
defective or nonconforming supplies by Seller from
Grumman, unless a longer period has been approved by
Grumman in writing."
3. The following new subparagraph (6) is added:
"(6) Grumman's rights under this Article III.B shall, at
Grumman's option, be assignable to and enforceable
by Grumman's customers and the ultimate purchasers
and users of end items into which the supplies
delivered by Seller are incorporated."
C. Article IV Changes:
1. At the end of subdivision (1) of paragraph A add the
words "including aircraft model changes".
2. At the end of the second sentence of paragraph B add the
words "or such claim shall be deemed waived".
3. After the second sentence of paragraph B add the
following new sentence:
"as requested and required by Grumman, Seller shall
submit for Grumman evaluation Seller's estimated
`not-to-exceed' price for changes within five (5) days of
notice by Grumman of the pending change."
D. Article VII, Patent Indemnity:
Following the words "Grumman and its customers" add the words
"and any subsequent purchaser or user of the supplies".
E. Article X, Property, Special Tooling and the Test Equipment,
delete paragraph B and substitute the following:
B. Tooling
1. Seller Use Tools
Seller shall plan, design, build, test and be accountable
for all tooling required to manufacture the Production
Articles and related products. Seller will repair,
maintain, and replace as necessary all Seller Use Tools
furnished under this Purchase Order and the cost for such
services is included in the Purchase Order price. Such
tooling shall be provided in accordance with the
requirements set forth in the Tooling Manual specified
elsewhere in this Purchase Order. All tooling shall be of
a type and durability capable of supporting
Boeing/Grumman requirements for said products for the
combined life of the 767 and 777 Programs. All lead, zinc
and kirksite tooling material utilized in connection with
this Purchase Order shall be furnished at no charge
(either direct or indirect) to Grumman, and no portion of
the Purchase Order price shall be allocable to such
tooling.
2. Seller shall be responsible for providing for the
exclusive use as further defined below in Clause C
("Tooling Provisions") of all foregoing dies required to
produce forgings for the Products ordered hereunder.
C. Tooling Provisions
1. Title
Title to all Accountable Tooling produced or acquired in
connection with this Purchase Order shall be retained by
Seller as security for the payment of the price thereof
and retained thereafter unless and until Grumman shall
request that title to all or part of such tooling by
transferred to Grumman, its customer, or any third party
as hereinafter provided; however, all Accountable Tooling
shall be used only in the performance of this Purchase
Order. Except for forging dies and special tools made of
lead, zinc or kirksite, and notwithstanding Seller's
retention of title, Grumman may at any time (including
before or after any termination pursuant to Article VI)
for any reason, and in Grumman" absolute discretion,
remove any Accountable tooling from Seller's possession
or require Seller to deliver any Accountable tooling to
Grumman or any third party, or direct Seller to use or
not use any such Accountable Tooling, or take any other
action with respect to such Accountable Tooling that
could be taken by the absolute owner thereof, including
without limitation the power to divest Seller of legal
title to any such Accountable Tooling, whether or not the
Accountable Tooling is removed from Seller's possession,
and to transfer such title to Grumman or to any other
party. Should Grumman elect to move any Accountable
Tooling, Seller agrees to provide all assistance and
support required by Grumman to permit such movement to
occur in a timely manner that will support Grumman
requirements, and Seller further agrees the movement of
Tooling including any and all data such as tool planning
and tool drawings shall be delivered in a manner that
will support Grumman production requirements.
Seller agrees that any schedule acceleration that is
required by Grumman in order to establish a "Tooling
window" that will enable and allow Grumman a reasonable
period for moving the Accountable Tooling to Grumman, its
customer, or to another supplier shall be deemed to be
within the scope of this Purchase Order for purposes of
Article IV "Changes". If any action taken by Grumman
pursuant to this paragraph causes a change in the cost of
or the time required for the performance of any part of
the work under this Contract, an equitable adjustment
shall be made in accordance with Article IV "Changes".
2. Subcontractors
In the event that any subcontractor of Seller is required
to manufacture, acquire or use any Accountable Tooling,
the pertinent subcontract shall provide that legal title
to such Accountable Tooling shall vest in the
subcontractor. In addition, such subcontract shall confer
upon Grumman such rights and powers relative to title,
possession and use of the Accountable Tooling and impose
upon the subcontractor such obligations as will enable
Grumman to fulfill its obligations to Boeing and for
Boeing to retain its superior rights in such Accountable
Tooling consistent with the provisions of Clause C.1
above. Notwithstanding any other provisions of this
Contract (including before or after termination pursuant
to Article VI) or normal industrial practice with respect
to items such as forging dies, in the event procurement
responsibility hereunder is transferred to a Grumman
authorized subcontractor, Grumman or its designees shall
retain the primary right to use all forging dies produced
for use under this Purchase Order. Forging dies shall be
used only in the performance of this Purchase Order and
such other Purchase Orders as Grumman may designate in
writing, and such dies shall be retained for use in
production of forgings until Grumman specifies in writing
that a requirement for the use of such dies no longer
exists.
3. Insurance and Risk of Loss
Seller shall bear the risk of all loss or damage to any
Accountable Tooling until such time as the Accountable
Tooling is permanently delivered to Grumman or its
customer or otherwise permanently removed from Seller's
possession and control at Grumman's direction. Seller
shall maintain all risk physical damage insurance on all
Accountable Tooling, and provide evidence of such
insurance to Grumman until such time as it is permanently
removed from Contractor's possession and control at
Grumman's direction. The cost of such insurance is
included in the price of the Products.
4. Purchase Order Closure
On completion of this Purchase Order or termination of
the Purchase Order for Grumman's convenience pursuant to
Article VI, Seller shall be entitled to be reimbursed for
its reasonable costs incurred, using the rates agreed to
in performing such of the following tasks, as they may in
writing be requested of Seller in respect to disposition
of Tooling.
(a) Presentation and storage thereof beyond six (6)
months following said Purchase Order completion or
termination date. If no order and tools not used for
6 months.
(b) Removal, dismantling (if directed by Grumman),
packing and preparation for shipment FOB Grumman,
Bethpage.
II. SPECIAL PROVISIONS
A. Notice of Delay:
Seller shall promptly notify Grumman by telegraph of any
circumstances, including but not limited to labor disputes, that
may cause a delay in delivery. Such notification shall state the
estimated period of delay. Seller shall use additional effort,
including premium effort, in order to avoid or minimize delay.
Any additional costs resulting from such premium effort shall be
borne by Seller. Nothing herein shall be construed to prejudice
any of the rights or remedies provided to Grumman by law. Seller
shall, in addition to the above, require each of its
subcontractors under this Purchase Order to provide notice and
information to Grumman concerning any possible delay of any
subcontracted goods to Grumman.
B. Confidential Disclosure
Seller shall keep confidential all designs, processes, drawings,
specifications, reports, data and other technical or proprietary
information and the features of all parts, equipment, tools,
gauges, patterns and other items furnished or disclosed to Seller
by Grumman or its customer in connection with this Purchase
Order. Unless otherwise provided herein or authorized by Grumman
in writing, Seller shall use such information and items and the
features thereof only in the performance of this Purchase Order.
In the event any information or items are no longer necessary for
the performance of this Purchase Order, Seller shall promptly
return such information and items to Grumman or make such other
disposition thereof as may be directed or approved by Grumman.
Grumman or its customer shall have the right to audit all
pertinent books and records of Seller in order to verify
compliance with this Clause. In all subcontracts for performance
of work related to this Purchase order, Seller shall include
provisions which provide to Grumman the same rights and
protections as provided in this Clause.
C. License
(1) For purposes of this paragraph, "Licensed Property" shall
be deemed to mean all patents (including divisions,
continuations or substitutions thereof), designs,
specifications, processes, tooling, drawings, technical
data and other information used in the development or
production of Products. In consideration for Grumman's
agreement to pay certain tooling, design, development and
certification costs for the Products, Seller hereby
grants to Grumman or its customer a present, royalty-free
non-exclusive license to use Licensed Property to make,
have made, use and sell Products. Grumman or its customer
shall have the right to exercise said license at any time
subsequent to the date of this Purchase Order. At any
time following the exercise of the license granted
herein, Grumman shall have the right to require Seller to
transfer to Grumman or its customer the title to and
possession of all tooling, fixtures, dies and jigs used
by Seller or seller's subcontractors in the development
or production of Products.
(2) In addition to the above license, Seller hereby grants to
Grumman or its customer a present, royalty-free
non-exclusive license to use and have others use, in any
manner and for any purpose whatsoever, all designs,
specifications, processes, tooling, drawings, inventions
and discoveries, whether or not patentable, and any other
information which is developed, designs, conceived, or
first reduced to practice in connection with the
performance of this Purchase Order. Seller shall, if
requested by Grumman in writing, deliver to Grumman
copies of any or all of the above mentioned data in a
manner that will support Grumman production requirements.
Such data shall be delivered at no charge, except for
reasonable reproduction and assembly costs, which shall
not include profit.
D. Facilities
Seller agrees to bear all risk of providing adequate facilities
and equipment to perform this Purchase Order in accordance with
the applicable schedules. If any contemplated use of Government
or other facilities or equipment is not permitted by the
Government or is not available for any other reason, Seller shall
be responsible for arranging for equivalent facilities and
equipment at no cost to Grumman, and any failure to do so shall
not be deemed to in any way excuse Contractor's performance under
Article VI.A of the General Conditions ("Termination for
Default") or under any provisions of law.
E. Future Orders
Seller shall not decline to accept orders issued by Grumman or
its customer for quantities of Products in addition to the
quantities identified in this Purchase Order without first
providing Grumman with three (3) years written notice of Seller's
intent to decline to accept such orders. The parties agree that
the provisions of this Purchase Order may be made applicable to
any such future orders.
F. Publicity and Customer Contact
1. Publicity
No materials relating to the subject matter of this
Purchase Order including news releases, photographs,
films, advertisements, public announcements and denials
or confirmation of such announcements, shall be made by
the Seller without Grumman's prior written consent.
2. Customer Contact
Seller shall not contact actual or potential customers
regarding the Model 767 or any other Boeing Model
programs unless specifically authorized by Grumman in
writing. Except in those cases where Seller has been
authorized in writing to deal directly with customers,
Seller shall respond to any inquiry from potential or
actual aircraft customers regarding these programs by
requesting that the inquiry be directed to Grumman, and
Seller shall simultaneously advise Grumman of the
inquiry.
G. Periodic Inspection and Review
Authorized representatives of Grumman or its customer shall be
entitled to enter the plant of Seller at all reasonable times
during the work to conduct preliminary inspections and tests of
the goods and work-in-process and to review quality problems that
might occur during performance of the Purchase Order and to audit
compliance with Grumman quality requirements. Such access shall
be subject to U.S. Government regulations.
<PAGE>
FORM OF
MASTER AGREEMENT
THIS AGREEMENT is made and entered into as of the date last executed by
and between NORTHROP GRUMMAN CORPORATION, a Delaware Corporation, as represented
by its Aircraft Division, with a place of business at One Northrop Avenue,
Hawthorne, California, 90250 (hereinafter called "Buyer") and LEONARD'S METAL,
INC., a Missouri corporation, with its principal place of business at 3030
Highway 94 N; St. Charles, MO 63302-0678 (hereinafter called "Seller").
WITNESSETH:
Seller agrees to sell and deliver to Buyer, and Buyer agrees to
purchase and receive from Seller, the products hereinafter described for use by
Buyer upon the following terms and conditions.
1. DEFINITIOIONS AND EXPLANATIONS
The following definitions shall apply to the following terms as they are used in
the FRP, unless another meaning is clearly indicated by the context in which
such term is used:
"Purchase Order" or "Change Order" (hereinafter called "Order") means the
instrument used by the Buyer in implementing the Master Agreement for the
procurement from the Supplier of those Products, Services and Data as described
herein and to modify or amend such existing Order.
"Day" shall mean a calendar day as opposed to working day of manufacturing
calendar day unless otherwise specified.
"Parties" shall mean the Buyer and Supplier collectively.
"Products" shall mean all good, supplies, material, raw or processed items,
hardware, parts, systems, equipment, components, accessories, including spare
products (Spares) and all property except Data, real property and interests in
real property.
"Services" shall mean Supplier's time and effort as distinguished from the
purchase of Products and Data. All dollars or dollar amounts specified in this
Master Agreement and all Orders hereto are stated in Then-Year Dollars unless
otherwise indicated.
"Then-Year Dollars" refers to the cost/price during the period performance.
2. IMPLEMENTING ORDERS
Orders for the product to be purchased under this Agreement shall be issued at
any time during the effectively of this Agreement on Buyer's standard Purchase
Order/Change Order form. Each Purchase Order/Change Order shall reference this
Agreement and itemized the quantities, descriptions, prices and delivery
schedule. To be valid, any order must be in writing from the Buyer to the
Seller, to be followed by a Purchase Order/Change Order. An order placed
electronically is deemed to be in writing for the purpose of the Agreement.
3. OBLIGATIONS
This Agreement together with the Exhibits referenced below (which by this
reference are hereby incorporated into and are part of this Agreement, and the
implementing orders) establish and respective rights and obligations of the
parties.
Exhibit 1.0 Statement of Work
Exhibit 2.0 Pricing
Exhibit 3.0 Schedule
Exhibit 4.0 Terms and Conditions
Exhibit 5.0 Special Provisions
Exhibit 6.0 Quality Assurance Provisions
Exhibit 7.0 Tooling
4. ORDER OF PRECEDENCE
In the event of any inconsistency or conflict between any parts or sections of
this Agreement, the inconsistency shall be resolved by giving precedence to the
following order:
4.1 Master Agreement (excluding Exhibits)
4.2 Implementing Order(s)
4.3 Terms and Conditions
4.4 Special Provisions
5. PERIOD OF PERFORMANCE
The period of performance of this agreement shall be for a period of one (1)
year with yearly options to extend the period of performance an additional two
(2) years. Buyer shall have the right to exercise the options under this
agreement concurrently or consecutively by giving written notice to seller of
it's election to exercise such option(s) at least thirty (30) days prior to the
end of the performance period. Such option exercise may be transmitted by
facsimile (FAX) or electronically.
6. PAYMENT TERMS
Payment terms shall 1/2% 10, Net 30.
7. RELIANCE
Seller acknowledges that it is, and that Buyer relies upon Seller as, an expert
fully competent in furnishing and supporting the Products purchase hereunder. In
this context, Seller agrees that it will not deny responsibility or obligation
to Buyer on the grounds that Buyer approved any specification, drawings, plan or
other documentation prepared by Seller, or that Buyer provided recommendations
or assistance in furnishing or supporting the products.
8. SECTION AND PARAGRAPH HEADINGS
The section and paragraph heading herein are for convenience only, and shall not
be interpreted to limit or effect in any way the meaning of the language
contained in such paragraphs.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed in their corporate names by
their officers thereunto duly authorized to execute such agreements.
Co. LEONARD'S METAL, INC. NORTHROP CORPORATION
- ---------------------------- --------------------------
Name:_______________________ Name:_____________________
Title:________________________ Title:______________________
Date:________________________ Date:______________________
FORM OF EXHIBITS FOR PO#s 8401588 and 8401875
EXHIBIT 1.0
STATEMENT OF WORK
Introduction
Seller to fabricate and deliver parts as specified in Attachment "A" and in
accordance with the prices and lead times set forth herein with applicable
drawings and processes. Attachment "A" lists Buyer's anticipated requirements
and Buyer does not guarantee, represent or warrant that Buyer's actual
requirements be as estimated. Buyer is making no firm commitment and assumes no
liability, financial or otherwise, except for the parts actually ordered. In the
event the Buyer does not order the quantities specified in Attachment "A", there
shall be no adjustment in the unit price.
1.2 REVIEWS AND PEPORTING
THE REVIEWS AND REPORTING REQUIREMENTS SHALL PROVIDE THE BUYER OPPORTUNITY TO
EXAMINE AND ANALYZE SELLER'S PROGRESS AND RESULTS TO ASSURE THEY ARE ACHIEVING
THE REQUIREMENTS OF THIS PROCUREMENT.
1.2.1 STATUS REPORTING
Seller shall provide the Buyer an automated status report, upon request, stating
the quantities per line item furnished to date, the quantity remaining for each
line item, current production operation and remaining operations, and any
constraints on meeting the delivery date set forth, and schedule for recovery.
1.2.2 PROGRAM REVIEWS
Seller shall assist the Buyer in the conduct of periodic program reviews through
first article and initial production and as requested thereafter. The program
review shall be conducted at the Seller's facility. An agenda will be prepared
by the Buyer.
1.2.3 FIELD REPRESENTATIVE/QUALITY SOURCE INSPECTOR
Seller shall provide access to Buyer's field representatives to all
manufacturing areas where work is being performed and administrative areas to
verify/monitor work in process, review delivery schedule, expedite current
orders, provide technical support and perform source inspection.
1.2.4 ELECTRONIC DATA INTERCHANGE (EDI)
Seller shall implement an automatic EDI system to exchange program data with
Buyer within (120) days after the initial implementing order. The EDI shall
conform to ANSI X12 standard and transmitted over a value added network (VAN)
currently used by Buyer. Seller shall enter into a formal trading partner
agreement with the Buyer.
1.3 TOOLING
The seller's tooling shall be capable of producing 5 ship sets of parts per
month, and must be capable of producing a total of 800-1000 ship sets.
1.4 BLUE STREAK PROVISIONS
1.4.1 NORMAL DELIVERY
Seller agrees to deliver any new "similar" part number on an non expedite basis
within (6) weeks after receipt of Buyer's order in sufficient quantity to
support Buyer's ship set requirements during Seller's transition to normal
production.
1.4.2 EXPEDITE DELIVERY
Seller shall delivery any existing or new "similar" part number on an expedite
basis, within three (3) weeks after receipt of Buyer's order.
1.4.3 EMERGENCY DELIVERY
When Buyer specifies a delivery as an emergency i.e. line stop, Seller shall
expend all effort on a 24 hour basis to support Buyer's requirements.
1.5 AIRPLANE ON GROUND (AOG) ORDERS
1. Seller will provide "AOG" on call personnel list to be contacted on 24
hour day basis, 365 days a year.
2. Seller will provide "AOG" delivery commitments to Buyer within three (3)
hours of receipt of requirement notification. Based on production support on a
24 hour day basis, 365 days a year.
1.6 INVENTORY RETENTION
The Seller shall retain inventory of ten (10) percent of the total on order
quantity at all times and be available for delivery to Buyer within 24 hours.
1.7 DELIVERY SCHEDULE CHANGES
Delivery schedule changes may be made by Buyer for parts currently on order
under an implementing order to the subject Master Agreement, provided that there
is no change to the order quantity if:
A. Seller is notified at least six (6) months prior to delivery
for the accelerated schedule and four (4) months prior to the delivery for the
decelerate schedule of the parts affected.
B. The monthly rate of production shall be within 2-7 shipsets
per month range.
1.8 LEAD TIME
Seller's lead time shall not exceed that set forth below for the initial
procurement and option 1 and option 2.
THE FOLLOWING PORODUCTION LEAD TIMES ARE BASED UPON LMI HAVING RAW MATERIAL
REQUIRED IN STOCK:
INITIAL ORDER (1ST YEAR) 8-10 WEEKS
OPTION #1 6 (7) WEEKS
OPTION #2 6 WEEKS
ADD (4) WEEKS IF PART REQUIRES CHEM-MILL.
EXHIBIT 2.0
PRICING
2.1 THE PRICES SET FORTH IN ATTACHMENT "A" FOR 1080 PART NUMBERS ARE FIRM FIXED
PRICES FOR RECURRING UNIT COST FOR THE INITIAL PROCUREMENT AND OPTIONS 1 AND 2
IN THE MASTER AGREEMENT. ANY NEW LIKE PART NUMBER SHALL BE PRICED AS FOLLOWS:
Sheet Brake Form: $17.88
Sheet Periphery: 22.28
Sm. Extrusion: 13.49
2.3 Expedite charges shall not exceed the following. Actual expedite cost
shall be negotiated.
OVERTIME: SATURDAY: SUNDAY: HOLIDAY:
OPENING CHARGES: N/A $500.00 $1,000.00 $1,500.00
LABOR PREMIUM: $11.00/hr $11.00/hr $18.00/hr $25.00/hr
An hourly wrap rate of $49.00 is to be applied to the above when written
authorization is given by Buyer to expedite.
PROCESSING AND SUBCONTRACT:
Actual Cost Plus 18%
2.4 TOOLING
Tooling rework labor charge: $49.00/hr
EXHIBIT 3.0
SCHEDULE
3.1 IMPLEMENTING PURCHASE ORDERS
3.1.1 Issue implementing Purchase Order any time during a three (3)
year period.
3.1.2 All parts and quantities are ordered pursuant to the Implementing
Purchase Order due in accordance with negotiated lead times for the initial
procurement and options.
3.2 BLUE STREAK
3.2.1 Any parts required to support a blue streak, shall be due six (6)
weeks (normal lead time) or three (3) weeks (expedited lead time) after go
ahead.
EXHIBIT 4.0
TERMS AND CONDITIONS
ALL TERMS AND CONDITIONS OF THIS AGREEMENT SHALL APPLY TO EACH BUYER'S
IMPLEMENTING PURCHASE ORDER AND AMENDMENT ISSUED HEREUNDER TO THE SAME EXTENT AS
THOUGH SET FORTH IN FULL IN EACH BUYER'S PURCHSE ORDER AND AMENDMENT.
The Purchase Order shall be subject to T-2 (R. 9-94) and T-55 (R. 10-92) which
are contained in the Northrop Corporation Terms and Conditions booklet, dated
June 1994, incorporated herein by reference, except those provisions listed
below which are amended and agreed to by Buyer and Seller.
ARTICLE 20. "OFFSET COMMITMENT"
A. "Definition: "Offset" means the obligations that Buyer
undertakes to assist a customer country in reducing any trade imbalance caused
by its purchase of Buyer's Product or to meet other customer country national
objectives".
B. Buyer presently has made certain Offset arrangements with
customer countries and anticipates that certain future foreign sales customers
will require an offset agreement as a condition of their procurement of Buyers
products. Notwithstanding that this Order is or is not made in direct support of
a foreign sale, as a condition of this Order, Seller agrees that it is obligated
to support Buyer's offset commitments.
C. Buyer and Seller will cooperate with each other through
exchange of information and data necessary to verify or confirm Northrop Offset
credits through Seller, if any."
It is also agreed that Seller will accept any additions, changes, deletions,
adjustments and modifications to the terms and conditions resulting from Buyer's
customer. Any resultant cost impact will be subject to negotiation.
EXHIBIT 5.0
SPECIAL PROVISIONS
5.1 Buyer is making no firm commitment and assumes no liability, financial or
otherwise, except for the Product actually ordered.
5.2 All material will be supplied by the Seller, however, Northrop Aircraft
Division will supply the first (148) parts with material.
5.3 Release by Buyer to Seller of an implementing order is conditioned upon
Seller's maintenance of its quality system approval, maintaining 95% on time
delivery and 98% hardware quality in accordance with Supplier Performance Rating
System (SPRS), satisfactory financial rating and Buyer's sole satisfaction of
all performance requirements specified in Buyer's order.
5.3 If Seller is unable to deliver the quantities orders and/or meet the
specified delivery schedule in the Purchase Order/Change Order, Buyer shall have
the right to cancel the Order or any portion thereof without liability.
5.4 In the event of 5.4 (above), Buyer may also, at its election, purchase all
or any part of the requirements specified in the Purchase Order from another
source without liability and/or termination of this Agreement. Buyer reserves
the right to any and all other remedies for such non-delivery.
5.5 If Seller is unable to meet the performance requirements specified in 5.4
and 5.5 (above) or any conditions of Article 17 of Terms T-2 or it's Buyer
concluedes, based on available data, that delivery of any product is delayed
more than two (2) months from the date of schedule delivery by circumstances
beyond Seller's control, Force Major, Buyer has the right to terminate this
Agreement, or any portion thereof in accordance with T-2 Termination for Cause.
In such an event Seller grants to Buyer an irrevocable, non exclusive, free,
paid up license to use and have others use to complete Seller's obligation
hereunder all Seller's tools, dies, jig fixtures, shop aides and any other
information to the products hereinafter involved. Additionally, Seller grants
the Buyer the right to purchase at a pro rated value any work in process or
parts or materials acquired by Seller. Payment of complete parts shall be at the
Agreement price. Seller, upon request, shall deliver such data in a manner that
will support Buyer's production.
5.6 Whenever the Seller has knowledge that any present or potential labor
dispute, or other matter or circumstances, is delaying or threatens to delay the
timely performance of this Agreement, Seller shall immediately give written
notice there of, including all information relevant there to the Buyer. The
substance of this Article shall be inserted in any lower-tier purchase order
issued by Seller.
5.8 The FAA or its representatives shall at no charge to Buyer, Boeing or the
FAA, be entitled to inspect and evaluate Contractor's plant, including, but not
limited to, Contractor's facilities, systems data, equipment, personnel, testing
and all work-in-process and completed products manufactured for installation on
any Program Airplane. The costs of and fees for such inspection and evaluation
are included in the prices paid hereunder.
5.9 Upon receipt of notice from the FAA or Boeing that a conformity inspection
shall be required with respect to any first Production Article or any other
Production Article following a change in the configuration thereof, Contractor
shall coordinate with regional FAA personnel to develop and implement a plan to
bring such Production Article into compliance with FAA requirements prior to the
delivery.
5.10 Buyer may terminate all or part of this Agreement including any Order
issued hereunder, by written notice for Buyer's convenience at any time and for
any reason. Any such written notice of termination shall specify the effective
date and the extent of any such termination. On receipt of a written notice of
termination Seller shall immediately:
1. Stop work on any undelivered Products;
2. Terminate its subcontracts and purchase orders relating to
undelivered Products;
3. Settle any termination claims made by its subcontractors or
suppliers; provided, that Buyer shall have approved the amount of such
termination claims prior to such settlement;
4. Transferred title to the extent not already transferred and deliver
to Buyer all supplies and materials, work-in-process, Tooling and manufacturing
Drawings and data produced or acquired by Seller for the performance of this
Master Agreement and any implementing order hereunder.
5. Take such other action as, in Buyer's reasonable opinion, may be
necessary, and as Buyer shall direct in writing to facilitate termination of
this Agreement.
If Buyer terminates this Agreement in whole or in part, Seller shall be
paid for parts completed at time of notice of such termination's and a pro rata
amount for parts partially completed.
If Buyer terminates this Agreement in whole or in part, Seller shall
have the right to submit a termination claim and entitled to be compensated in
the manner set forth in Article 13 of the Terms T-2. However, the agreed amount,
may not exceed the total amount payable under any terminated implementing
order(s) to the Agreement reduced by 91) the amount of payments previous made
and (2) the price of work not terminated.
If Seller and Buyer fail to agree on the whole amount to be paid
because of the termination of work, Buyer shall pay Seller the amounts
determined by Buyer as follows, but without duplication of any amount previously
agreed upon.
1. The price for completed supplies or services accepted by Buyer and
previously paid for, adjusted for any saving of freight and other charges.
2. The total of:
a. The costs incurred in the performance of the work
terminated, including initial costs and preparatory expense allocable thereto.
b. The cost of settling and paying termination settlement
proposals under terminated subcontracts that are properly chargeable to the
terminated portion of the Agreement.
c. A sum, as profit on paragraph (a) above, determined to be
fair and reasonable.
3. The reasonable costs of settlement of the work terminated,
including:
a. Accounting, legal, clerical and other expenses reasonable
necessary for the preparation of the termination clause and supporting data;
b. The termination and settlement of subcontracts (excluding
the amounts of such settlements); and
c. Storage, transportation, and other costs incurred,
reasonably necessary for the preservation, protection, or disposition of the
terminated inventory.
EXHIBIT 6.0
QUALITY ASSURANCE PROVISIONS
Seller is responsible for performing inspection to ensure all parts in
compliance with Purchase Order requirements. Northrop Source Inspection is
required.
6.2 Seller is responsible for compliance to applicable Q.A. 500 requirements.
The following documents attached hereto are hereby incorporated into and are
part of this Master Agreement.
DOCUMENT TITLE
QA 500 "QUALITY ASSURANCE REQUIREMENTS
DATED JUNE 1987 FOR SUPPLIERS, LEVEL 2"
QA 500-1 "SPECIAL QUALITY ASSURANCE
DATED JUNE 1987 REQUIREMENTS FOR SUPPLIERS"
QA 500-2 "Non conforming Material
Dated June 1987 Corrective Actions and Disposition
System Requirements for Suppliers"
6.3 Seller is responsible for compliance with Drawing No. 233000, Revision "C"
for the storage, maintenance and inspection of mylars.
6.4 Seller shall implement and maintain a Statistical Process Control (SPC)
program that meets the intent of D1-9000, Advanced Quality System for Boeing
Suppliers and satisfy the following minimum requirements. Verification of
Seller's SPC program shall be performed by Buyer's Quality personnel:
6.4.1 DEMONSTRATE PROCESS/PART CONTROL AND CAPABILITY.
6.4.2 Calculation of capability ratios (CPK's) for key process
paramenters and/or part key characteristics and charting of the CPK's on a
monthly basis.
6.4.3 Make all SPC data and charts available for review by Northrop
Quality Assurance personnel.
6.4.4 Preparation of process flow diagrams which identify key process
operations, inspection points and data collection points for key process
parameters and and/or part key characteristics on manufacturing shop paperwork.
Plans and/or diagrams must address the following:
- What are the quality requirements?
- How are the quality requirements satisfied?
- What is the verification that quality requirements were met?
6.5 First Article verification will be required on all parts and
following a major design change.
6.5.1 Prepare and obtain Buyer concurrence on a schedule for
verification.
6.5.2 Provide required surface table and set-up and inspection tools.
6.6.3 Have a Buyer Quality representative present during the
verification process.
- One part complete, less processing, that has been fabricated
utilizing the supplier's planned production process.
- "Should be" and "actual" dimensions on first article
verification sheet.
- Applicable blue prints and specifications
- Application Mylars.
- Purchase Orders
- Shop Paperwork
- Any other relevant data
6.6 SELLER SHALL UTILIZE APPROVED PROCESS SOURCES AS LISTED IN D1-4426, BOEING
APPROVED PROCESS SOURCES. SELLER SHALL SUBMIT A CERTIFICATION OF COMPLIANCE FORM
IN ACCORDANCE WITH GA 500 ON EACH SHIPMENT OF PARTS.
6.7 The Inspection Notes shall be incorporated in the implementing order.
THE FOLLOWING REFERENCED STANDARD PURCHASE ORDER AND INSPECTION NOTES ARE
APPLICABLE BY REFERENCE FOR SUBSEUQENT PURCHASE ORDERS ISSUED AGAINST THIS
MASTER AGREEMENT FOR MANUFACTURE OF PARTS LISTED IN APA IV DATED 15-MAR-94 AND
AS AMENDD HEREAFTER.
CLAUSE 90001: FIRST ARTICLE INSPECTION (FAI) - FIRST ARTICLE INSPECTION IS
RQUIRED AND WILL BE PERFORMED ON ALL DETAILS AND ASSEMBLIES. FIRST ARTICLE
INSPECTION IS THE RESPONSIBILITY OF THE SUPPLIER. ONE PIECE FROM THE FIRST
PRODUCTION LOT SHALL BE DESIGNATED AS FIRST ARTICLE. THE FABRICATION OF FIRST
ARTICLE PART MUST UTILIZE THE EQUIPMENT AND COMPLETE COMPLEMENT OF PLANNED TOOLS
AND PROCESSES AND IN THE SAME SEQUENCE AS WILL BE USED IN PRODUCTION.
SUPPLIER MUST PREPARE, AND OBTAIN CONCURRENCE FROM SUPPLIER QUALITY SUPPORT, A
SCHEDULE FOR FIRST ARTICLE VERIFICATION.
NOTE: FIRST ARTICLE VERIFICATION OF SHEET METAL PARTS TO UNDIMENSIONED DRAWINGS
WILL REQUIRE OVERLAY OF THE PART TO A PCM (PHOTO CONTACT MASTER) COMMONLY
REFERRED TO AS A FULL SIZE MYLAR. IT SHOULD BE NOTED THAT THE CENTER OF THE
LINES DEFINING PARTS AS DRAWN ON THE PCM IS CONSIDERED NOMINAL. WHEN USING PCM'S
FOR FIRST ARTICLE VERIFICATION, IT IS IMPORTANT TO CHECK THE ACCURACY OF THE PCM
USING THE GRID LINES. PCM GRID ACCURACY SHALL BE IN ACCORDANCE WITH BDS-1090.
PCM'S NOT METING GRID ACCURACY MAY NOT BE USED FOR PART ACCEPTANCE AND SHOULD BE
RETURNED FOR REPLACEMENT. FIRST ARTICLE INSPECTION REPORTS PROVIDED BY SUPLIER
TO NORTHROP GRUMMAN QUALITY REPRESENTATIVE SHOULD REFERENCE PCM ACCURACY AS A
DIMENSIONAL CALLOUT, PART ACCEPTANCE FOR UNDIMENSIONED CHARACTERISTICS CAN BE
RECORDED AS ATTRIBUTE DATA (I.E. PERIPHERY MEASURED BY OVERLAY TO PCM).
A DETAILED INSPECTION REPORT SIGNED BY THE SUPPLIER'S QUALITY ASSURANCE MANAGER
SHALL BE PROVIDED TO NORTHROP GRUMMAN QUALITY ASSURANCE REPRESENTATIVE FOR
REVIEW. THE REPORT, AS A MINIMUM, SHALL CONTAIN THE FOLLOWING ITEMS, AND SHALL
BE KEPT AT SUPPLIER'S FACILITY AS PART OF PERMANENT RECORDS FOR SEVEN YEARS.
1. PURCHASE ORDER NUMBER, DRAWING REVISION NUMBER, PROCESS SPECIFICATIONS
INCLUDING REVISION AND PSD (PROCESS SPEC DEPARTURE) USED.
2. VERIFICATION OF EACH DIMENSION/CHARACTERISTICS TO THE
ENGINEERING/SPECIFICATION AND RECORDING OF ACTUAL MEASUREMENS/RESULTS.
3. VERIFICATION OF MANUFACTURING PLAN, TOOLING, AND PROCESSES.
4. INSPECTION AND CALIBRATION OF CHECK FIXTURE, IF APPLICABLE.
5. WHERE MULTIPLE CAVITY DIES OR MOLDS ARE USED, EACH CAVITY MUST BE
INDIVIDUALLY REPORTED. UNLESS OTHERWISE AUTHORIZED IN THE CONTRACT OR PURCHASE
ORDER, A NEW FIRST ARTICLE INSPECTION IS RQUIRED WHEN:
A. THE FIRST ARTICLE HAS BEEN REJECTED.
B. REMAKE/DUPLICATION OF PRODUCTION TOOLS, CHANGE IN MANUFACTURING
EQUIPMENT OR SEQUENCE.
C. CHANGE IN PATTERN, MOD OR MATERIAL
D. THE FIRST ARTICLE HAS NOT BEEN VERIFIED BY THE NORTHROP GRUMMAN
QUALITY REPRESENTATIVE
ACCEPTANCE OF FIRST ARTICLE DOES NOT RELIEVE SUPPLIER OF HIS OBLIGATION TO
MANUFACTURE ALL SUBSEQUENT PRODUCTS IN ACCORDANCE WITH APPLICABLE DESCRIPTIONS,
SPECIFICATIONS, DRAWINGS AND WORK STATEMENTS. PARTS REQUIRING "PRODUCTION PROVE"
SHALL BE NOTED ON PURCHASE ORDER AND WILL REQUIRE, IN ADDITION TO NORMAL
IDENTIFICATION REQUIRED BY DRAWING, THE WORD "PRODUCTION PROVE" APPLIED TO ALL
PARTS.
CLAUSE 90002: MANUFACTURING PLAN - SUPPLIER SHALL DEVLEOP A MANUFACTURING PLAN
AND AN INSPECTION PLAN WHICH INCLUDE ALL SEQUENTIAL OPERATIONS AND PROCESS
SPCIFICATIONS NEEDED TO MANUFACTURE, ASSEMBLE, AND INSPECT PARTS CALLED OUT ON
PURCHASE ORDER. THE PLAN SHALL INCLUDE REFERENCES TO PROCESS SPECIFICATIONS,
INSPECTION STEPS, MEASUREMENT POINTS FOR KEY CHARACTERISTICS AND MAJOR
MANUFACTURING PROCESSES. THE PLAN SHALL CONTAIN SUFFICIENT DETAIL FOR SUPPLIER
TO BE ABLE TO PROVIDE ADEQUATE OBJECTIVE EVIDENCE OF PURCHASE ORDER COMPLIANCE
AND SHALL BE REVIEWED BY NORTHROP GRUMMAN QUALITY FIELD REPRESENTATIVE ON AN
AUDIT BASIS.
NOTE: BLUE STREAK SUPPLIERS ARE NOT REQUIRED TO MONITOR KEY CHARACTERISTICS
USING STATISTICAL PROCESS CONTROL.
CLAUSE 90003: STATISTICAL PROCESS CONTROL - SUPPLIER SHALL IMPLEMENT STATISTICAL
PROCESS CONTROL IN ACCORANCE WITH THE INTENT OF BOEING SPECIFICATION D1-9000,
SECTION 2 AND 3. SUPPLIERS SHALL BE RESPONSIBLE FOR IDENTIFYING KEY
CHARACTERISTICS (KC) IF THE BUYER HAS NOT IDENTIFIED KC. THE SUPPLIER SHALL ALSO
PREPARE PROCESS FLOW DIAGRAMS WHICH WILL IDENTIFY KEY PROCESS OPERATIONS,
INSPECTION POINTS, AND DATA COLLECTION POINTS FOR KEY PROCESS PARAMETERS AND/OR
KEY CHARACTERISTICS. THE SUPPLIER SHALL USE THESE DATA COLLECTION POINTS TO
MEASURE, RECORD, AND CHART KEY CHARACTERISTICS AND/OR KEY PROCESS PARAMETERS.
SUPPLIER MUST MAKE ALL SPC DATA AVAILABLE FOR REVIEW BY NORTHROP GRUMMAN AND
MUST REPORT CAPABILITY RATIOS (CPK) TO NORTHROP GRUMMAN ON A REGULAR BASIS.
CLAUSE 90004: SUPPLIER CERTIFICATION - SUPPLIER MUST CERTIFY TO ALL MATERIAL AND
PROCESS REQUIREMENTS DESIGNATED BY REFERENCE IN SPECIFICATIONS NOTED ON THE
ENGINEERING DRAWING. PROCESSES OR SPECIFICATIONS DESIGNATED IN BOEING DOCUMENT
D1-4426 SHALL BE PERFORMED BY SUPPLIERS OR SOURCES APPROVED IN ACCORDANCE WITH
D1-4426. WHEN REQUIRED BY SPECIFICATION, QUANTITATIVE TEST REPORTS WILL BE
TRACEABLE THE LOT BEING MANUFACTURED. ALL QUALITY RECORDS WILL BE MAINTAINED FOR
A MINIMUM OF SEVEN YEARS AT SUPPLIER'S FACILITY AND WILL BE SUBJECT TO
EXAMINATION BY NORTHROP GRUMMAN. EACH SHIPMENT WILL BE ACCOMPANIED BY A
CERTIICATE OF CONFORMANCE, FORM 31-500 AND ANY ADDITIONAL REQUIRED SUPPORTING
DOCUMENTATION. ALSO, THE SUPPLIER SHALL ASSURE THAT ALL PERSONNEL/EQUIPMENT MEET
QUALIFICATIONS/CERTIFICATIONS AS REQUIRED BY PROCESS SPECIFICATIONS.
CLAUSE 90005: PURCHASE ORDER REVIEW - SUPPLIER SHALL, AFTER RECEIPT OF AN ORDER
AND PRIOR TO BEGNNING WORK, CONTACT THE NORTHROP GRUMMAN QUALITY ASSURANCE
REPRESENTATIVE TO REVIEW THE REQUIREMENTS OF THE PURCHASE ORDER, IF NECESSARY.
THIS REVIEW IS INTENDED TO DEVELOP COMMUNICATION WITH THE QA REPRESENTATIVE AND
THE SUPPLIER TO FACILITATE THE UNDERSTANDING OF PURCHASE ORDER QUALITY
REQUIREMENTS.
CLAUSE 90006: DRAWING REVISION - DRAWINGS AND ADCN'S LISTED ON THE PURCHASE
ORDER AND THE ATTACHED PLANNING SHEET ARE UPDATED ONLY WHEN THERE IS A CHANGE TO
THE CONFIGURATION OF THE NOTED PART NUMBER. PART CONFIGURATION IS DEFINED BY THE
C995 NOTES ON THE PLANNING CONTROL SHEET. SUPPLIER IS AUTHORIZED TO WORK TO THE
DRAWING REVISION LEVEL NOTED ON THE PURCHASE ORDER OR TO A HIGHER REVISION
DRAWING SUPPLIED BY NORTHROP GRUMMAN. IF ANY ADCN'S OR DRAWING REVISIONS CHANGE
THE CONFIGURATION OF THE PART AND ARE NOT CALLED OUT ON THE PURCAHSE ORDER OR
PLANNING CONTROL SHEET, THE BUYER SHOULD BE NOTIFIED IMMEDIATELY FOR WRITTEN
AUTHORIZATION.
CLAUSE 90007: QA-500 LEVEL 2 - COMPLIANCE WITH NORTHROP GRUMMAN QA-500 QUALITY
ASSURANCE REQUIREMENTS FOR SUPPLIERS DATED JUNE 1987, LEVEL 2, IS REQUIRED FOR
THIS ORDER.
CLAUSE 90008: SOURCE INSPECTION - SOURCE INSPECTION IS REQUIRED PRIOR TO
SHIPMENT FROM THE SUPPLIER'S FACILITY. THE REQUIREMENT IS WAIVED FOR "KEY PLAN
SUPPLIER" ONLY AFTER THE APPROVAL OF FIRST ARTICLE. NOTIFY THE QUALITY ASSURANCE
REPRESENTATIVE SERVICING THE SUPPLIER'S AREA AT LEASE 2 DAYS IN ADVANCE FOR
DOMESTIC SUPPLIERS AND 7 DAYS IN ADVANCE FOR INTERNATIONAL SUPPLIERS OF THE NEED
FOR SOURCE INSPECTION. IN THE EVENT CONTACT CANNOT BE MADE, CALL (310) 331-6424
OR (310) 332-3057.
CLAUSE 22008: PACKAGING TO BE IN ACCORDANCE WITH p7000.
CLAUSE 40011: MAKE, PROCESS AND IDENTIFY TO NOTED CONFIGURATION, WRAP AND
PACKAGE FOR DELIVERY TO NORTHROP GRUMMAN PER REFERENCED SPECIFICATIONS.
CLAUSE 40012: PARTS WILL BE USED ON A BOEING AIRCRAFT AND MUST COMPLY WITH
BOEING SPECIFICATIONS AND/OR SPECIAL NOTES ON YOUR DRAWING PERTAINING TO BOEING.
CLAUSE 40013: ALTERATION OF MATERIAL IS PROHIBITED UNLESS SPECIFICALLY NOTED IN
THIS PURCHASE ORDER.
CLAUSE 61007: YOUR PACKING SHEET MUST BE PLACED ON OUTSIDE OF CONTAINER AND MUST
RELFECT NORTHROP GRUMMAN PUCHASE ORDER NUMBER.
CLAUSE 61082: SUPPLIER REQUESTED INFORMATION - FORM 31-99, SUPPLIER INFORMATION
REQUEST (SIR) IS THE DOCUMENT USED TO PROVIDE INFORMATION IN RESPONSE TO
INQUIRIES FROM SUPPLIERS. SUPPLIER REQUESTS CONCERNING CLARIFICATION/
INTERPRETATION OF DRAWINGS, TOOLING, PROCESSING, MANUFACTURING/PLANNING,
MATERIALS, PARTS, AND ANY OTHER TYPES OF TECHNICAL QUESTIONS ARE MADE THROUGH
PROCUREMENT USING THE SIR. SIR FORMS ARE AVAILABLE BY CONTACTING YOUR BUYER OR
FOLLOW-UP PERSONNEL.
EXHIBIT 7.0
TOOLING
7.1 Seller shall furnish all necessary tooling.
7.2 Seller shall generate prior to first article a listing of all Seller made
tools. This list shall be maintained during the life of this Agreement.
7.3 Special tooling that are essential to the forming process and specific
joggle dies will be provided by Buyer where reasonable. Any tools furnished by
Buyer are accountable.
7.4 List of tools provided (See Attachment "A").
7.5 Buyer furnished tools made available to the Seller for use under this
Agreement are supplied in a "where is" "as is" condition. It is Sellers
responsibility to perform tooling verification to ensure that Buyer furnished
tools will produce parts which conform to the Engineering Drawings and
Specifications called out in this Agreement.
7.6 All tools furnished by Buyer are accountable in accordance with T-55 and
Boeing Documents M31-24.
7.7 Control and storage of all contract and reference tooling fabricated,
purchase or Buyer supplied will be the responsibility of the Seller and will be
performed per Purchase Order Terms and Conditions T-55.
Master Contract Agreement Note:
1) Planning control sheets (PCS) or other internal Northrop data are provided by
Buyer to Seller for reference only and Seller is solely responsible to meet all
requirements of the Master Agreement and implementing order(s) thereto. Buyer
disclaims any liabilities with respect to any defect in said data. Seller is
required to build to print ("Drawing/Mylar").
2) The "Ship To" location and "Ship Via" will be stated on individual Purchase
Orders issured in reference to this Master Agreement.
Purchase Agreement:
Effective From: 02-Aug-94 To: 02-Aug-97
CLAUSE 01042: THIS PURCHASE ORDER IS ISSUED AND ENTERED INTO BY AND BETWEEN
NORTHROP GRUMMAN COMMERCIAL AIRCRAFT DIVISION AND THE SELLER FOR PRODUCTS AND/OR
SERVICES AS SPECIFIED HEREIN AND IN STRICT ACCORDANCE WITH TEMS AND CONDITIONS
IDENTIFIED HEREIN.
CLAUSE 01044: THIS PURCHASE ORDER IS SUBJECT TO TERMS T-2, DATED 2-94, ENTITLED
"PURCHASE ORDER TERMS AND CONDITIONS (COMMERCIAL) (FIXED PRICE SUPPLY),"
PREVIOUSLY TRANSMITTED TO SELLER.
CLAUSE 01012: THIS PURCHASE ORDER IS SUBJECT TO TERMS T-55, DATED 10-92,
ENTITLED "PURCHASE ORDER TERMS AND CONDITIONS (PROPERTY CONTROL)," PREVIOUSLY
TRANSMITTED TO SELLER.
CLAUSE 06002: SCHEDULES AND COMPLETION OF ALL TOOLS ARE AT THE OPTION OF THE
SELLER PROVIDING SUCH TOOL COMPLETION SCHEDULES ARE CONSISTENAT WITH THE
DELIVERY REQUIRED FOR PRODUCTION PARTS.
CLAUSE 30006: IN ORDER TO MAINTAIN SCHEDULED DELIVERIES OF TOOLING AND PARTS OR
ASSEMBLIES, SELLER SHALL SUBMIT A PROGRESS REPORT, WHEN REQUESTED BY THE BUYER
OR THE BUYER'S REPRESENTATIVE, HIGHLIGHTING THE MAJOR MILESTONES AND DATES OF
THEIR OCCURRENCE. THIS REPORT WILL BE COORDINATED BETWEEN SELLER AND BUYER
FOLLOW-UP ON A WEEKLY BASIS AT SELLER/BUYER FACILITY AND WILL BE MADE ATNO
ADDITIONAL COST TO BUYER.
CLAUSE 90025: PART IDENTIFICATION - IN ADDITION TO THE REQUIREMENTS OF THE
ENGINEERING AND/OR PROCESS SPECIFICATION, THE SUPPLIER SHALL APPLY THE DATE OF
FINAL ACCEPTANCE (CALENDAR DATE) ON PARTS DIRECTLY TRACEABLE TO SUPPLIER'S
MANUFACTURING/INSPECTION RECORDS.
SUPPLIERS SHALL ALSO APPLY EITHER THEIR NORTHROP SUPPLIER CODE NUMBER OR COMPANY
NAME.
CLAUSE 95020: MATERIAL MARKING/PRESERVATION - WHEN MATERIAL SPECIFICATIONS
REQUIRE SPECIFIC MARKING AND PART PROTECTION/PRESERVATION THEN MATERIAL SHALL BE
MARKED IN ACCORDANCE WITH SPECIFICATION. PART PROTECTION/PRESERVATION SHALL BE
PER SPECIFICATION LEVEL. SUPPLIER MUST ALSO INDICATE PURCHASE ORDER NUMBER,
MATERIAL SIZE AND LOT IDENTIFICATION ON ALL PACKING SHEET AND INVOICES.
CLAUSE 95021: AGE SENSITIVE PARTS/MATERIAL. SUPPLIER SHALL IDENTIFY ALL AGE
SENSITIVE PARTS AND/OR MATERIAL (ITEMS HAVING CHARACTERISTICS SUSCEPTIBLE TO
QUALITY DEGRADATION WITH AGE SUCH AS, BUT NOT LIMITED TO, RUBBER, SYNTHETIC
RUBBER, SEALANTS, ADHESIVES, RESINS, PAINTS, ELASTOMERS, O-RINGS, SEALS, ETC.).
AGE SENSITIVE MATERIAL MUST BE MARKED IN SUCH A MANNER AS TO INDICATE THE DATE
AT WHICH THE CRITICAL LIFE WAS INITIATED AND WHEN THE USEFUL LIFE WILL BE
EXPENDED, I.E., SHELF LIFE EXPRIATION. ALL CERTIFICATIONS AND TEST REPORTS SHALL
BE MAINTAINED AT SUPPLIER'S FACILITY SUBJECT TO EXAMINATION BY NORTHROP GRUMMAN.
EACH SHIPMENT WILL BE ACCOMPANIED BY A CERTIFICATE OF CONFORMANCE, FORM 31-500.
EXHIBITS FOR PO# 31501242
EXHIBIT 1.0
STATEMENT OF WORK
Introduction
Seller to fabricate and deliver parts as specified in Attachment "A" and in
accordance with the prices and lead times set forth herein with applicable
drawings and processes. Attachment "A" lists Buyer's anticipated requirements
and Buyer does not guarantee, represent or warrant that Buyer's actual
requirements be as estimated. Buyer is making no firm commitment and assumes no
liability, financial or otherwise, except for the parts actually ordered. In the
event the Buyer does not order the quantities specified in Attachment "A", there
shall be no adjustment in the unit price.
1.2 REVIEWS AND PEPORTING
THE SELLER SHALL PROVIDE THE BUYER WITH VISIBILITY AND STATUS OF THE SELLER'S
PROGRESS AND RESULTS. TO ASSURE ACHIEVING THE REQUIREMENTS OF THIS PROCUREMENT.
1.2.1 STATUS REPORTING
Seller shall provide the Buyer an automated status report, upon request, stating
the quantities per line item furnished to date, the quantity remaining for each
line item, current production operation and remaining operations, and any
constraints on meeting the delivery date set forth, and schedule for recovery.
1.2.2 PROGRAM REVIEWS
Seller and Buyer shall conduct periodic program review's to evaluate overall
status regarding Quality, Technical and Contractual issues. These program review
shall be conducted monthly, as a minimum, through first article and initial
production and as requested thereafter. An agenda will be prepared by the Buyer.
1.3 FIELD REPRESENTATIVE/QUALITY SOURCE INSPECTOR
Seller shall provide access to Buyer's field representatives to all
manufacturing areas where work is being performed and administrative areas to
verify/monitor work in process, review delivery schedule, expedite current
orders, provide technical support and perform source inspection. Upon request
Seller shall provide, at no cost to Northrop, office facilities, office
supplies, equipment and services, including secretarial and telephone services,
at its own facilities as reasonably required by Northrop for performance of this
Contract. A reasonable portion of the working area shall include provisions for
privacy to accommodate telephone calls, meetings and similar activities.
1.4 ELECTRONIC DATA INTERCHANGE (EDI)
Seller shall implement an automatic EDI system to exchange program data with
Buyer within (120) days after the initial implementing order. The EDI shall
conform to ANSI X12 standard and transmitted over a value added network (VAN)
currently used by Buyer. Seller shall enter into a formal trading partner
agreement with the Buyer.
1.5 TOOLING
The seller's tooling shall be capable of producing up to 7 ship sets of parts
per month, and must be capable of producing a total of 800-1000 ship sets. Refer
to Exhibit 7.0 for tooling provisions.
1.6 SUSTAINING SUPPORT REQUIREMENTS
In addition to fabrication and delivery set forth herein Seller shall maintain
the capability and capacity for the following.
1.7 BLUE STREAK PROVISIONS
1.7.1 NORMAL DELIVERY
Seller agrees to deliver any new "similar" part number on an non expedite basis
within (6) weeks (30 manufacturing days) after receipt of Buyer's order in
sufficient quantity to support Buyer's ship set requirements during Seller's
transition to normal production.
1.7.2 EXPEDITE DELIVERY
Seller shall delivery any existing or new "similar" part number on an expedite
basis, within three (3) weeks (15 manufacturing days) after receipt of Buyer's
order.
1.7.3 EMERGENCY DELIVERY
When Buyer specifies a delivery as an emergency i.e. line stop, Seller shall
expend all effort on a 24 hour basis to support Buyer's requirements.
1.8 AIRPLANE ON GROUND (AOG) ORDERS
1.8.1 Seller will provide "AOG" on call personnel list to be contacted
on 24 hour day basis, 365 days a year.
1.8.2 Seller will provide "AOG" delivery commitments to Buyer within
three (3) hours of receipt of requirement notification. Based on production
support on a 24 hour day basis, 365 days a year.
1.8.3 Seller shall deliver parts on an expedited basis, based on a 24
hour, 365 days a year shift for AOG requirements.
1.9 PURCHASE ON ASSEMBLY (POA) ORDERS
1.9.1 Seller will provide "POA" on call personnel list to be contacted
on a 24 hour a day, 365 days a year basis.
1.9.2 Seller will provide "POA" delivery commitments to Buyer within
three (3) hours of receipt of requirement notification based on production
support on a 24 hours a day, 365 days a year basis.
1.9.3 POA DELIVERY Seller shall deliver any existing or new "similar
part number on as expedited basis.
1.10 INVENTORY RETENTION
The Seller shall retain inventory of ten (10) percent of the total quantity of
parts on order at all times and further shall be available for delivery to Buyer
within 24 hours to support critical shortage requirements.
1.11 SCHEDULE CHANGES
Delivery schedule changes or firing order may be made by Buyer for parts
currently on order under an implementing order to the subject Master Agreement,
at no expense if:
1.11.1 Seller is notified at least six (6) months prior to delivery for
the accelerated schedule and four (4) months prior to the delivery for the
decelerate schedule of the parts affected.
1.11.2 The monthly rate of production shall be within 2-7 shipsets per
month range.
1.12 LEAD TIME/CYCLE TIME
Seller's lead time/cycle time shall not exceed that set forth in Attachment "A".
1.13 QUALITY ASSURANCE
1.13.1 Seller shall perform inspection to ensure all parts are in
compliance with Purchase Order requirements. Northrop Source Inspection is
required.
1.13.2 Seller will comply with applicable Q.A. 500 requirements. The
following documents attached hereto are hereby incorporated into and are part of
this Master Agreement.
DOCUMENT TITLE
QA 500 "QUALITY ASSURANCE REQUIREMENTS
DATED JUNE 1987 FOR SUPPLIERS, LEVEL 2"
QA 500-1 "SPECIAL QUALITY ASSURANCE
DATED JUNE 1987 REQUIREMENTS FOR SUPPLIERS"
QA 500-2 "Non conforming Material
Dated June 1987 Corrective Actions and Disposition
System Requirements for Suppliers"
QA 500-4 "Software Quality Assurance"
1.13.3 Seller shall comply with Drawing No. 233000, Revision "C" for
the storage, maintenance and inspection of mylars.
1.13.4 Seller's SPC program shall meet the requirements of D1-9000,
Advanced quality system for Boeing Sellers and satisfy the following minimum
requirements.
1.13.5 The Seller shall demonstrate process/part control and
capability.
1.13.6 The Seller's SPC program shall meet the requirements of D1-9000,
Calculation of capability ratios (CPK's) for key process parameters, and/or part
key characteristics and charting of the CPK's on a monthly basis.
1.13.7 Seller's SPC data and charts available for review by Northrop
Quality Assurance personnel.
1.13.8 Preparation of process flow diagrams which identify key process
operations, inspection points and data collection points for key process
parameters and and/or part key characteristics on manufacturing shop paperwork.
Plans and/or diagrams must address the following:
- What are the quality requirements?
- How are the quality requirements satisfied?
- What is the verification that quality requirements were met?
1.13.9 First Article verification will be required on all parts and
following a major design change.
1.13.10 The Seller shall prepare and obtain Buyer concurrence on a
schedule for verification.
1.13.11 The Seller shall provide required surface table and set-up and
inspection tools.
1.13.12 The Seller shall have a Buyer Quality representative present
during the verification process.
- One part complete, less processing, that has been fabricated
utilizing the supplier's planned production process.
- "Should be" and "actual" dimensions on first article
verification sheet.
- Applicable blue prints and specifications
- Application Mylars.
- Purchase Orders
- Shop Paperwork
- Any other relevant data
1.13.13 Seller shall utilize approved process sources as listed on
D14426, Boeing Approved Process Sources. Seller shall submit a certification of
compliance form in accordance with QA 5000 on each shipment of parts.
1.13.14 The inspection Notes shall be incorporated in the implementing
order IAW Section 6.0.
EXHIBIT 2.0
PRICING
2.1 The prices set forth in Attachment "A" to this exhibit are firmed fixed
price for unit cost (including labor, material and processing) and non-recurring
cost for the term of this Master Agreement. 2.2 Expedite charges shall be in
accordance with the information below. Actual expedite hours shall be negotiated
at the time of the request support. The expedited delivery dates and
implementing order are to reflect any agreement between buyer and the Seller to
deliver items purchased undert this Master Agreement. In the event delivery
dates are not met, that portion indicted as additional cost for expedited
production and delivery may be reduced by Buyer by the stated amount or a
portion thereof as may be equitable under the circumstances involved. The
resultant reduction in cost is in addition to any other rights and remedies
which the Buyer may have in such case.
EXPEDITE CHARGES
Expedite charges are to be in accordance with the following and will remain firm
for the period of this Master Agreement:
OVERTIME SATURDAY SUNDAY HOLIDAY
$60.00 $60.00 $67.00 $74.00
OPENING CHARGES
SATURDAY SUNDAY HOLIDAY
$500.00 $1,000.00 $1,500.00
PROCESSING AND SUBCONTRACT
Actual Cost plus 18%
2.3 The prices for customer variable items shall be negotiated at the time of
implementation using the same pricing formula used in developing the prices in
Attachment "A" to this Exhibit.
2.4 TOOL REWORK CHARGES
$49.00 per hour
EXHIBIT 3.0
SCHEDULE
3.1 IMPLEMENTING PURCHASE ORDERS
3.1.1 Buyer may issue an implementing Purchase/Change Order any time
during a (3) year period.
3.1.2 All parts and quantities are ordered pursuant to the Implementing
Purchase Order and are due in accordance with negotiated lead times specified in
Exhibit 1.0, sections 1.4 and 1.5.
3.2 FIRST ARTICLE
3.2.1 All First Articles shall be presented for inspection no less than
5 manufacturing days prior to the Due on Dock date to allow for first article
verification.
3.3 BLUE STREAK
3.3.1 Any parts required to support a blue streak, shall be due six (6)
weeks (normal lead time) or three (3) weeks (expedited lead time) after go
ahead.
3.4 AOG DELIVERY
3.4.1 Any parts required to support AOG efforts are to be delivered on
an all-out expedited basis by Seller.
3.5 POA DELIVERY
3.5.1 Any parts required to support POA efforts are to be delivered on
an all-out expedited basis by Seller.
EXHIBIT 4.0
TERMS AND CONDITIONS
4.1 All terms and conditions of this Agreement shall apply to each Buyer's
implementing Purchase Order and amendment issued hereunder to the same extent as
though set forth in full in each Buyer's purchse order and amendment.
4.2 The Purchase Order shall be subject to T-2 (R. 9-94) and T-55 (R. 10-92)
which are contained in the Northrop Corporation Terms and Conditions booklet,
dated June 1994, incorporated herein by reference, except those provisions
listed below which are amended and agreed to by Buyer and Seller.
4.3 It is also agreed that Seller will accept any additions, changes, deletions,
adjustments and modifications to the terms and conditions resulting from Buyer's
customer. Any resultant cost impact will be subject to negotiation.
EXHIBIT 5.0
SPECIAL PROVISIONS
5.1 Buyer is making no firm commitment and assumes no liability, financial or
otherwise, except for the Product actually ordered.
5.2 All material will be supplied by the Seller, however, Buyer's Accommodation
Sales (310) 332-2578 must first be contacted and if available at Buyer's
facility, seller is required to purchase material under Accommodation Sales, for
the total part quantities on order. The payment terms will be negotiated.
5.3 Release by Buyer to Seller of an implementing order is conditioned upon
Seller's maintenance of its quality system approval, maintaining 95% on time
delivery and 98% hardware quality in accordance with Supplier Performance Rating
System (SPRS), satisfactory financial rating and Buyer's sole satisfaction of
all performance requirements specified in Buyer's order.
5.4 If Seller is unable to deliver the quantities orders and/or meet the
specified delivery schedule in the Purchase Order/Change Order, Buyer shall have
the right to cancel the Order or any portion thereof without liability.
5.5 In the event of 5.4 (above), Buyer may also, at its election, purchase all
or any part of the requirements specified in the Purchase Order from another
source without liability and/or termination of this Agreement. Buyer reserves
the right to any and all other remedies for such non-delivery.
5.6 If Seller is unable to meet the performance requirements specified in 5.4
and 5.5 (above) or any conditions of Article 17 of Terms T-2 or it's Buyer
concluedes, based on available data, that delivery of any product is delayed
more than two (2) months from the date of schedule delivery by circumstances
beyond Seller's control, Force Major, Buyer has the right to terminate this
Agreement, or any portion thereof in accordance with T-2 Termination for Cause.
In such an event Seller grants to Buyer an irrevocable, non exclusive, free,
paid up license to use and have others use to complete Seller's obligation
hereunder all Seller's tools, dies, jig fixtures, shop aides and any other
information to the products hereinafter involved. Additionally, Seller grants
the Buyer the right to purchase at a pro rated value any work in process or
parts or materials acquired by Seller. Payment of complete parts shall be at the
Agreement price. Seller, upon request, shall deliver such data in a manner that
will support Buyer's production.
5.7 Whenever the Seller has knowledge that any present or potential labor
dispute, or other matter or circumstances, is delaying or threatens to delay the
timely performance of this Agreement, Seller shall immediately give written
notice there of, including all information relevant there to the Buyer. The
substance of this Article shall be inserted in any lower-tier purchase order
issued by Seller.
5.8 Seller Note - Notify the Buyer immediately if your key personnel structure
is changed.
5.9 a. Seller understands and agrees that Buyer and its representatives may
visit the Seller's facilities or those of lower-tier subcontractor for purposes
of maintaining surveillance activities including the right to witness any and
all test performed as part of the requirements of this contract. Sellers shall
provide Buyer with reasonable facilities and equipment for safe and convenient
performance of these duties and escorted free access to all areas essential to
the proper conduct of the aforementioned activities.
b. Seller agrees to insert the substance of this clause,
including this paragraph b., in each lower-tier subcontract hereunder.
5.11
Returnable containers delivered to Buyer under the terms of this Master
Agreement should be appropriately marked and referenced on the Seller's packing
sheet.
5.12 All material shipped to Buyer's Georgia Production Site shall be limited to
4,000 maximum skid weight.
5.13 Termination cost for subcontractor inventory of raw material or components
in excess of the amount required for sequential completion of each production
run, as specified in the subcontract, shall be unallowable unless specifically
authorized by the Buyer in writing as provided and supported by a change order.
The subcontractor shall insert in each of its subcontracts a similar type
provision for controlling excessive accumulation of inventories of raw materials
and components in the hands of its subcontractors.
5.14 The FAA or its representatives shall at no charge to Buyer, Boeing or the
FAA, be entitled to inspect and evaluate Contractor's plant, including, but not
limited to, Contractor's facilities, systems data, equipment, personnel, testing
and all work-in-process and completed products manufactured for installation on
any Program Airplane. The costs of and fees for such inspection and evaluation
are included in the prices paid hereunder.
5.15 Upon receipt of notice from the FAA or Boeing that a conformity inspection
shall be required with respect to any first Production Article or any other
Production Article following a change in the configuration thereof, Contractor
shall coordinate with regional FAA personnel to develop and implement a plan to
bring such Production Article into compliance with FAA requirements prior to the
delivery.
5.16 Seller shall notify Buyer of any proposal change affecting form, fit or
function to the applicable drawing(s) as defined by this purchase order.
5.17 Buyer approval must be obtained prior to implementation of any proposed
change to the design, parts, materials, or fabrication methods or processes,
specified in a control drawing, called out on the purchase order.
5.18 All drawing part number identified in accordance with BAC 5307 shall also
be suffixed with the applicable revision letter to which the part number was
manufactured. Drawing part numbers not yet subject to a revision change shall
use the suffix "NC.
5.19 If licensed vehicles will be used on Buyer and on Boeing's premises in
connection with the performance of this Contract, Seller shall carry and
maintain, and shall ensure that any Subcontractor who uses a licensed vehicle on
Northrop's and on Boeing's premises in connection with performance of this
contract carries and maintains, throughout the period of the performance of this
contract, Commercial Automobile Liability insurance covering all vehicles,
whether owned, hired, rented, borrowed or otherwise, with limits of liability of
not less than One Million Dollars ($1,000,000) per occurrence combined single
limit for bodily injury and property damage.
5.20 NOVATION
Master Agreement Numberr 31401340, including all amendments, exhibits,
and orders, and any future amendments, exhibits, and orders may be subject to
novation for a period not less than 5 years.
5.21 TERMINATION
a. Buyer may terminate all or part of this Agreement including any
Order issued hereunder, by written notice for Buyer's convenience at any time
and for any reason. Any such written notice of termination shall specify the
effective date and the extent of any such termination.
b. On receipt of a written notice of termination Seller shall
immediately:
1. Stop work on any undelivered Products;
2. Terminate its subcontracts and purchase orders relating to
undelivered Products;
3. Settle any termination claims made by its subcontractors or
suppliers; provided, that Buyer shall have approved the amount of such
termination claims prior to such settlement;
4. Transferred title to the extent not already transferred and deliver
to Buyer all supplies and materials, work-in-process, Tooling and manufacturing
Drawings and data produced or acquired by Seller for the performance of this
Master Agreement and any implementing order hereunder.
5. Take such other action as, in Buyer's reasonable opinion, may be
necessary, and as Buyer shall direct in writing to facilitate termination of
this Agreement.
c. If Buyer terminates this Agreement in whole or in part, Seller shall
be paid for parts completed at time of notice of such termination's and a pro
rata amount for parts partially completed.
d. If Buyer terminates this Agreement in whole or in part, Seller shall
have the right to submit a termination claim and entitled to be compensated in
the manner set forth in Article 13 of the Terms T-2. However, the agreed amount,
may not exceed the total amount payable under any terminated implementing
order(s) to the Agreement reduced by (1) the amount of payments previous made
and (2) the price of work not terminated.
e. If Seller and Buyer fail to agree on the whole amount to be paid
because of the termination of work, Buyer shall pay Seller the amounts
determined by Buyer as follows, but without duplication of any amount previously
agreed upon.
1. The price for completed supplies or services accepted by Buyer and
previously paid for, adjusted for any saving of freight and other charges.
2. The total of:
a. The costs incurred in the performance of the work
terminated, including initial costs and preparatory expense allocable thereto.
b. The cost of settling and paying termination settlement
proposals under terminated subcontracts that are properly chargeable to the
terminated portion of the Agreement.
c. A sum, as profit on paragraph (a) above, determined to be
fair and reasonable.
3. The reasonable costs of settlement of the work terminated,
including:
a. Accounting, legal, clerical and other expenses reasonable
necessary for the preparation of the termination clause and supporting data;
b. The termination and settlement of subcontracts (excluding
the amounts of such settlements); and
c. Storage, transportation, and other costs incurred,
reasonably necessary for the preservation, protection, or disposition of the
terminated inventory.
EXHIBIT 6.0
QUALITY ASSURANCE PROVISION
6.1 FIRST ARTICLE INSPECTION
First Article Inspection (FAI) is required and will be performed on all
details and assemblies. FAI is the responsibility of the supplier. One piece
from the first production lot shall be designated as first article. The
fabrication of first article part must utilize the equipment and complete
complement of planned tools and processes and in the same sequence as will be
used in production. Supplier must prepare and obtain concurrence from supplier
quality support on a schedule for first article verification. Note: first
article verification of sheet metal parts to undimensioned drawings will require
overlay of the part to a pcm (photo contact master) commonly referred to as a
full size mylar. It should be noted that the center of the lines defining parts
as drawn on the pcm is considered nominal. When using pcm's for first article
verification, it is important to check the accuracy of the pcm using the grid
lines. Pcm grid accuracy shall be in accordance with bds-1090. Pcm's not meting
grid accuracy may not be used for part acceptance and should be returned for
replacement. First article inspection reports provided by suplier to northrop
grumman quality representative should reference pcm accuracy as a dimensional
callout, part acceptance for undimensioned characteristics can be recorded as
attribute data (i.e. periphery measured by overlay to pcm).
A detailed inspection report signed by the supplier's quality assurance manager
shall be provided to northrop grumman quality assurance representative for
review. The report, as a minimum, shall contain the following items, and shall
be kept at supplier's facility as part of permanent records for seven years.
6.1.1 Purchase order number, drawing revision number, process specifications
including revision and psd (process spec departure) used.
6.1.2 Verification of each dimension/characteristics to the
engineering/specification and recording of actual measurements/results.
6.1.3 Verification of manufacturing plan, tooling, and processes.
6.1.4 Inspection and calibration of check fixture, if applicable.
6.1.5 Where multiple cavity dies or molds are used, each cavity must be
individually reported. Unless otherwise authorized in the contract or purchase
order, a new first article inspection is required when:
a. The first article has been rejected.
b. Remake/duplication of production tools, change in
manufacturing equipment or sequence.
c. Change in pattern, mod or material
d. The first article has not been verified by the Northrop
Grumman quality representative
Acceptance of first article does not relieve supplier of his obligation to
manufacture all subsequent products in accordance with applicable descriptions,
specifications, drawings and work statements.
6.2 MANUFATURING PLAN
Supplier shall develop a manufacturing plan and an inspection plan which include
all sequential operations and process specifications needed to manufacture,
assemble, and inspect parts called out on purchase order. The plan shall include
references to process specifications, inspection steps, measurement points for
key characteristics and major manufacturing processes. The plan shall contain
sufficient detail for supplier to be able to provide adequate objective evidence
of purchase order compliance and shall be reviewed by Northrop Grumman quality
field representative on an audit basis.
6.3 DI-9000
A supplier shall implement statistical process control in accorance with the
intent of boeing specification d1-9000, section 2 and 3. Suppliers shall be
responsible for identifying key characteristics (kc) if the buyer has not
identified kc. The supplier shall also prepare process flow diagrams which will
identify key process operations, inspection points, and data collection points
for key process parameters and/or key characteristics. The supplier shall use
these data collection points to measure, record, and chart key characteristics
and/or key process parameters
6.4 SUPPLIER CERTIFICATION
Supplier must certify to all material and process requirements designated by
reference in specifications noted on the engineering drawing. Processes or
specifications designated in Boeing document d1-4426 shall be performed by
suppliers or sources approved in accordance with d1-4426. When required by
specification, quantitative test reports will be traceable the lot being
manufactured. All quality records will be maintained for a minimum of seven
years at supplier's facility and will be subject to examination by Northrop
Grumman. Each shipment will be accompanied by a certificate of conformance, form
31-500 and any additional required supporting documentation. Also, the supplier
shall assure that all personnel/equipment meet qualifications/certifications as
required by process specifications.
6.5 PURCHASE ORDER REVIEW
Supplier shall, after receipt of an order and prior to beginning work, contact
the Northrop Grumman quality assurance representative to review the requirements
of the purchase order, if necessary. This review is intended to develop
communication with the Quality Engineering Representative and the supplier to
facilitate the understanding of purchase order quality requirements.
6.6 DRAWING REVISION
Drawings and Advanced Drawing Change Notice (ADCN) listed on the purchase order
and the attached planning sheet are updated only when there is a change to the
configuration of the noted part number. Part configuration is defined by the
c995 notes on the planning control sheet. Supplier is authorized to work to the
drawing revision level noted on the purchase order or to a higher revision
drawing supplied by Northrop Grumman. If any ADCNs or drawing revisions change
the configuration of the part and are not called out on the purchase order or
planning control sheet, the buyer should be notified immediately for written
authorization.
6.7 SOURCE INSPECTION
Source inspection is required prior to shipment from the supplier's facility.
The requirement is waived for "key plan supplier" only after the approval of
first article. Notify the quality assurance representative servicing the
supplier's area at lease 2 days in advance for domestic suppliers and 7 days in
advance for international suppliers of the need for source inspection. In the
event contact cannot be made, call (310) 331-6424 or (310) 332-3057.
EXHIBIT 7.0
TOOLING
7.1 Buyer will supply the initial tools only. Buyer supplied tools, fixtures and
jigs made available to the Seller for use under this order are supplied in a
"where is-as is" condition. It is the Seller's responsibility to ensure that
they will produce parts which conform to the engineering drawings and
specifications called out in this order. Cost of rework of tools shall be NGCAD
responsibility.
7.2 Seller shall generate prior to first article, a listing of all Seller made
tools. This list shall be maintained during the life of this Agreement.
7.3 All special tools furnished by Buyer or made by Seller are accountable in
accordance with T-55 and Boeing Document M31-24.
7.4 Seller shall be responsible to perform tooling verification of Buyer
furnished tools to Engineering drawings and Purchase Order requirements prior to
fabrication of parts.
7.5 List of tools required to perform the fabrication at Buyer's facility is
noted on the Buyer's Planning Control Sheet (PCS) which is provided for
reference. A full report of accountable tools will be provided prior to issuance
of this Master Agreement.
7.6 Copies of in-house fabrication and or assembly plans will be provided to
Seller for developmental purposes only. These plans are for reference only and
will not be maintained by Buyer.
7.7 Tooling fabricated by the Seller and not called out by P.O. shall be
considered Boeing owned tooling and shall be maintained in Buyer's Tool Control
and Accountability System at no expense to Buyer.
7.8 Seller will be held responsible for
incorportating the necessary changes to all tooling. Verification of tooling
will be performed by inspection of parts. Changes and associated cost will be
NGCAD responsibility.
7.9 All tooling fabricated by Seller and specified on Purchase Orders will be
Buyer accountable tooling and subject to Buyer's Property Management system.
Control and accountability of tools will be in accordance with Northrop
Grumman's Property Accountability Purchase Order (PAPO).
7.10 Boeing Supplier's Tooling Manual, M31-24 will be flowed down to Seller.
Buyer's reference and inspection special tools will be provided, as required.
Buyer will control and issue any tooling P.O.'s to tag any accountable tools
required; Boeing Life Time Serial Number's will be issued at that time.
7.11 Buyer accountable special toolig no longer required to support production
will be dispositioned per M31-24 in accordance with the Buyers existing Property
Management Systems and procedures.
7.12 Reference tool designs will be provided on request. Tool designs for buyer
accountable special tools provided to Seller will be maintained and will be
stamped in bold letters "for Reference Only".
7.13 Existing tooling fabricated bny Buyer and in his Tool Control and
Accountability records will be available to Seller, if requested, and if
consistent with the current manufacturing philosophy developed by the Seller and
the Buyer.
7.14 Buyer supplied tooling will be identified on the PCS and PO. Directed
change effort on Buyer supplied tools will be accomplished by Tool Order for
Buyer incorporation, or by the Seller after authorization by Buyer.
7.15 Buyer's Manufacturing Engineering will be responsible for directing change
incorporation, supplying the required reference tooling, and/or supplying the
coordinting date to support the Seller production tooling fabrication and/or
maintenance effort as requested by Seller.
7.16 Routine maintenance of Buyer suppled reference tools provided under Section
7.12 above, will be Seller's responsibility as outlined above.
7.17 Control, transfer, storage, rountine maintenance and replacement of all
contract and reference tooling (fabricated, purchased or Buyer supplied) will be
the responsibility of the Seller and will be performed per Purchase Order terms
and conditions T-55.
7.18 Rework or remake tooling must receive a new Boeing Lifetime Serial Number
as defined in M31-24, Section 7.41.
7.19 Buyer's Quality Assurance Personnel will conduct periodic inspections of
the Buyer provided tools.
7.20 Seller shall provide at no cost or expense to Buyer the control,
accountability, care, storage maintenance and replacement of all tools furnished
by Buyer or made by Seller. All Seller make tools shall be in accordance with
Terms T-55. Tooling to remain at Seller's for fabricating purposes (Ref:
Property Accountability Purchase Order No. 81827045. Seller agrees to retain all
reports and records for a minimum of 3 years after completion of purchase order
and to contact Buyer before any disposition action is taken.
CLAUSE 90001: FIRST ARTICLE INSPECTION (FAI) - FIRST ARTICLE INSPECTION IS
RQUIRED AND WILL BE PERFORMED ON ALL DETAILS AND ASSEMBLIES. FIRST ARTICLE
INSPECTION IS THE RESPONSIBILITY OF THE SUPPLIER. ONE PIECE FROM THE FIRST
PRODUCTION LOT SHALL BE DESIGNATED AS FIRST ARTICLE. THE FABRICATION OF FIRST
ARTICLE PART MUST UTILIZE THE EQUIPMENT AND COMPLETE COMPLEMENT OF PLANNED TOOLS
AND PROCESSES AND IN THE SAME SEQUENCE AS WILL BE USED IN PRODUCTION.
SUPPLIER MUST PREPARE, AND OBTAIN CONCURRENCE FROM SUPPLIER QUALITY SUPPORT, A
SCHEDULE FOR FIRST ARTICLE VERIFICATION.
NOTE: FIRST ARTICLE VERIFICATION OF SHEET METAL PARTS TO UNDIMENSIONED DRAWINGS
WILL REQUIRE OVERLAY OF THE PART TO A PCM (PHOTO CONTACT MASTER) COMMONLY
REFERRED TO AS A FULL SIZE MYLAR. IT SHOULD BE NOTED THAT THE CENTER OF THE
LINES DEFINING PARTS AS DRAWN ON THE PCM IS CONSIDERED NOMINAL. WHEN USING PCM'S
FOR FIRST ARTICLE VERIFICATION, IT IS IMPORTANT TO CHECK THE ACCURACY OF THE PCM
USING THE GRID LINES. PCM GRID ACCURACY SHALL BE IN ACCORDANCE WITH BDS-1090.
PCM'S NOT METING GRID ACCURACY MAY NOT BE USED FOR PART ACCEPTANCE AND SHOULD BE
RETURNED FOR REPLACEMENT. FIRST ARTICLE INSPECTION REPORTS PROVIDED BY SUPLIER
TO NORTHROP GRUMMAN QUALITY REPRESENTATIVE SHOULD REFERENCE PCM ACCURACY AS A
DIMENSIONAL CALLOUT, PART ACCEPTANCE FOR UNDIMENSIONED CHARACTERISTICS CAN BE
RECORDED AS ATTRIBUTE DATA (I.E. PERIPHERY MEASURED BY OVERLAY TO PCM).
A DETAILED INSPECTION REPORT SIGNED BY THE SUPPLIER'S QUALITY ASSURANCE MANAGER
SHALL BE PROVIDED TO NORTHROP GRUMMAN QUALITY ASSURANCE REPRESENTATIVE FOR
REVIEW. THE REPORT, AS A MINIMUM, SHALL CONTAIN THE FOLLOWING ITEMS, AND SHALL
BE KEPT AT SUPPLIER'S FACILITY AS PART OF PERMANENT RECORDS FOR SEVEN YEARS.
1. PURCHASE ORDER NUMBER, DRAWING REVISION NUMBER, PROCESS SPECIFICATIONS
INCLUDING REVISION AND PSD (PROCESS SPEC DEPARTURE) USED.
2. VERIFICATION OF EACH DIMENSION/CHARACTERISTICS TO THE ENGINEERING/
SPECIFICATION AND RECORDING OF ACTUAL MEASUREMENS/RESULTS.
3. VERIFICATION OF MANUFACTURING PLAN, TOOLING, AND PROCESSES.
4. INSPECTION AND CALIBRATION OF CHECK FIXTURE, IF APPLICABLE.
5. WHERE MULTIPLE CAVITY DIES OR MOLDS ARE USED, EACH CAVITY MUST BE
INDIVIDUALLY REPORTED. UNLESS OTHERWISE AUTHORIZED IN THE CONTRACT OR PURCHASE
ORDER, A NEW FIRST ARTICLE INSPECTION IS RQUIRED WHEN:
A. THE FIRST ARTICLE HAS BEEN REJECTED.
B. REMAKE/DUPLICATION OF PRODUCTION TOOLS, CHANGE IN MANUFACTURING
EQUIPMENT OR SEQUENCE.
C. CHANGE IN PATTERN, MOD OR MATERIAL
D. THE FIRST ARTICLE HAS NOT BEEN VERIFIED BY THE NORTHROP GRUMMAN
QUALITY REPRESENTATIVE
ACCEPTANCE OF FIRST ARTICLE DOES NOT RELIEVE SUPPLIER OF HIS OBLIGATION TO
MANUFACTURE ALL SUBSEQUENT PRODUCTS IN ACCORDANCE WITH APPLICABLE DESCRIPTIONS,
SPECIFICATIONS, DRAWINGS AND WORK STATEMENTS. PARTS REQUIRING "PRODUCTION PROVE"
SHALL BE NOTED ON PURCHASE ORDER AND WILL REQUIRE, IN ADDITION TO NORMAL
IDENTIFICATION REQUIRED BY DRAWING, THE WORD "PRODUCTION PROVE" APPLIED TO ALL
PARTS.
CLAUSE 90002: MANUFACTURING PLAN - SUPPLIER SHALL DEVLEOP A MANUFACTURING PLAN
AND AN INSPECTION PLAN WHICH INCLUDE ALL SEQUENTIAL OPERATIONS AND PROCESS
SPCIFICATIONS NEEDED TO MANUFACTURE, ASSEMBLE, AND INSPECT PARTS CALLED OUT ON
PURCHASE ORDER. THE PLAN SHALL INCLUDE REFERENCES TO PROCESS SPECIFICATIONS,
INSPECTION STEPS, MEASUREMENT POINTS FOR KEY CHARACTERISTICS AND MAJOR
MANUFACTURING PROCESSES. THE PLAN SHALL CONTAIN SUFFICIENT DETAIL FOR SUPPLIER
TO BE ABLE TO PROVIDE ADEQUATE OBJECTIVE EVIDENCE OF PURCHASE ORDER COMPLIANCE
AND SHALL BE REVIEWED BY NORTHROP GRUMMAN QUALITY FIELD REPRESENTATIVE ON AN
AUDIT BASIS.
NOTE: BLUE STREAK SUPPLIERS ARE NOT REQUIRED TO MONITOR KEY CHARACTERISTIDS
USING STATISTICAL PROCESS CONTROL.
CLAUSE 90003: STATISTICAL PROCESS CONTROL - SUPPLIER SHALL IMPLEMENT STATISTICAL
PROCESS CONTROL IN ACCORANCE WITH THE INTENT OF BOEING SPECIFICATION D1-9000,
SECTION 2 AND 3. SUPPLIERS SHALL BE RESPONSIBLE FOR IDENTIFYING KEY
CHARACTERISTICS (KC) IF THE BUYER HAS NOT IDENTIFIED KC. THE SUPPLIER SHALL ALSO
PREPARE PROCESS FLOW DIAGRAMS WHICH WILL IDENTIFY KEY PROCESS OPERATIONS,
INSPECTION POINTS, AND DATA COLLECTION POINTS FOR KEY PROCESS PARAMETERS AND/OR
KEY CHARACTERISTICS. THE SUPPLIER SHALL USE THESE DATA COLLECTION POINTS TO
MEASURE, RECORD, AND CHART KEY CHARACTERISTICS AND/OR KEY PROCESS PARAMETERS.
SUPPLIER MUST MAKE ALL SPC DATA AVAILABLE FOR REVIEW BY NORTHROP GRUMMAN AND
MUST REPORT CAPABILITY RATIOS (CPK) TO NORTHROP GRUMMAN ON A REGULAR BASIS.
CLAUSE 90004.1: SUPPLIER CERTIFICATION - SUPPLIER MUST CERTIFY TO ALL MATERIAL
AND PROCESS REQUIREMENTS DESIGNATED BY REFERENCE IN SPECIFICATIONS NOTED ON THE
ENGINEERING DRAWING. PROCESSES OR SPECIFICATIONS DESIGNATED IN BOEING DOCUMENT
D1-4426 SHALL BE PERFORMED BY SUPPLIERS OR SOURCES APPROVED IN ACCORDANCE WITH
D1-4426. WHEN REQUIRED BY SPECIFICATION, QUANTITATIVE TEST REPORTS WILL BE
TRACEABLE THE LOT BEING MANUFACTURED. ALL QUALITY RECORDS WILL BE MAINTAINED FOR
A MINIMUM OF SEVEN YEARS AT SUPPLIER'S FACILITY AND WILL BE SUBJECT TO
EXAMINATION BY NORTHROP GRUMMAN. EACH SHIPMENT WILL BE ACCOMPANIED BY A
CERTIICATE OF CONFORMANCE, FORM 31-500 AND ANY ADDITIONAL REQUIRED SUPPORTING
DOCUMENTATION. ALSO, THE SUPPLIER SHALL ASSURE THAT ALL PERSONNEL/EQUIPMENT MEET
QUALIFICATIONS/CERTIFICATIONS AS REQUIRED BY PROCESS SPECIFICATIONS.
NOTE 1: PURCHASE ORDERS WHICH REQUIRE RECEIVING INSPECTION AT NORTHROP GRUMMAN
MUST INCLUDE COPIES OF PROCESS CERTIFICATIONS AND TEST REPORTS WITH SHIPMENT.
NOTE 2: ALL SHIPMENTS WHICH REQUIRE RECEIVING INSPECTION AT NORTHROP GRUMMAN
WILL INCLUDE A CERTIFICATE OF CONFORMANCE, FORM 31-500 (EXCEPT THOSE SUPPLIER'S
WHO HAVE BEEN EXEMPTED FROM USING FORM 31-500 FOR SOURCE INSPECTE SHIPMENTS).
CLAUSE 90005: PURCHASE ORDER REVIEW - SUPPLIER SHALL, AFTER RECEIPT OF AN ORDER
AND PRIOR TO BEGNNING WORK, CONTACT THE NORTHROP GRUMMAN QUALITY ASSURANCE
REPRESENTATIVE TO REVIEW THE REQUIREMENTS OF THE PURCHASE ORDER, IF NECESSARY.
THIS REVIEW IS INTENDED TO DEVELOP COMMUNICATION WITH THE QA REPRESENTATIVE AND
THE SUPPLIER TO FACILITATE THE UNDERSTANDING OF PURCHASE ORDER QUALITY
REQUIREMENTS.
CLAUSE 90006: DRAWING REVISION - DRAWINGS AND ADCN'S LISTED ON THE PURCHASE
ORDER AND THE ATTACHED PLANNING SHEET ARE UPDATED ONLY WHEN THERE IS A CHANGE TO
THE CONFIGURATION OF THE NOTED PART NUMBER. PART CONFIGURATION IS DEFINED BY THE
C995 NOTES ON THE PLANNING CONTROL SHEET. SUPPLIER IS AUTHORIZED TO WORK TO THE
DRAWING REVISION LEVEL NOTED ON THE PURCHASE ORDER OR TO A HIGHER REVISION
DRAWING SUPPLIED BY NORTHROP GRUMMAN. IF ANY ADCN'S OR DRAWING REVISIONS CHANGE
THE CONFIGURATION OF THE PART AND ARE NOT CALLED OUT ON THE PURCAHSE ORDER OR
PLANNING CONTROL SHEET, THE BUYER SHOULD BE NOTIFIED IMMEDIATELY FOR WRITTEN
AUTHORIZATION.
CLAUSE 90007: QA-500 LEVEL 2 - COMPLIANCE WITH NORTHROP GRUMMAN QA-500 QUALITY
ASSURANCE REQUIREMENTS FOR SUPPLIERS DATED JUNE 1987, LEVEL 2, IS REQUIRED FOR
THIS ORDER.
CLAUSE 90008: SOURCE INSPECTION - SOURCE INSPECTION IS REQUIRED PRIOR TO
SHIPMENT FROM THE SUPPLIER'S FACILITY. THE REQUIREMENT IS WAIVED FOR "KEY PLAN
SUPPLIER" ONLY AFTER THE APPROVAL OF FIRST ARTICLE. NOTIFY THE QUALITY ASSURANCE
REPRESENTATIVE SERVICING THE SUPPLIER'S AREA AT LEASE 2 DAYS IN ADVANCE FOR
DOMESTIC SUPPLIERS AND 7 DAYS IN ADVANCE FOR INTERNATIONAL SUPPLIERS OF THE NEED
FOR SOURCE INSPECTION. IN THE EVENT CONTACT CANNOT BE MADE, CALL (310) 331-6424
OR (310) 332-3057.
CLAUSE 90025: PART IDENTIFICATION - IN ADDITION TO THE REQUIREMENTS OF THE
ENGINEERING AND/OR PROCESS SPECIFICATION, THE SUPPLIER SHALL APPLY THE DATE OF
FINAL ACCEPTANCE (CALENDAR DATE) ON PARTS DIRECTLY TRACEABLE TO SUPPLIER'S
MANUFACTURING/INSPECTION RECORDS.
SUPPLIERS SHALL ALSO APPLY EITHER THEIR NORTHROP SUPPLIER CODE NUMBER OR COMPANY
NAME.
CLAUSE 22008: PACKAGING TO BE IN ACCORDANCE WITH p7000.
CLAUSE 01044: THIS PURCHASE ORDER IS SUBJECT TO TERMS T-2, DATED 2-94, ENTITLED
"PURCHASE ODER TERMS AND CONDITIONS (COMMERCIAL) (FIXED PRICE SUPPLY),"
PREVIOUSLY TRANSMITTED TO SELLER.
CLAUSE 01012: THIS PURCHASE ORDER IS SUBJECT TO TERMS T-55, DATED 10-92,
ENTITLED "PURCHASE ORDER TERMS AND CONDITIONS (PROPERTY CONTROL)," PRVIOUSLY
TRANSMITTED TO SELLER.
<PAGE>
NORTHROP CORPORATION
PURCHASE ORDER TERMS AND CONDITIONS
(COMMERCIAL) (FIXED PRICE SUPPLY)
1. DEFINITIONS. "Buyer" means Northrop Corporation, its divisions or
subsidiaries. "Seller" means the party with whom Buyer is contracting. "Order"
means the instrument of contracting including this purchase order and all
referenced documents, exhibits, and attachments. "Products" means those goods,
supplies, materials, articles, items, parts, component or assemblies described
in the Order.
2. ORDER. This Order is Buyer's offer to Seller. All parties expressly agree
that time is of the essence in the performance of this order.
3. ACCEPTANCE. Seller's Acceptance is expressly limited to the written terms of
this Order. No additional or different terms shall be binding. Buyer hereby
objects to any additional or different terms contained in Seller's acceptance.
Any of the following acts by Seller shall constitute acceptance: signing and
returning a copy of this Order; commencement of performance; or informing Buyer
of commencement.
4. COMPLETE AGREEMENT. This Order is the complete and exclusive statement of all
terms and conditions of agreement.
5. MODIFICATION. No modification of this Order (including any additional or
different terms in Seller's acceptance) shall be binding on Buyer unless agreed
to in writing and signed by Buyer's purchasing representative.
6. PACKING AND SHIPPING Seller shall unless otherwise stated in the Order: (a)
Prepare all products for shipment to prevent damage or deterioration, comply
with Buyer's packaging requirements, secure the lowest lawful transportation
rates, and comply with carrier's classification, tariffs, and packaging
instructions; (b) Pay all charges for preparation, packing, crating, cartage,
and shipping (except forward freight collect when F.O.B. place of shipment); (c)
Make one daily shipment of all products by the same means of transportation; (d)
Number and mark each container consecutively with applicable Order and part
number; (e) Indicate the container and Order numbers on the applicable bill of
lading; (f) Place one copy of the packing sheet showing the Order number(s) and
Supplier number inside the first container and attach one copy to the outside of
the container; (g) Instruct the Shipper to include the Order number and Supplier
number on his invoice; (h) Do not declare value of the shipment unless tariff
rates or rating is dependent upon the released or declared value, then declare
the maximum value for lowest rates or rating. Seller will notify Buyer, before
shipping of any conflict between Buyer's and carrier's packaging requirements.
Damage resulting from improper packaging will be charged to Seller.
7. DELIVERY shall be strictly in accordance with the specified quantities and
schedule. If at any time it appears Seller may not meet the schedule, Seller
shall immediately notify Buyer of the reason and length of the delay. Seller
shall make every effort to avoid or minimize the delay to the maximum extent
possible including the expenditure of premium time and most expeditious
transportation. Any additional cost caused by these requirements shall be paid
by Seller.
8. F.O.B., TITLE AND RISK OF LOSS. Unless otherwise specified, F.O.B. shall be
Buyer's designated location. Risk of loss and title shall pass to Buyer upon
acceptance. Passing of title shall not constitute acceptance or relieve Seller
of any other obligation.
9. INVOICE AND PAYMENT. Seller shall send a separate invoice for each shipment.
No invoice shall be issued prior to shipment of products. Payment due dates,
including discount periods, will be calculated from the date of acceptance of
products or correct invoice, whichever is later. Unless freight and other
charges are itemized, any discount will be taken on the full amount of invoice.
Buyer has the right, without loss of discount privileges, to pay invoices
covering products shipped in advance of the schedule on the normal maturity
after the date specified for delivery. Payment shall not constitute acceptance
of the products.
10. PRICE WARRANTY. Seller warrants that the product's price does not exceed the
price charged by Seller to any other customer purchasing the same products in
like or smaller quantities under similar conditions.
11. QUALITY CONTROL. Seller shall provide a quality control system acceptable to
Buyer. Manufacturing, certification, inspection and testing records shall be
kept complete and available to Buyer at Seller's facility. Buyer may inspect
these records and manufacturing plans and test the products at Seller's plant at
all reasonable times. Buyer shall be entitled, at Buyer's option, to station
representatives at Seller's and its subcontractors' and suppliers' plants.
Seller shall furnish, free of charge, all reasonable office space, other
facilities, and assistance required by Buyer's representatives at Seller's
plant. Buyer's personnel shall at all times observe Seller's rules of conduct
and security. A like provision giving Buyer the rights set forth above shall be
included in Seller's subcontracts and purchase orders.
12. NON-CONFORMING GOODS. If the Seller fails to deliver or delivers defective
or nonconforming products, Buyer may: (a) Rescind this Order, (b) Accept such
products at an equitable price reduction; (c) Reject such products; (d) Demand
specific performance; or (e) Rework or replace such products and charge the cost
incurred to Seller.
13. REJECTED PRODUCTS. For goods exceeding $50/unit or $25,000 total, Seller
shall appropriately label each previously rejected product and list the specific
defect and repair made.
14. INSPECTION AND ACCEPTANCE. Buyer, its customer and higher tier contractors
may inspect the products at all reasonable times and places, including during
manufacture and before shipment. Seller shall provide all information,
facilities and assistance necessary for inspection without additional charge.
Buyer's final inspection and acceptance shall be at destination in accordance
with Buyer's procedures. If rejection of a shipment would result from Buyer's
normal inspection level under such procedures, Buyer may, at its option, conduct
an above-normal level of inspection, up to 100% inspection, and charge the
Seller the reasonable costs thereof.
15. WARRANTIES. Seller warrants that all products delivered shall conform to all
requirements of this Order, be free from defects in material, workmanship,
design (unless Buyer provided the design) and fit for the intended purpose.
Buyer's approval of designs furnished by Seller or any approval of Seller's
"First Article" shall not relieve Seller of any obligations under this Warranty.
Seller's warranties shall be enforceable by Buyer, Buyer's customers and any
subsequent owner, user or operator of the products.
16. CHANGES. Buyer may, at any time, issue written
change order to: suspend performance of this Order, in whole or in part, make
changes to the drawings, designs, specifications, quantities, shipping, packing,
delivery, the amount of Buyer Furnished Property, or reschedule performance. If
the change order causes an increase or decrease in the cost or time required to
perform this Order, whether or not changed by the Order, an equitable adjustment
shall be made in the purchase price and/or delivery schedule. Any claim shall be
unconditionally waived unless it is in writing and delivered to Buyer within 30
days of the date of the written change order. If Seller claims the cost of any
property made obsolete, Buyer shall have the right to acquire that property for
the cost claimed. Buyer has the right to examine any of Seller's pertinent books
and records for the purpose of verifying Seller's claim. Nothing in this clause
shall excuse Seller from proceeding with this Order as changed, including the
failure of the parties to agree on any equitable adjustment to be made under
this clause.
17. TERMINATION FOR CAUSE. Buyer may terminate this Order in whole or part for
Seller's default; insolvency; bankruptcy; reorganization; suspension of
business; liquidation proceedings; appointment of a trustee or receiver for
Seller's property or business; assignment; failure to make progress as to
endanger performance of this Order; or failure to provide assurances in
accordance with Uniform Commercial Code (UCC) 2-609. Upon termination under this
clause, Seller may reserve the right to transfer title and deliver to Buyer all
completed products and all partially completed products produced or specifically
acquired for performance of this Order.
18. TERMINATION FOR CONVENIENCE. The performance of work under this Order may be
terminated in whole or in part, by Buyer for Buyer's conveniences at any time
and for any reason on Buyer giving written termination notice to Seller and
shall pay to Seller termination charges computed in the following manner: (1) a
sum computed and substantiated in accordance with standard accounting practices
for those reasonable costs incurred by Seller prior to the date of termination
for completed work, work in process, materials directly related to the order,
for orderly phaseout of performance as requested by Buyer in order to minimize
the costs of the termination and for preparation and settlement of Seller's
termination claim, and (2) reasonable profit on such work performed; provided,
however, that Buyer shall not be liable to seller for any costs which would not
have been charged had the order not been terminated nor for any sum in excess of
the total price stated in the order for the terminated goods. Seller must submit
any claim for equitable adjustment to Buyer within 45 days and submit Seller's
final termination settlement proposal within 120 days after receipt of notice of
termination or such claim shall be absolutely and unconditionally waived.
19. DISPUTES. Either party may litigate any dispute arising under or relating to
this order. Such litigation shall be brought and jurisdiction and venue shall be
proper only in a state or federal district court in Los Angeles County. Pending
resolution of any such dispute by settlement or by final judgment, the parties
shall proceed diligently with performance.
20. OFFSET COMMITMENT. This clause shall only apply to orders in excess of
$10,000.00 A. Definition: "Offset" means the obligations that Buyer undertakes,
in order to market its Products, to assist a customer country in reducing any
trade imbalance caused by its purchase of Buyer's Products or to meet other
customer country national objectives. Buyer presently has made certain Offset
arrangements with customer countries and anticipates that certain future Foreign
Military Sales (FMS) or foreign direct sales customers will require an offset
agreement as a condition of their procurement of Buyer's products.
Notwithstanding that this Order is or is not made in direct support of a foreign
sale, Seller agrees that it is obligated to support Buyer's offset commitments
as a condition of this Order.
C. Seller agrees, at Buyer's request, to expeditiously develop an aggressive
offset program to achieve participation consistent with the total value of
Seller's purchase orders with Buyer. The provisions of this clause shall provide
the basis upon which Buyer and Seller shall develop specific offset commitments
consistent with Buyer's prime contract commitments to its customers.
21. SELLER'S DATA. Any knowledge, information., drawings, designs, data or
computer programs (herein called "Data") which Seller discloses to Buyer for
this order that Seller has not marked with a "proprietary" legend, shall not be
considered proprietary to Seller or in any way restrict Buyer's use of such
Data.
22. DISCLOSURE OR DISPOSAL. Seller shall safeguard and keep secure all designs,
processes, drawings, specifications, reports, data and other technical or
proprietary information and features of all parts, equipment, tools, gauges,
patterns and other items furnished or disclosed to Seller by Buyer. Unless
otherwise provided herein, or authorized by Buyer in writing, Seller shall use
such information and items, and the features thereof, only in the performance of
this Order. Seller shall not sell, or otherwise dispose of as scrap or
otherwise, any completed or partially completed or defective Products without
defacing or rendering such Products unsuitable for use. Upon completion or
termination of this Order, Seller shall, at Seller's expense, dispose of all
information, items and Products as required or directed to Buyer.
23. BUYER'S PROPERTY. Buyer shall retain title to all property furnished to
Seller (i.e., dies, molds, jigs, tools, materials, etc.). Seller shall label,
maintain and dispose of Buyer's property, including scrap, according to Buyer's
direction and Seller shall be responsible for all loss or damage.
24. RESERVED
25. RESPONSIBILITY FOR CLAIMS/INDEMNITY. 0Seller shall at its own expense
defend, indemnify and hold harmless Buyer from any claims, injury, or liability
arising out of or related to this Order, including attorneys' fees and costs.
In the event that Seller fails to defend, hold harmless, and indemnify
Buyer, then Seller shall pay for any damages, attorneys" fees, and any other
fees, costs and expenses that may be incurred by Buyer in the defense of any
action related to the Order and/or in the prosecution of any action to enforce
the provisions of the clause.
26. NOTIFICATION OF DEBARMENT/SUS PENSION. Seller shall provide prompt written
notice to Buyer if, at any time during the performance of this order, Seller is
suspended, debarred or declared ineligible for contract award by any US.
Government department or agency.
27. DELEGATION OR ASSIGNHEENT of this Order is not permitted without Buyer's
prior written approval.
28. SUBCONTRACTING of this Order is not permitted without Buyer s prior written
approval unless Seller is a retailer, jobber or distributor.
Cost-plus-a-percentage-of-cost subcontracts or purchase orders are prohibited.
29. COMPLIANCE WITH LAWS. Seller warrants that it shall comply with all
applicable Federal, State and local laws. Seller shall submit certification that
the products were produced in compliance with the Fair Labor Standards Act (29
US.C. 201-219).
30. CHOICE OF IAW. This Order and any dispute arising hereunder shall be
governed by the substantive and procedural laws of the State of California,
except, however, that California's Choice of Law provisions shall not apply.
31. NONWAIVER. Any failure at any time of Buyer to enforce any provision of this
Order shall not constitute a waiver of such provision or prejudice the right of
Buyer to enforce such provision at any subsequent time.
32. PARTIAL INVALIDITY. If any provision of this Order is or becomes void or
unenforceable by force or operation of law, all other provisions shall remain
valid and enforceable.
33. CLEARANCE OF MATERIALS INTENDED FOR PUBLIC RELEASE. No news releases,
photographs, films, videos, advertisements, public announcements, denials,
confirmations, or comments concerning any part of this order or any related
program shall be made without prior written approval of Buyer.
34. RIGHTS IN COPYRIGHTS. The parties expressly agree that all original works of
authorship fixed in any tangible form, including software improvements,
enhancements, derivative works and mask works, whether specially ordered or
commissioned, made by Seller alone or jointly with others in connection with
this Order are hereby assigned to Buyer. The author of the works agrees to
execute all necessary documents to transfer and assign all right, title and
interest in said work to Buyer.
35. PATENT AND COPYRIGHT INDEMNITY. Seller shall defend Buyer, Buyer's
customers, and any subsequent seller or user of the Products against all claims
and proceedings alleging infringement of any United States or foreign patent or
copyright of any Products delivered under this Order, and Seller shall hold them
harmless from any resulting liabilities and losses, provided Seller is
reasonably notified of such claims and proceedings. Seller's obligation shall
not apply to Products manufactured pursuant to detailed designs developed and
furnished by Buyer nor to any infringement rising from the use or sale of
Products in combination with items not delivered by Seller if such infringement
would not have occurred from the use or sale of such Products solely for the
purpose for which they were designed or sold to buyer.
36. INSURANCE REQUIREMENTS. Seller and its subcontractors shall procure and
maintain worker's compensation, comprehensive general liability, bodily injury
and property damage insurance in reasonable amounts, and such other insurance as
Buyer may require. Seller shall instruct its carrier to provide Buyer's Risk
Management organization thirty (30) days advance written notice prior to the
effective date of any cancellation or change in the term or coverage of any of
Seller's required insurance. If requested, Seller shall send a "Certificate of
Insurance" showing Seller's compliance with these requirements. Also, if
requested, Seller shall name Buyer as an additional insured for the duration of
this Order.
37. ANTI-KICKBACK PROGRAM. Kickbacks are prohibited. Seller and each of its
subcontractors shall submit certification to Buyer on demand that they have not
paid kickbacks and are in full compliance with 41 U.S.C. 51-58. The substance of
this clause shall be incorporated in all subcontracts issued hereunder. Seller
shall immediately notify the Northrop Law Department of the division issuing
this Order of any alleged violations involving any of Buyer's or Seller's
employees.
38. ASBESTOS. Seller shall not provide any product that contains asbestos and
shall submit certification to Buyer on demand that the products contain no
asbestos.
39. LABOR DISPUTES. Whenever Seller has knowledge that any present or potential
labor dispute is delaying or threatens to delay the timely performance of this
Subcontract, Seller shall immediately give notice to Buyer including all
relevant information. Seller agrees to insert the substance of this clause,
including this sentence, in any lower-tier subcontract where a labor dispute
might delay timely performance of this Subcontract.
40. ORDER OF PRECEDENCE. In the event of any inconsistency between any parts of
this Order, the inconsistency shall be resolved by giving precedence in the
following order:
(1) Typed purchase Order
(2) Purchase Order Terms and Conditions
(3) Statement of Work
(4) Procurement Specification/Drawing
(5) SDRL/DIDS
(6) Other referenced Documents
41. SAFE DRINKING WATER AND TOXIC ENFORCEMENT ACT OF 1986. As a result of
passage of California's "Safe Drinking Water and Toxic Enforcement Act of 1986
(Proposition 65)," Northrop suppliers are hereby required to identify any
chemicals on the California list of chemicals known to cause cancer or
reproductive toxicity that are contained in any products being furnished to
Northrop. Such information may be provided on material safety data sheets
furnished with the product which clearly identifies the chemicals and which
includes a statement concerning its carcinogenicity or reproductive toxicity.
Note: A list of currently regulated chemicals is available from the State
of California Health and Welfare Agency, 1600 Ninth Street, Room 450,
Sacramento, CA 95814. In order for Seller to be assured of knowing the chemicals
currently on the list, and those that will be listed, it is necessary that
Seller request the health and welfare agency to include Seller in its
distribution on Proposition 65 materials.
Seller's and Subtier Supplier's performance to any or all work requirements
of this Order may require application of Primer, Top Coating, and/or other
Aerospace Coating subject to local air pollution control regulation. These
rules, listed in Table 1, restrict the VOC (Volatile Organic Compounds) content
and emissions of aerospace assembly and component coatings. Compliance with
these rules is mandatory by law for all suppliers located within the affected
jurisdictions. No instruction or requirement, verbal or written, by Northrop
shall be construed as to modify or circumvent the requirement for Seller's
compliance with said rules. Should seller find that prior to or during
performance of work on this order, a violation of the applicable rule will or
does exit, Seller is required to take action to ensure Northrop's schedule,
quality requirements, and all Terms and Conditions of this Order are maintained
within full compliance of the law, or advise the buyer immediately of inability
to perform.
Seller's efforts at establishing or maintaining compliance with the
applicable local air pollution control rule or regulation shall be at no cost or
charge to Northrop. In the event that the local Air Pollution Regulatory Agency
determines that Seller is not in compliance or fails to maintain compliance with
the appropriate rule or regulation, Northrop may, at its sole option, terminate
this Order pursuant to the default provisions contained herein.
42. RESERVED
43. RESERVED
44. RESERVED
TAXES. Seller's prices includes applicable Federal, State and Local taxes.
<TABLE>
<CAPTION>
TABLE 1. AIR POLLUTION REGULATIONS FOR AEROSPACE
COATING OPERATIONS IN SOLUTHERN CALIFORNIA
<S> <C> <C>
- ------------------------------------ ----------------------------------- -----------------------------------
Geographical Area Affected Rule or Regulation
Regulatory Agency Number and Name
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
South Coast Air Quality Management South Coast Air Basin (Los Rule 1124 Aerospace Assembly and
District Angeles, Orange, Riverside and Component Coating Operations
portions of San Bernardino
Counties)
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
Ventura County Air Pollution Ventura County Rule 74.13 Aerospace Component
Control District Surface Coating and Cleaning
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
San Diego County Air Pollution San Diego County Rule 67.9 Aerospace Coating
Control Districts Operations
- ------------------------------------ ----------------------------------- -----------------------------------
- ------------------------------------ ----------------------------------- -----------------------------------
Kern County Air Pollution Control Kern County Rule 410.4 Surface Coating of
District Manufactured Metal Parts of
Products
- ------------------------------------ ----------------------------------- -----------------------------------
</TABLE>
Terms T-2 (R. 2-94)
<PAGE>
NORTHROP CORPORATION
PURCHASE ORDER TERMS AND CONDITIONS
(PROPERTY CONTROL)
In addition to these Terms, FAR 52.245-2 (Fixed Price) or 52.245-5 (Cost Type),
52.245-9 (All), and 52.245-1 9 (As-is Property), shall apply as applicable, if a
Purchase Order is issued pursuant to a Government contract.
1. DEFINITIONS
A. BUYER means Northrop Corporation.
B. CUSTOMER means for purposes of these terms, a Northrop Customer as
stated on the property identification I.D.) tag.
C. SELLER means the party with whom Buyer is contracting and includes
any reference to "Subcontractor," "Contractor," "Supplier" or "Vendor"
D. PROPERTY means all property, both real and personal, and includes
property as defined in these requirements.
E. BUYER OR CUSTOMER PROPERTY means all property owned by or leased to
the Buyer or Customer, or acquired by the Buyer or Customer under the terms of
this Order including Seller acquired property or Buyer or Customer furnished
property. (When Government owned property is provided for the performance of
this Order, rent charges may apply.)
F. BUYER OR CUSTOMER FURNISHED PROPERTY means property in the
possession of or directly acquired by Buyer or Customer, and subsequently made
available for use in the performance of this Order. (When Government owned
property is provided for the performance of this Order, rent charges may apply.)
G. SELLER-ACQUIRED PROPERTY means property acquired or otherwise
provided by Seller for the performance of this Purchase Order and to which the
Customer and/or Buyer has title.
H. FACILITIES means property used for production, maintenance,
research, development, or testing. It includes plant equipment and real
property. It does not include material, special test equipment, special tooling,
or agency-peculiar property. When used in a facilities contract, the term
includes all property provided under that contract.
I. FACILITIES CONTRACT means a contract under which Government
facilities are provided to a contractor or subcontractor by the Government for
use in connection with performing one or more related contracts for supplies or
services. It is used occasionally to provide special tooling or special test
equipment. Facilities contracts may take any of the following forms
a. A facilities acquisition contract providing for the acquisition,
construction, and installation of facilities.
b. A facilities use contract providing for the use, maintenance,
accountability, and disposition of facilities.
c. A consolidated facilities contract, which is a combination of a
facilities acquisition and a facilities use contract.
J. PLANT EQUIPMENT means personal property of a capital nature
(including equipment, machine tools, test equipment, furniture, vehicles, and
accessory and auxiliary items) for use in manufacturing supplies, in performing
services, or for any administrative or general plant purpose. It does not
include special tooling or special test equipment.
K. SPECIAL TOOLING (ST) means jigs, Numerical Control (N/C) Software,
dies, fixtures, molds, patterns, tapes, gauges, other equipment and
manufacturing aids, all components of these items, and replacement of these
items, which are of such a specialized nature that without substantial
modification or alteration their use is limited to the development or production
of particular supplies or parts thereof or to the performance of particular
services. It does not include material, special test equipment, facilities
(except foundations and similar improvements necessary for installing special
tooling), general or special machine tools, or similar capital items.
L. SPECIAL TEST EQUIPMENT (STE) means either single or multipurpose
integrated test units engineered, designed, fabricated or modified to accomplish
special purpose testing in the performance of this Order. It consists of items
or assemblies of equipment including standard or general purpose items or
components that are interconnected and interdependent so as to become a new
functional entity for special testing purposes. It does not include material,
Special Tooling, facilities (except foundations and similar improvements
necessary for installing special test equipment) and plant equipment items used
for general plant testing purposes.
M. AGENCY PECULIAR PROPERTY means United States Government (USG) owned
personal property which is peculiar to the mission of one agency (e.g. DOD, NASA
etc.), and not readily available as a commercial item(s).
N. NONSEVERABLE means property that cannot be removed after erection or
installation without substantial loss of value or damage to the property or to
the premises where installed.
O. MATERIAL means property that may be incorporated into or attached to
a deliverable end item or that may be consumed or expended in performing a
contract. It includes assemblies, components, parts, raw and processed
materials, and small tools and supplies that may be consumed in normal use in
performing a contract.
P. SALVAGE means property that, because of its worth, damaged,
deteriorated, or incomplete condition or specialized nature, has no reasonable
prospect of sale or use as serviceable property without repairs, but has some
value in excess of its scrap value.
Q. SCRAP means personal property that has no value except for its basic
material content.
2. SELLER PROPERTY CONTROL SYSTEM APPROVAL.
Seller shall establish written procedures and an implemented Property
Control System which are fully compliant with all provisions herein. Seller may
then initiate written request for Buyer's approval of Seller's Property Control
system which includes submittal of documents noted in Paragraph D below.
Seller's approved Property control system shall be maintained by Seller in
strict accordance with the procedures approved by Buyer. Buyer reserves the
right to conduct periodic surveillance or otherwise review Seller's approved
Property Control System to assure compliance with the requirements of these
Terms.
A. Buyer will evaluate Seller's Property Control System, identify any
necessary changes thereto, or approve Seller's procedures and the implementation
thereof. Buyer will notify Seller of Buyer's assessment of Seller's Property
control System in writing.
B. Buyer's approval of or acceptance of the Government's approval of
Seller's Property control System applies only to the specific Seller name and
address identified in Buyer's written approval acceptance notification to
Seller.
C. If Seller has a "Government Approved" Property Control System, Buyer
may, with appropriate Government agreement, accept such approval in lieu of
conducting a duplicative survey of Seller's implemented system. However,
Seller's Property Control Procedures shall be subject to Buyer's review and
approval.
D. One copy of each of the following must be submitted to Buyer:
1) Seller's current Property Control Procedures.
2) Sample of Seller's property record location document.
3) Sample of Seller's property maintenance record document.
4) Executed Northrop form "Property Control Requirements Certification
of Receipt and Agreement."
5) Authority document granting approval of Seller's Property Control
System if "Government Approved."
6) Other Property Control documentation, as Buyer may request.
3. PROPERTY CONTROL SYSTEM DISAPPROVAL AND RESINSTATEMENT
(BUYER/GOVERNMENT)
A. Buyer reserves the right to withdraw Buyer's approval of Seller's
Property Control System at any time. Buyer will notify Seller in writing of such
disapproval, the reasons therefore, and corrective action required. Problems
identified will be promptly addressed by Seller in writing within thirty (30)
days. Failure to resolve problems may result in disapproval of Seller's Property
Control System and may require immediate return of Buyer or Customer furnished
property regardless of completion status of Seller's in-process contract
performance. In such case, Buyer may exercise Contract Termination proceedings
as provided in the applicable contract clause(s). Initial notification may
permit utilization of property for completion of work in process pending
resolution of problem areas.
B. Seller is required to notify Buyer in writing of relocation, name
change or discontinuance of business as soon as such conditions are known.
1) Seller's name change, relocation, or discontinuance of business
subsequent to Buyer's approval of Seller's Property Control System shall:
1a) Subject Seller to immediate return of Buyer or Customer furnished
property as Buyer may direct.
1b) Immediately invalidate Buyer's prior approval/acceptance of
Seller's Property Control System. If name change only, Seller's Property Control
System may continue in effect for thirty (30) days unless otherwise notified in
writing by Buyer.
1c) Require Seller's resubmittal of the documents identified in
paragraph 2.D to Buyer for review immediately after Seller's name change or
relocation.
C. Seller must obtain Buyer's prior written authorization to transfer
Buyer furnished property to Seller's new location.
4. USAGE LIMITATION FOR BUYER OR CUSTOMER PROPERTY. Buyer or customer
may deliver to Seller, for use in connection with this Order, property described
as Buyer or Customer furnished property. Seller may manufacture, acquire, or
modify such property for Buyer or the Customer for use on this Order unless
otherwise provided herein or approved by Buyer. Seller shall immediately notify
buyer in writing, of any additional property required and any property listed on
this Order which is not being used.
NOTE: The requirements of these terms shall apply to all Buyer or
Customer property in Seller's possession, from receipt of such property by
Seller, through and following completion or termination of this Order, until
Buyer releases Seller from accountability for such property in writing.
5. TITLE
A. Buyer or customer shall retain title to all Buyer or Customer
furnished property. All Buyer or Customer furnished property and all property
acquired by the Seller, title to which vests in Buyer or Customer under this
paragraph, are subject to the provisions of this clause. Title to Buyer or
Customer property shall not be affected by its incorporation into or attachment
to any property not owned by the Buyer or Customer, nor shall Buyer or Customer
property become a fixture or lose its identity as personal property by being
attached to any real property.
C. Title to each item of facilities, special test equipment, and
special tooling (other than that subject to a special tooling clause) acquired
by the Seller for the Buyer or Customer under this contract shall pass to and
vest in the Buyer or Customer when its use in performing this Order commences or
when the Buyer or Customer has paid for it, whichever is earlier, whether or not
title previously vested in the Buyer or Customer.
D. If Seller is directed to purchase materials which appear as a direct
item of cost on Buyer's Order, title shall pass to and vest in Buyer or Customer
upon delivery of such material to Seller. Title to all other material shall pass
to and vest in Buyer or Customer when:
1.The material is issued for use on Buyer's Order,
2.Seller commences processing of the material or its use for Buyer's
Order, or
3.Buyer pays Seller the cost of such material whichever occurs first.
6. IDENTIFICATION. All property furnished to Seller will generally have
been identified prior to delivery by Buyer. Otherwise, all required
identification instructions shall be furnished by Buyer upon receipt of a
request in writing from Seller. Seller must advise Buyer if upon receipt,
property identification is different from the applicable transmittal/record
documents.
7. RECORDS AND DATA. Seller shall develop property records for use
during Order performance and retain records upon Order completion for a minimum
of three (3) years. Seller's property records shall provide for positive
traceability to applicable shipping, receiving, storage allocation and
utilization documents. As a minimum of such records shall provide information
for each item of Buyer or Customer owned/ furnished property as follows:
A. SI/STE: (a) Ownership. (b) Acquisition authority, Purchase Order
No./Contract No. and Shipping authority serial number and date. (C)Description
including identification number and serial number. (d) Quantity. (e) Unit Cost.
(f) Location. (g) Annual inventory date and by whom. (h) Northrop material
return document.
B. MATERIAL, SELLER AND/OR BUYER FURNISHED (a) Purchase Order number.
(b) Name/description. (c) Unit cost (Lay-in material only). (d) Quantities
received. (e) Quantities issued by Supplier. (f) Quantities returned. (g) NSN
and/or serial number (as applicable). (h) Northrop material return document. (i)
Disposition (if applicable). (j) Posting reference and date of transaction. (k)
Unit of measure (each, box, etc.). (l) Northrop furnished material control
document. (M) Northrop material return document.
8. SELLER'S LIABILITY
A. Unless changed by the terms of the Purchase Order, the Seller shall
be liable for shortages, loss, damage, or destruction to Buyer or Customer
property. Seller may also be liable when the use or consumption of Buyer or
Customer property unreasonably exceeds the allowances provided for by the Order,
the Bill of Material, or other appropriate criteria.
B. Seller shall investigate and report to the Buyer all cases of loss,
damage, or destruction of Buyer or Customer property including accepted products
or end items in its possession or control immediately by telephone as soon as
the facts become known and as requested by the Buyer or Customer. A written
loss, damage or destruction report shall be submitted to Buyer, or if directed,
to the Customer within fifteen (15) working days after incidence of loss, damage
or destruction becomes known. Reports shall provide as a minimum the following
information: 1. Applicable Purchase Order number under which the property
provided was lost, damaged or destroyed. 2. Description and item identification
number of property lost, damaged or destroyed. 3. Cost or estimate of repairs
(if damaged). 4. Date, time, investigative actions taken and cause or origin of
loss, damage or destruction. 5. Actions taken to prevent further loss, damage or
destruction, and to prevent repetition of similar incidents. 6. The amount of
insurance covering that property furnished under the Purchase Order. 7. Security
classification of property, as applicable. 8. Other facts or circumstances
relative to determining reason for loss damage or destruction, including a
statement as applicable that property was or was not being used for its intended
purpose.
C. ALTERNATE RISK OF - APPLICABLE ONLY IF EXPRESSLY AUTHORIZED. When
authorized by Buyer or Customer that Seller is released of liability and
thereafter, any loss, damage or destruction occurs to Customer property, the
risk of which has been assumed by the Customer, Buyer or Customer shall replace
such items or Seller shall make repairs of the property or take such other
action as Buyer or Customer directs. An equitable adjustment will be made to the
price of Buyer's Order for any Seller repairs to property or other such action
directed in writing by Buyer.
9. DISCREPANCIES INCIDENT TO SHIPMENT
A. BUYER OR CUSTOMER FURNISHED AND SELLER ACQUIRED PROPERTY. If
overages, shortages, or damages are discovered upon receipt of Buyer or Customer
furnished property, the Seller shall provide a statement of the condition and
apparent causes to the Buyer. Only that quantity of property actually received
will be recorded on the official records.
B. CARRIER LIABILITY. When the shipment is moved by Customer Bill of
Lading and carrier liability is indicated, Seller shall report any discrepancies
to Buyer.
C. SELLER-ACQUIRED PROPERTY. The Seller shall take all actions
necessary in adjusting overages, shortages, or damages in shipment of
Seller-acquired property.
10. INVENTORY REQUIREMENTS. Physical inventories of Buyer or Customer
property in the possession of Seller, or for which the Seller has
responsibility, shall be taken by Seller at least once annually. Records of such
inventory shall be retained by Seller and made available to Buyer or Customer
upon request. Physical inventories are required immediately upon termination or
completion of an Order. When a follow-on Order is involved, Seller shall
indicate on his property record documents that record balances have been
transferred (referencing new Purchase Order number) in lieu of preparing a
formal inventory list, and that Seller continues to accept responsibility and
accountability for the balance of such property lists and under the terms of the
follow-on Order. Physical inventories consist of sighting, tagging or marking,
describing, recording, reporting, and reconciling the property with the records.
Personnel who perform the physical inventory shall not be the same individuals
who have custody of the property unless the Supplier's operation is too small to
do otherwise.
11. UTILIZATION, MAINTENANCE, AND REPAIR OF PROPERTY. Seller shall
maintain and administer an effective program for the utilization, maintenance,
repair, protection, and preservation of Buyer or Customer property until
disposed of by Seller in accordance with this clause. Supplier shall upon
receipt of Buyer or Customer furnished property enter maintenance requirements
for each property item in the appropriate record system. Property and materials
subject to deterioration or corrosion, through exposure to air, moisture, or
other elements during fabrication and interim storage periods, shall not be
stored in outdoor areas. The Purchase Order includes no compensation to Seller
for the performance of any repair or replacement for which Buyer or Customer is
responsible. An equitable adjustment will be made in the price and in any
contractual provisions affected by such repair or replacement of Buyer or
Customer property made at the direction of Buyer or Customer, in accordance with
the procedures provided for in the "Changes" clause of this order. Repair of
special Tooling (ST)/Special Test Equipment (STE) requires written approval of
Northrop Tooling Quality Assurance if no rework purchase Order (P.O.) exists.
Any repair or replacement for which Seller is responsible under the provisions
of the Order shall be accomplished by Seller at its own expense, except for such
costs as may be acceptable to Buyer.
MAINTENANCE REQUIREMENTS: Seller shall identify conditions pertaining
to the need for and the performance of preventive maintenance and recording of
work accomplished under the program including any deficiencies in property
discovered as a result of inspections/maintenance. Preventive maintenance is
maintenance performed on a regularly scheduled basis to prevent the occurrence
of defects and to detect and correct minor defects before they result in serious
consequences. An effective preventive maintenance program shall utilize
individuals qualified to perform the maintenance requirements of the contract
and include as a minimum, the following: (a) Maintaining records of all
maintenance performed or deemed not required. Records shall include as a
minimum: Date of review for maintenance, the date maintenance performed, by whom
(Individual's signature or initials for these elements required on document of
record), type of maintenance, deficiencies found/corrective action taken, date
next maintenance is due and disclosure of the need for repair, replacement and
other capital rehabilitation work as applicable. (b) Adjustments for wear,
repair, or replacement of worn or damaged parts and the elimination of causes of
deterioration. This will be accomplished by responsible technicians visually
observing noted conditions and advising management who will direct appropriate
action. (c) Removal of sludge, chips, and cutting oils from property. This will
be accomplished by responsible technicians at completion of job run (or earlier
as required). (d) Taking necessary precautions to prevent deterioration caused
by contamination, corrosion, and other substances. This will be accomplished by
application of such preservatives as cosmoline, LPS #3, heavy grease, etc., in
accordance with such industrial maintenance practice. (e) Proper storage and
preservation of accessories and contract special tools furnished with an item of
plant equipment but not regularly used with it. This will be accomplished in
accordance with applicable storage and preservation methods identified in
paragraphs (c) and (d) above. (f) Calibration of precision measuring equipment
and any item requiring calibration to applicable specification/procedures.
Seller's maintenance program shall provide for disclosing and reporting the need
for repair, and other capital rehabilitation work for Buyer or Customer property
in its possession or control. 12. ACCESS. Buyer and the Customer, and any
persons designated by either Buyer or Customer, shall, at all reasonable times,
have access to the premises wherein any Buyer or Customer property is located,
for the purpose of inspecting the property and/or surveying Seller's Property
Control System.
13. FINAL ACCOUNTING, RETURN AND DISPOSITION OF PROPERTY. Buyer shall
provide disposition instructions for Seller's retention, move or return to Buyer
or Customer property. Items of property shall be delivered as directed by Buyer
or the Customer or disposed of in accordance with Buyer's written instructions.
14. RESTORATION OF SELLER'S PREMISES AND ABANDONMENT. Unless otherwise
provided herein, Buyer or Customer.
A. May abandon, with written advice to Seller, any property in place,
and thereupon all obligations of Buyer or Customer regarding such abandoned
property shall cease.
B. Has no obligation to Seller with regard to restoration or
rehabilitation costs.
15. SHMPING/TRANSFERRING PROPERTY. Property may be shipped or transferred from
Seller's facility to another location of Seller, or any sub-tier source and
return, at Seller's cost., with applicable move/transfer documents established
and maintained to fully control and provide for accurate traceability and return
of such moved/transferred property. If property is shipped or transferred to
Seller's sub-tier source, Seller shall maintain files sufficiently documented to
reflect Seller's review and approval of applicable sub-tier sources Property
Control System. Property to be returned to Buyer shall, in addition to being
documented on Seller's shipping documents, be authorized by Buyer and documented
on Buyer's instructions.
<PAGE>
AMENDMENTS TO PO # 31401875
Revision Two is issued to add the following Purchase Order statement created for
the Delegated Acceptance Program (DAP) suppliers. This statement applies only to
Leonard's Metal, Inc., Auburn Plant; "Seller is authorized to perform delegated
acceptance and use buyer-furnished stamps as directed. However, each new first
Article Inspection requires Source/Receiving Inspection, as applicable. The
following documentation shall be provided with each shipment: Certificates of
Compliance; Shipping document and First Article Inspection report (first
shipment only).
**NOTE** Critical parts require Receiving/Source inspection in all
cases, unless specifically exempted by the Purchase Order." All other provisions
of the Master Agreement which incorporates the provisions of MDA dated 3/22/95
remain in full force and effect.
Amendment four (4) to Master Agreement's 841588, dated 3-15-94 and 8401875,
dated 8-20-94, as amended 3-2-98.
Under section 1 titled "Definitions and Explanations" the following explanation
is added:
Under Section 5 titled "Period of Performance" the following paragraphs have
been revised to read as follows: The period of performance of this agreement
shall be extended one(1) year from May 10, 1997 to July 15, 1998 with a one (1)
year option from July 16, 1998 to July 05, 1999.
Seller to fabricate and deliver parts as specified in Attachment "A" (as amended
3-15-97) and in accordance with the prices and lead times set forth herein with
applicable drawings and processes. Buyer is making no firm commitment and
assumes no liability, financial or otherwise, except for the parts actually
ordered.
Section 1.8 Lead Time has been revised to read as follows:
Seller's lead time is 8 weeks after receipt of order or advanced authorization
from Buyer. Seller's lead time is 14 weeks for all Chem-Milled parts after
receipt of material.
Exhibit 2.0, Pricing, Section 2.1 has been revised to read as follows:
Leonard's Metal will furnish extrusion and rolled shape until such time as
Northrop Grumman will be furnishing this material. Leonard's Metal will be
reimbursed monthly for its cost of material used to make parts including scrap
allowance of 3% to 5%.
Administrative handling charge of 9%.
Exhibit 5.0, Special provisions, Section 5.2 has been revised to read as
follows:
Set Up Charge of $150.00, on orders less than 25, not applicable on
AOG's, POA's and spares. Minimum 10 piece orders not applicable on AOG's, POA's
and spares.
AMENDMENTS TO PO # 31401558
THIS PURCHASE ORDER SUPERSEDES PURCHASE ORDER 31400080 ISSUED UNDER APA
DATE 3/15/94.
Revision two is issued to add the following:
In accordance with Section 5, PERIOD OF PERFORMANCE, of Master
Agreement 31401558, said Option Two contained therein is hereby
exercised as of the date hereof which extends the subject Master
Agreement for a period of one year from the completion date of Option
One of the Master Agreement.
All provisions of the Master Agreement and MDA dated 3/22/95 remain in
full force and effect with the exception of the following: Exhibit 1.0
STATEMENT OF WORK:
1.6 INVENTORY RETENTION. Pricing for Out of Scope parts on claims is in
accordance with Item 2 on letter dated 10/26/95 from Ted Kretschmar to Art
Regopolos.
Revision Two is also issued to add the following Purchase Order
statement created for the Delegated Acceptance Program (DAP) suppliers.
This statement applies only to Leonard's Metal, Inc., Auburn Plan:
"Seller is authorized to perform delegated acceptance and use
buyer-furnished stamps as directed. However, each new first Article
inspection requires Source/Receiving Inspection, as applicable. The
following documentation shall be provided with each shipment:
Certificates of Compliance; Shipping document and First Article
inspection report (first shipment only).
**NOTE** Critical parts required Receiving/Source inspection in all
cases unless specifically exempted by the Purchase Order.
Revision one is issued to add the following:
In accordance with Section 5, PERIOD OF PERFORMANCE, of Master
Agreement 31401558, said option contained therein is hereby exercised
as of the date hereof which extends the subject master Agreement for a
period of one year from the execution date of the subject Master
Agreement. All provisions of the Master Agreement remain in full force
and effect.
Amendment four (4) to Master Agreement's 841588, dated 3-15-94 and 8401875,
dated 8-20-94, as amended 3-2-98.
Under section 1 titled "Definitions and Explanations" the following explanation
is added:
Under Section 5 titled "Period of Performance" the following paragraphs have
been revised to read as follows: The period of performance of this agreement
shall be extended one(1) year from May 10, 1997 to July 15, 1998 with a one (1)
year option from July 16, 1998 to July 05, 1999.
Seller to fabricate and deliver parts as specified in Attachment "A" (as amended
3-15-97) and in accordance with the prices and lead times set forth herein with
applicable drawings and processes. Buyer is making no firm commitment and
assumes no liability, financial or otherwise, except for the parts actually
ordered.
Section 1.8 Lead Time has been revised to read as follows:
Seller's lead time is 8 weeks after receipt of order or advanced authorization
from Buyer. Seller's lead time is 14 weeks for all Chem-Milled parts after
receipt of material.
Exhibit 2.0, Pricing, Section 2.1 has been revised to read as follows:
Leonard's Metal will furnish extrusion and rolled shape until such time as
Northrop Grumman will be furnishing this material. Leonard's Metal will be
reimbursed monthly for its cost of material used to make parts including scrap
allowance of 3% to 5%.
Administrative handling charge of 9%.
Exhibit 5.0, Special provisions, Section 5.2 has been revised to read as
follows:
Set Up Charge of $150.00, on orders less than 25, not applicable on
AOG's, POA's and spares. Minimum 10 piece orders not applicable on AOG's, POA's
and spares.
LMI AEROSPACE, INC.
1998 STOCK OPTION PLAN
<PAGE>
Table of Contents
I. Purpose of the Plan.................................................... 1
II. Term of Plan........................................................... 1
III. Plan Administration.................................................... 1
IV. Eligibility............................................................ 3
V. Shares Subject to the Plan............................................. 3
VI. Grants of Options...................................................... 3
VII. Changes in Capital Structure - Change in Control....................... 6
VIII. Employee's Agreement................................................... 8
IX. Amendment and Termination.............................................. 8
X. Preemption by Applicable Laws and Regulations.......................... 8
XI. Miscellaneous.......................................................... 9
<PAGE>
LMI AEROSPACE, INC.
1998 STOCK OPTION PLAN
I. Purpose of the Plan
The LMI Aerospace, Inc. 1998 Stock Option Plan (the "Plan") is
intended to provide a means whereby employees of LMI Aerospace, Inc., a Missouri
corporation ("LMI"), and its subsidiaries (collectively, the "Company") may
develop a sense of proprietorship and personal involvement in the development
and financial success of the Company, and to encourage them to remain with and
devote their best efforts to the business of the Company, thereby advancing the
interests of the Company and its stockholders. Accordingly, LMI may award to
employees of the Company options ("Options") to purchase shares of LMI's common
stock, par value $0.02 per share (the "Stock"). Options may be either
nonqualified stock options ("NQSOs") or options which are intended to qualify as
incentive stock options ("ISOs") under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
II. Term of Plan
The Plan was approved and adopted by the directors of LMI on
May 11, 1998 and became effective as of such date. The Plan was approved and
adopted by the stockholders of LMI on May 11, 1998 and became effective as of
such date. The Plan shall remain in effect until the earlier of ten (10) years
from the effective date or termination by the Board of Directors of LMI (the
"Board"). If the Plan is terminated by the Board, no Options may be awarded
after the effective date of such termination but, subject to the third sentence
of this Article II, Options previously granted shall remain outstanding in
accordance with all applicable terms and conditions under which they were
granted and the terms and conditions of the Plan.
III. Plan Administration
The Plan shall be administered by the Board or a committee
consisting of at least two members of the Board (the "Committee"); provided that
so long as LMI is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended ("1934 Act"), each member of the Committee
shall be a "Non-Employee Director" within the meaning of Rule 16b-3 under the
1934 Act, as such rule or its equivalent is then in effect ("Rule 16b-3") and an
"outside director," within the meaning of Treas. Reg. ss.ss.1.162-27(e)(3) or
any successor thereto. Committee members shall serve at the pleasure of the
Board and may resign at any time by delivering written notice to the Board.
Vacancies in the Committee, however caused, shall be filled by the Board. The
Committee is authorized to interpret the Plan and may from time to time adopt
such rules and regulations, not inconsistent with the provisions of the Plan, as
it may deem advisable to carry out the Plan. The Committee shall act by a
majority of its members and the Committee may act either by vote at a telephonic
or other meeting or by a memorandum or other written instrument signed by all of
its members.
<PAGE>
Subject to and consistent with the terms, restrictions and
limitations of the Plan, the Committee shall have the sole authority to: (i)
grant Options; (ii) determine the terms and provisions of each agreement with an
optionee pursuant to which Options are granted under the Plan (an "Agreement"),
including the determination of the purchase price of the Stock covered by each
Option (the "Exercise Price"), the terms and duration of each Option, the
employees to whom, and the times at which, Options shall be granted, whether the
Option shall be an NQSO or an ISO, and the number of shares to be covered by
each Option; (iii) prepare and distribute, in such manner as the Committee
determines to be appropriate, information about the Plan; and (iv) make all
other determinations deemed necessary or advisable for the administration of the
Plan. The Committee may vary the terms and provisions of the individual
Agreements in its discretion, and may fix such waiting and/or vesting periods,
exercise dates or other limitations as it shall deem appropriate with respect to
Options granted under the Plan including, without limitation, the achievement of
specific goals as a condition to vesting, and may specify those conditions upon
which such vesting provisions or exercise dates may be accelerated.
Notwithstanding the foregoing, the Committee is not authorized to make any
determination inconsistent with the requirements, restrictions, prohibitions or
limitations specified in the Plan.
The day-to-day administration of the Plan may be carried out
by such officers and employees of the Company as shall be designated from time
to time by the Committee. All expenses and liabilities incurred by the Committee
in connection with the administration of the Plan shall be borne by the Company.
The Committee may employ attorneys, consultants, accountants, appraisers,
brokers or other persons, and the Committee, the Board, the Company and the
officers and employees of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. The interpretation and construction
by the Committee of any provisions of the Plan and any determination by the
Committee under any provision of the Plan shall be final and conclusive for all
purposes. Neither the Committee nor any member thereof shall be liable for any
act, omission, interpretation, construction or determination made in connection
with the Plan in good faith, and the members of the Committee shall be entitled
to indemnification and reimbursement by the Company in respect of any claim,
loss, damage or expense (including counsel fees) arising therefrom to the
fullest extent permitted by law. The members of the Committee shall be named as
insureds in connection with any directors and officers liability insurance
coverage that may be in effect from time to time.
<PAGE>
IV. Eligibility
Employees of the Company shall be eligible to receive Options
under the Plan. In granting Options to an employee, the Committee shall take
into consideration the contribution the employee has made or may make to the
success of the Company and such other considerations as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from officers and other employees of the Company with
regard to these matters; provided, however, that the Chief Executive Officer of
the Company shall not consult with or otherwise participate in any decision with
respect to granting of Options to such Chief Executive Officer. In no event
shall any employee or his or her legal representatives, heirs, legatees,
distributees, or successors have any right to participate in the Plan, except to
such extent, if any, as the Committee shall determine.
V. Shares Subject to the Plan
Subject to adjustment as provided in Article VII, the
aggregate number of shares which may be issued pursuant to the exercise of
Options granted under the Plan shall not exceed 583,723. Such shares may consist
of authorized but unissued shares of Stock or previously issued shares
reacquired by LMI. Any of such shares which remain unsold and which are not
subject to outstanding Options at the termination of the Plan shall cease to be
subject to the Plan, but until termination of the Plan and the expiration of all
Options granted under the Plan, LMI shall at all times reserve for issuance upon
the exercise of Options granted under the Plan a sufficient number of shares to
meet the requirements of the Plan and the outstanding Options. If any Option, in
whole or in part, terminates by expiration or for any other reason other than
exercise, the shares reserved for issuance upon exercise of such Option shall be
available for later grants under the Plan.
VI. Grants of Options
Options granted under the Plan shall be of such type (ISO or
NQSO), for such number of shares of Stock, and subject to such terms and
conditions as the Committee shall designate. The Committee may grant Options to
any eligible individual at any time and from time to time during the term of the
Plan as set forth in Article II. For purposes of the Plan, the date on which an
Option is granted is referred to as the "Grant Date."
To the extent that the aggregate Market Value Per Share
(determined at the Grant Date) of Stock with respect to which ISOs (determined
without regard to this sentence) are exercisable for the first time by any
individual during any calendar year (under all plans of the Company) exceeds
$100,000, such ISOs shall be treated as NQSOs. The foregoing limitation on ISOs
shall be applied by taking into account the ISOs in the order in which they were
granted.
<PAGE>
Options granted pursuant to the Plan shall be evidenced by
Agreements that shall comply with and be subject to the following terms and
conditions and may contain such other provisions, consistent with the Plan, as
the Committee shall deem advisable. References herein to "Agreements" shall
include, to the extent applicable, any amendments to such Agreements.
A. Payment of Option Exercise Price. Upon exercise of an
Option, the full Exercise Price for the shares with respect to which
the Option is being exercised shall be payable to the Company: (i) in
cash or by check payable and acceptable to the Company; (ii) by
tendering to the Company shares of Stock owned by the optionee having
an aggregate Market Value Per Share (as defined below) as of the date
of exercise and tender that is not greater than the full Exercise Price
for the shares with respect to which the Option is being exercised and
by paying any remaining amount of the Exercise Price as provided in (i)
above; or (iii) subject to such instructions as the Committee may
specify, at the optionee's written request the Company may deliver
certificates for the shares of Stock for which the Option is being
exercised to a broker for sale on behalf of the optionee, provided that
the optionee has irrevocably instructed such broker to remit directly
to the Company on the optionee's behalf the full amount of the Exercise
Price from the proceeds of such sale. In the event the optionee elects
to make payment as allowed under clause (ii) above, the Committee may,
upon confirming that the optionee owns the number of shares of Stock
being tendered, authorize the issuance of a new certificate for the
number of shares being acquired pursuant to the exercise of the Option
less the number of shares being tendered upon the exercise and return
to the optionee (or not require surrender of) the certificate for the
shares of Stock being tendered upon the exercise. Payment instruments
will be received subject to collection.
B. Number of Shares. Each Agreement shall state the total
number of shares of Stock that are subject to the Option.
C. Exercise Price. The Exercise Price for each Option shall be
fixed by the Committee at the Grant Date, but (i) in no event may the
Exercise Price per share for shares of Stock subject to an ISO be less
than the Market Value Per Share (as defined below) on the Grant Date;
and (ii) in no event may the Exercise Price for shares of Stock subject
to an ISO granted to an employee who owns (including ownership through
the attribution provisions of Section 424(d) of the Code) in excess of
10 percent of the outstanding voting stock of the Company (a "10
percent Stockholder") be less than 110 percent of the Market Value Per
Share on the Grant Date.
<PAGE>
D. Market Value Per Share. The "Market Value Per Share" as of
any particular date ("Date") shall be determined as follows: (i) if the
Stock is listed for trading on a national or regional stock exchange or
is included in the NASDAQ National Market or Small-Cap Market, the
closing selling price quoted on such exchange or in such market which
is published in The Wall Street Journal for the trading day immediately
preceding the Date, or if no trade of the Stock shall have been
reported for the Date, the closing price quoted on such exchange or in
such market which is published in The Wall Street Journal for the next
day prior thereto on which a trade of the Stock was reported; or (ii)
if the Stock is not so listed, admitted to trading or included in such
market, the average of the highest reported bid and lowest reported
asked prices as quoted in the "pink sheets" published by the National
Daily Quotation Bureau for the first day immediately preceding the Date
on which the Stock is traded. If shares of the Stock are not listed or
admitted to trading on any exchange, including either of such markets,
or quoted in the "pink sheets," the "Market Value Per Share" shall be
determined by the Committee in good faith using any fair and reasonable
means selected in its discretion.
E. Term. The term of each Option shall be determined by the
Committee at the Grant Date; provided, however, that each Option shall,
notwithstanding anything in the Plan or an Agreement to the contrary,
expire not more than ten years (five years with respect to an ISO
granted to an employee who is a 10 percent Stockholder) from the Grant
Date or, if earlier, the date specified in the Agreement.
F. Terms Governing Exercise. In the discretion of the
Committee, each Agreement may contain provisions stating that the
Option granted therein may not be exercised in whole or in part for a
period or periods of time or until the achievement of specific goals,
in either case as specified in such Agreement. Except as so specified
therein, any Option may be exercised in whole at any time or in part
from time to time during its term, provided that in no event shall an
Option, or any portion thereof, be exercisable until at least six
months after the date of grant of such Option. No ISO granted to a 10
percent Stockholder may be exercisable later than five years from the
Grant Date.
G. Termination of Employment. If an individual's employment
with the Company shall terminate for a reason other than: (i)
retirement in accordance with the terms of a retirement plan or policy
of LMI or one of its subsidiaries ("Retirement"); (ii) permanent
disability (as defined in Section 22(e)(3) of the Code); or (iii)
death, the individual's Options and all unexercised rights thereunder
shall expire and automatically terminate.
If termination of employment is due to Retirement or permanent
disability, the individual shall have the right to exercise any Option
at any time within the 12-month period (three-month period in the case
of Retirement for Options that are ISOs) following such termination of
employment or the expiration date of such Option, whichever shall first
occur, provided that such Option shall be exercisable only to the
extent it was exercisable immediately prior to such termination of
employment.
<PAGE>
Whether any termination of employment is due to Retirement or
permanent disability and whether an authorized leave of absence or
absence for military or government service or for other reasons shall
constitute a termination of employment for purposes of the Plan shall
be determined by the Committee in its sole discretion.
If an individual shall die while entitled to exercise an
Option, the individual's estate, personal representative or
beneficiary, as the case may be, shall have the right to exercise the
Option at any time within the 12-month period following the date of the
optionee's death or the expiration date of such Option, whichever shall
first occur, provided that such Option shall be exercisable only to the
extent that the optionee was entitled to exercise the same on the day
immediately prior to the optionee's death.
Options may be granted under the Plan from time to time in
substitution for stock options and stock appreciation rights held by employees
of corporations other than the Company who become employees of the Company as a
result of a merger or consolidation of such other corporation with any entity
within the Company, the acquisition by any entity within the Company of assets
of such other corporation, or the acquisition by any entity within the Company
of stock of such other corporation with the result that such other corporation
becomes a subsidiary of an entity within the Company.
VII. Changes in Capital Structure - Change in Control
The existence of the Plan and the Options granted hereunder
shall not affect in any way the right or power of the Board or the stockholders
of LMI to make or authorize any adjustment, recapitalization, reorganization or
other change in LMI's capital structure or its business, any merger or
consolidation of LMI, any issuance of bonds, debentures, preferred or prior
preference stocks ahead of or affecting the Stock or the rights thereof, the
dissolution or liquidation of LMI or any sale or transfer of all or any part of
its assets or business, or any other corporate act or proceeding.
The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever, prior to the
termination of the Plan or the expiration of an Option theretofore granted, LMI
shall effect a subdivision or consolidation of shares of Stock or the payment of
a stock dividend on Stock without receipt of consideration by LMI, the remaining
shares of Stock available under the Plan and the number of shares of Stock with
respect to which such Option may thereafter be exercised: (i) in the event of an
increase in the number of outstanding shares, shall be proportionately increased
and the Exercise Price per share shall be proportionately reduced; and (ii) in
the event of a reduction in the number of outstanding shares, shall be
proportionately reduced and the Exercise Price per share shall be
proportionately increased, such that there shall be no change in the aggregate
Exercise Price applicable to the unexercised portion of the Option. Adjustments
under this Article VII shall be made by the Committee, 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.
<PAGE>
Except as may otherwise be expressly provided in the Plan, the
issuance by LMI of shares of capital stock of any class or securities
convertible into shares of capital stock of any class for cash, property, labor,
or services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of LMI
convertible into such shares of capital stock or other securities, and in any
case whether or not for fair value, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of Stock
available under the Plan or subject to Options theretofore granted or the
Exercise Price per share with respect to outstanding Options.
If LMI effects a recapitalization or otherwise materially
changes its capital structure (both of the foregoing are herein referred to as a
"Fundamental Change"), then thereafter upon any exercise of an Option granted
before the Fundamental Change the optionee shall be entitled to purchase under
such Option, in lieu of the number of shares of Stock as to which such Option
shall then be exercisable, the number and class of shares of capital stock and
securities to which the optionee would have been entitled pursuant to the terms
of the Fundamental Change if, immediately prior to such Fundamental Change, the
optionee had been the holder of record of the number of shares of Stock as to
which such Option is then exercisable.
Notwithstanding anything to the contrary contained in this
Article VII, upon the dissolution or liquidation of LMI, or upon a
reorganization, merger or consolidation of LMI with one or more corporations as
a result of which LMI is not the surviving corporation (or, in the case of a
three party merger where LMI, while the surviving corporation, becomes a
subsidiary of another corporation), or upon a sale of substantially all of the
assets of LMI, then the Plan shall terminate, and any Options granted under the
Plan shall terminate simultaneously with the consummation of any such
transaction (a "Control Transaction"), provided, however, that upon the
execution by the Company of an agreement providing for or the recommendation of
the Company with respect to, a Control Transaction, all restrictions with
respect to the exercisability of outstanding Options shall lapse and each such
Option shall be exercisable in full. Notwithstanding the foregoing, if the
provision shall be made in writing in connection with the Control Transaction in
question for the continuance of the Plan, for the assumption of Options
previously granted, or the substitution for such Options with 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 the option
price, Options previously granted shall continue in the manner and under the
terms so provided; provided, however, that the Committee or the Board shall have
the authority to amend this Article to require that a successor assume all
obligations under any outstanding Options.
<PAGE>
VIII. Employee's Agreement
If, at the time of the exercise of any Option, in the opinion
of counsel for LMI, it is necessary or desirable, in order to comply with any
then applicable laws or regulations relating to the sale of securities, for the
individual exercising the Option to agree to hold any shares issued to the
individual for investment and without intention to resell or distribute the same
and for the individual to agree to dispose of such shares only in compliance
with such laws and regulations, the individual shall be required, upon the
request of LMI, to execute and deliver to LMI, an agreement to such effect.
IX. Amendment and Termination
Subject to any requirement of stockholder approval contained
in Section 422 of the Code or Rule 16b-3, the Board may from time to time and at
any time alter, amend, suspend, discontinue or terminate this Plan and any
Options hereunder; provided, that no change in any Option granted before such
time may be made which would impair the rights of the optionee without the
consent of such optionee.
X. Preemption by Applicable Laws and Regulations
Anything in the Plan or any Agreement entered into pursuant to
the Plan to the contrary notwithstanding, if, at any time specified in the Plan
or in any Agreement for the making of any determination with respect to the
issuance or other distribution of shares of Stock, any law, regulation or
requirement of any governmental authority having jurisdiction in the premises
shall require either LMI or the employee (or the employee's beneficiary), as the
case may be, to take any action in connection with any such determination, the
issuance or distribution of such shares or the making of such determination
shall be deferred until such action shall have been taken.
XI. Miscellaneous
A. No Employment Contract. Nothing contained in the Plan shall
be construed as conferring upon any employee the right to continue in
the employ of the Company.
B. Employment with Subsidiaries. Employment by the Company for
the purpose of this Plan shall be deemed to include employment by, and
to continue during any period in which an employee is in the employment
of, any subsidiary of LMI.
C. No Rights as a Stockholder. An employee shall have no
rights as a stockholder with respect to shares issuable upon exercise
of an Option until the date of the issuance of shares to the employee
pursuant to such exercise. No adjustment will be made for dividends or
other distributions or rights for which the record date is prior to the
date of such issuance.
D. No Right to Corporate Assets. Nothing contained in the Plan
shall be construed as giving any employee, such employee's
beneficiaries, or any other person any equity or other interest of any
kind in any assets of LMI or any subsidiary or creating a trust of any
kind or a fiduciary relationship of any kind between LMI or any
subsidiary and any such person.
E. No Restriction on Corporate Action. Nothing contained in
the Plan shall be construed to prevent LMI or any subsidiary from
taking any corporate action that is deemed by it to be appropriate or
in its best interests, whether or not such action would have an adverse
effect on the Plan or any Option granted under the Plan. No employee,
beneficiary or other person shall have any claim against LMI or any
subsidiary as a result of any such action.
<PAGE>
F. Non-assignability. Neither an employee nor an employee's
beneficiary shall have the power or right to sell, exchange, pledge,
transfer, assign or otherwise encumber or dispose of such employee's or
beneficiary's interest arising under the Plan or any Option granted
under the Plan; nor shall such interest be subject to seizure for the
payment of an employee's or beneficiary's debts, judgments, alimony, or
separate maintenance or be transferable by operation of law in the
event of an employee's or beneficiary's bankruptcy or insolvency and to
the extent any such interest arising under the Plan or an Option
granted under the Plan is awarded to a spouse pursuant to any divorce
proceeding, such interest shall be deemed to be terminated and
forfeited notwithstanding any vesting provisions or other terms herein
or in the Agreement evidencing such Option.
G. Privilege of Stock Ownership. No person entitled to
exercise any Option granted under the Plan shall have rights or
privileges of a stockholder of the Company for any shares of Stock
issuable upon exercise of such Option until such person has become the
holder of record of such shares.
H. Application of Funds. The proceeds received by the Company
from the sale of shares of Stock pursuant to the Plan shall be used for
general corporate purposes.
I. Governing Law; Construction. All rights and obligations
under the Plan shall be governed by, and the Plan shall be construed in
accordance with, the laws of the State of Delaware without regard to
the law of conflicts. Titles and headings to articles in the Plan are
for purposes of reference only, and shall in no way limit, define or
otherwise affect the meaning or interpretation of any provisions of the
Plan.
J. Tax Withholding. The Company shall have the right to take
all necessary action to satisfy applicable obligations to withhold
amounts pursuant to federal, state, or local tax law, including,
without limitation, the deduction from shares of Stock delivered to an
optionee upon exercise of NQSO shares having an aggregate value equal
to or less than the amount required to be withheld. The Committee may
permit optionees to elect whether to pay cash or to use shares of Stock
to satisfy tax withholding requirements. Shares so used shall be valued
at the Market Value Per Share as of the date of the event triggering a
withholding obligation.
AMENDMENT NO. 5
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
WHEREAS, the Board of Directors of LMI Aerospace, Inc., formerly known
as 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, January 1, 1994,
October 1, 1995 and December 18, 1996;
WHEREAS, the Board of Directors of the Corporation, through the duly
authorized officers of the Corporation, desires to amend the Plan in order to
decrease 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, subject to
approval of the Shareholders.
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 May 11, 1998, in the following
respects:
1. By changing the name of the Plan to the "LMI Aerospace, Inc. 1989
Employee Incentive Stock Option Plan", effective as of the date hereof.
2. By deleting the first paragraph of Section 5 of the Plan (on page 2
of the Plan) and substituting in lieu thereof the following:
"5. Stock Subject to the Plan. The stock subject to the Option
shall be shares of the Company's authorized but unissued or reacquired
$0.02 par value common stock (the "Common Stock"). The aggregate number
of shares that may be issued under Options hereunder shall not exceed
276,277 shares of Common Stock (such number reflecting the total number
of shares of Common Stock available after all stock splits and
dividends as of the date hereof). The limitations established in this
Plan by the preceding sentences shall be subject to adjustment as
provided in Paragraph 6 hereunder."
<PAGE>
2. Except as expressly set forth in this Amendment No. 5 to the Plan,
all other provisions of the Plan, as amended, shall remain in full force and
effect.
Adopted as of the 11th day of May 1998.
LMI AEROSPACE, INC.
/s/ Ronald S. Saks
By:
Ronald S. Saks, President
Attest:
/s/ Lawrence E. Dickinson
Secretary
-2-
LMI AEROSPACE, INC.
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT, is made as of the 27th day of April 1998, between LMI
AEROSPACE, INC., a Missouri corporation (the "Corporation"), and LAWRENCE J.
LEGRAND1 ("LeGrand").
RECITALS
A. The Corporation has elected to award LeGrand 10,000 shares of common
stock ($0.02 par value) of the Corporation the ("Bonus Stock") as an inducement
to become employed as an officer of the Corporation and to work for the success
of the Corporation and its subsidiaries.
B. LeGrand has also purchased from Ronald S. Saks ("Saks") 30,000
shares of common stock ($0.02 par value) of the Corporation pursuant to the
terms of a certain Stock Purchase Agreement of even date herewith (the "Saks'
Stock"), and LeGrand's IRA has subscribed to purchase 30,000 shares of common
stock ($0.02 par value) of the Corporation (the "Corp. Stock"). All of the
common stock purchased by LeGrand and his IRA (i.e. the Saks' Stock and the
Corp. Stock) is sometimes referred to herein as the "Purchased Stock".
C. All of the common stock acquired by LeGrand and his IRA is referred
to collectively herein as the Restricted Stock.
D. LeGrand is willing to accept the Restricted Stock subject to the
terms of this Agreement.
E. In consideration of the premises and the mutual agreements and
covenants contained herein, the parties hereto agree as follows:
TERMS OF AGREEMENT
1. Bonus Stock Award. The Corporation hereby grants and awards to
LeGrand, subject to the conditions and restrictions set forth in this Agreement,
the Bonus Stock as a bonus for LeGrand's agreement to become a full time
employee of the Corporation and to serve as its Chief Operating Officer. Based
on an independent appraisal of the Corporation, the Corporation and LeGrand
agree that the fair market value of the Bonus Stock is $20.00 per share. In
addition, as further consideration, the Corporation will pay on behalf of
LeGrand all taxes, federal, state and local, payable by LeGrand as a result of
the award to him of the Bonus Stock, including all taxes payable by LeGrand as a
result of payment of taxes by the Corporation on behalf of LeGrand pursuant to
this sentence. Such obligation on the part of the Corporation to
1 Lawrence J. LeGrand is a party to this Agreement in his individual
capacity and as the beneficial owner of the Lawrence J. LeGrand IRA
Rollover account, CIBC Oppenheimer Corp. as Custodian (the "IRA").
1
<PAGE>
pay taxes on behalf of LeGrand will not apply to any taxes subsequently payable
by LeGrand with respect to the Bonus Stock.
2. Restrictions on Transfer. Subject to the exceptions and limitations
set forth elsewhere herein, none of the shares of Restricted Stock or the rights
relating thereto may be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of by LeGrand, and LeGrand agrees not to sell, assign,
transfer, pledge, hypothecate or otherwise dispose of such Restricted Stock or
rights, during a period of restriction extending from the date hereof and ending
on April 30, 2000 ("Period of Restriction"); provided, however, that the
restrictions on pledging the Restricted Stock shall not apply to the 30,000
shares of Purchased Stock pledged by LeGrand to Saks to secure payment for such
stock. At the time of the earlier of (i) the expiration of the Period of
Restriction or (ii) a "Change of Control" as defined in Section 9 (the
"Termination Date"), such restriction on transfer shall lapse and the Restricted
Stock, if not previously forfeited pursuant to Section 3 of this Agreement, will
become subject to (i) a right of first refusal pursuant to Section 4 of this
Agreement, and (ii) such limitations on transfer, if any, as may exist under
applicable law, the Shareholder Agreement between LeGrand and the Corporation,
the Voting Trust Agreement dated November 11, 1996 or any other agreement
binding upon LeGrand.
3. Possible Forfeiture of Restricted Stock Prior to Termination Date.
If LeGrand ceases to be employed by the Corporation or any of its Subsidiaries
for any reason (whether voluntarily or involuntarily) other than his death or
disability prior to the Termination Date, the following provisions shall apply:
(a) Bonus Stock - LeGrand shall immediately forfeit all of the
Bonus Stock, and the full ownership of such Bonus Stock shall
thereupon revert to the Corporation.
(b) Purchased Stock - The Corporation (as to the Corp. Stock) and
Saks (as to the Saks' Stock) shall have an option to
repurchase the Corp. Stock and the Saks' Stock, respectively,
for a purchase price (the "Purchase Price") equal to the
lesser of:
(i) the purchase price per share originally paid by
LeGrand, or
(ii) the per share value of the Corporation's common
stock determined by an independent appraiser in
conformity with the Business Valuation Standard of the
American Society of Appraisers and the Uniform Standards
of Professional Appraisal Practice, multiplied by the
number of shares being sold, which shall be based on the
appraisal most recently completed prior to the date of
the LeGrand's termination of employment.
2
<PAGE>
(c) Exercise of Option - If the Corporation and Saks (sometimes
referred to in this Section 3(c) as an "Option Holder") have
an option to purchase the Corp. Stock and the Saks' Stock (as
the case may be) pursuant to the provisions of Section 3(b) of
this Agreement, the option may be exercised by delivery of a
written notice of the Option Holder's exercise of the option
to the LeGrand within sixty (60) days of the termination of
LeGrand's employment (the "Notice of Exercise of Option"), and
LeGrand shall be obligated to sell to the Option Holder, all
of the Corp. Stock and the Saks' Stock(as the case may be)
then owned by LeGrand for the Purchase Price provided in
Section 3(b). The purchase and sale shall be closed on such
date and at such time and place (during normal business hours)
specified in the Notice of Exercise of Option from the Option
Holder to LeGrand, which closing shall be not less than thirty
(30) days after delivery of such Notice of Exercise of Option
nor more than ninety (90) days after the termination of
LeGrand's employment. At the closing the Option Holder shall
pay to LeGrand the full Purchase Price then due either (i) by
cashier's check or (ii) at the Option Holder's option, by
paying twenty percent (20%) of the Purchase Price by cashier's
check and by delivering to LeGrand a promissory note in
substantially the form attached hereto as Exhibit A (the
"Note") in the principal amount of the remainder of the
Purchase Price. The Note shall be dated as of the date of the
consummation of the aforesaid purchase, shall become payable
in five (5) equal, consecutive annual installments beginning
on the first anniversary of the closing date, and shall bear
interest (payable annually ) on the unpaid balance at the
lowest annual rate allowable under applicable provisions of
the Internal Revenue Code of 1986, as amended, to prevent any
portion of the principal payments from being treated as
imputed interest.
(d) LeGrand's Rights After Forfeiture or Sale - LeGrand shall have
no further rights under this Agreement with respect to the
Restricted Stock, after forfeiture of the Bonus Stock or the
sale of the Purchased Stock.
4. Right of First Refusal. In consideration of the agreement of the
Corporation to sell 30,000 shares of common stock of the Corporation to LeGrand,
contemporaneously herewith LeGrand gives the Corporation a right of first
refusal with respect to the Bonus Stock. After the Termination Date, if LeGrand
shall receive a bona fide written offer from a third party to purchase some or
all of the Bonus Stock at a specified purchase price and upon specified terms
and conditions (the "Third Party Offer"), LeGrand shall promptly give written
notice and a copy of such offer to the Corporation (the "Third Party Notice").
The Corporation shall have an option, but not the obligation, to purchase the
Bonus Stock which is subject to the Third Party Offer, which option may be
exercised within ten (10) days of the receipt by the Corporation of the Third
Party Notice by giving notice of such exercise to LeGrand ("Notice of Exercise
of Option"). If the Corporation elects to purchase the Bonus Stock which is
subject to the Third Party Offer, the closing shall take place no later than
twenty (20) days after the Notice of Exercise of Option at the offices of the
Corporation. The purchase price per share of the Bonus Stock shall be either (i)
seventy-five percent (75%) of the traded market value on the date of the Third
Party Notice if the stock of the Corporation is publicly traded, or (ii) one
hundred twenty-five percent (125%) of the book value per share of the
Corporation's stock determined as of the end of the Corporation's fiscal year
preceding the Third Party Notice if the stock of the Corporation is privately
held, as the case may be, multiplied by the number of shares of Bonus Stock to
be purchased. The purchase price shall be paid by cashier's check. As used
3
<PAGE>
herein the term "book value" shall have its generally accepted meaning for
accounting purposes and shall be determined by the firm of independent certified
public accountants employed by the Corporation. If the Corporation does not
elect to purchase the Bonus Stock which is subject to the Third Party Offer, the
Bonus Stock may be sold pursuant to the Third Party Offer, subject to the
restrictions contained in this Agreement and such limitations on transfer, if
any, as may exist under applicable law or any other agreement binding upon
LeGrand.
5. Certificates. One or more certificates representing the Restricted
Stock will be held by the Corporation or by its transfer agent, together with a
stock power to be executed by LeGrand in favor of the Corporation, until the
Termination Date, at which time a certificate or certificates for such
Restricted Stock will be issued to LeGrand. The certificates shall bear a legend
indicating that the shares of Restricted Stock are subject to the terms of this
Agreement.
6. Dividends and Voting. During the Period of Restriction with respect
to the Restricted Stock and until any subsequent transfer or forfeiture thereof
by LeGrand, LeGrand shall be treated as the sole beneficial owner of the
Restricted Stock, having all rights of a common stockholder of the Corporation
with respect thereto, except as otherwise may be set forth in this Agreement.
Specifically, (i) LeGrand shall be entitled to receive all dividends, payable in
stock, in cash or in kind, or other distributions, declared on or with respect
to any Restricted Stock as of a record date that occurs during the Period of
Restriction and prior to any transfer or forfeiture of such Restricted Stock,
provided that any such dividends payable in equity securities of the Corporation
or its affiliates, including Common Stock, any series of Preferred Stock, or any
warrants, options or rights to purchase any of the foregoing, shall be received
and held by LeGrand subject to the same restrictions on transfer and the same
conditions regarding forfeiture as apply to the Restricted Stock with respect to
which such dividends are paid, and (ii) LeGrand shall be entitled to exercise
all voting rights with respect to the Restricted Stock, if the record date for
the exercise of such voting rights occurs during the Period of Restriction and
prior to any transfer or forfeiture of the Restricted Stock. In the event of
forfeiture of the Restricted Stock by LeGrand, he shall not be required to
return to the Corporation any dividends or distributions previously paid to
LeGrand with respect to the Restricted Stock.
7. Designation of Beneficiary. LeGrand may designate a person or
persons to receive the Restricted Stock, in the event of the death of LeGrand.
Such designation must be made upon forms supplied by and delivered to the
Corporation and may be revoked in writing. If LeGrand fails effectively to
designate a beneficiary, LeGrand's estate will be deemed to be the beneficiary
of LeGrand with respect to the Restricted Stock.
8. Adjustments. In the event of any change in the outstanding shares of
common stock by reason of any stock dividend or stock split, recapitalization,
merger, sale, consolidation, spinoff, reorganization, combination, issuance of
stock rights or warrants, exchange of shares, or other similar corporate change,
an appropriate adjustment will be made by the Corporation to the number of
shares of Restricted Stock, the rights to which were previously awarded hereby,
consistent with equitable considerations; provided, however, that if the
Corporation shall deliver additional shares of common stock or other securities
for consideration, no such adjustment shall be made. No such adjustment may
materially change the value of benefits available to LeGrand as a result of the
prior award of the Restricted Stock.
4
<PAGE>
9. Change in Control. Notwithstanding anything to the contrary set
forth elsewhere in this Agreement, in the event of a "Change in Control" of the
Corporation, as defined below, all restrictions on transfer of the Restricted
Stock (other than the right of first refusal provided for in Section 4 hereof)
then in effect pursuant to Section 2 or any other provision of this Agreement
shall lapse and cease to be effective, as of the date of such Change in Control.
A Change in Control shall be deemed to have occurred as of the first
date that (a) any individual, corporation (other than the Corporation),
partnership, trust, association, pool, syndicate, or any other entity or any
group of persons acting in concert (other than any of the foregoing that is
controlled by or under common control with the Corporation) becomes the
beneficial owner, as that concept is defined in Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, as the result of any one or more securities transactions (including
gifts and stock repurchases but excluding transactions described in subdivision
(C), below), of securities of the Corporation then possessing thirty-five
percent (35%) or more of the voting power for the election of directors of the
Corporation, or (b) "approved directors" shall constitute less than a majority
of the entire Board of Directors of the Corporation, with "approved directors"
defined to mean the members of such Board as of the Date of Grant and any
subsequently elected members of such Board who shall be nominated or approved by
a majority of the approved directors on the Board prior to such election, or,
(c) the Corporation shall have entered into a binding agreement for a Sale of
the Corporation, as defined below, and shall have received all required
corporate, regulatory and other approvals for consummating such transaction. For
purposes of subdivision (c) of the preceding sentence, "Sale of the Corporation"
shall mean (i) any consolidation, merger or stock- for-stock-exchange involving
the Corporation or the securities of the Corporation in which the holders of
voting securities of the Corporation immediately prior to the consummation of
such transaction will own, as a group, immediately after such consummation,
voting securities of the Corporation (or, if the Corporation is not to survive
such transaction, voting securities of the corporation that issues securities to
such holders in such transaction) having less than fifty percent (50%) of the
total voting power in an election of directors of the Corporation (or such other
corporation), excluding any securities of any such other corporation owned by
any members of such group prior to such transaction and any securities to be
received in such transaction by any members of such group which represent
disproportionate percentage increases in their shareholdings vis-a-vis the other
members of such group, or (ii) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions), of all, or substantially
all, of the assets of the Corporation to a party which is not controlled by or
under common control with the Corporation.
10. Effect on Employment. The grant of the Restricted Stock and rights
thereto provided for herein shall not confer upon LeGrand any right to continue
in the employment of the Corporation or its Subsidiaries or to continue to
perform services for the Corporation or its Subsidiaries and shall not in any
way interfere with the right of the Corporation or its Subsidiaries to terminate
the services of LeGrand as an employee or officer at any time.
5
<PAGE>
11. Withholding. To the extent that the grant of the Restricted Stock
granted hereunder may obligate the Corporation to pay withholding taxes on
behalf of LeGrand, the Corporation will pay the minimum amount of such
withholding taxes then due and will (i) withhold such amount from LeGrand's
wages or other payments due to LeGrand, or (ii) apply to such payment funds then
delivered by LeGrand to the Corporation for such purpose, or (iii) withhold from
the Restricted Stock then distributed to LeGrand (and the certificate or
certificates representing such distributed shares of Restricted Stock) a number
of shares of Restricted Stock otherwise then distributable to LeGrand having a
fair market value on the date such shares of Restricted Stock are granted equal
to the amount of such payment, in which event LeGrand shall have no further
rights to such withheld shares of Restricted Stock.
12. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Missouri.
13. Execution of Agreement. In order to obtain all rights under this
Agreement, LeGrand must sign and return this Agreement to the Corporation prior
to, or simultaneously with, the delivery of the Restricted Stock by the
Corporation to LeGrand. If LeGrand fails to sign and return this Agreement to
the Corporation, the award of Restricted Stock provided for herein shall be
deemed void and never to have been granted.
The parties hereto have executed this Agreement as of the date first
above written.
LMI AEROSPACE, INC.
By:_________________________________
(Authorized Officer)
------------------------------------
Lawrence J. LeGrand
Ronald S. Saks has executed this Agreement as of the date first above
written solely for the purpose of accepting the right of first refusal given to
him by LeGrand pursuant to Section 4 of this Agreement.
__________________________________
Ronald S. Saks
6
SUBSCRIPTION AGREEMENT
LMI Aerospace, Inc. (f/k/a Leonard's Metal, Inc.)
3030 Highway 94 North
St. Charles, Missouri 63301
Ladies and Gentlemen:
1. Subscription.
The undersigned, Lawrence J. LeGrand ("LeGrand"), as the
beneficial owner of the Lawrence J. LeGrand IRA Rollover Account (the "IRA"),
hereby irrevocably subscribes for and agrees to cause the IRA to purchase from
LMI Aerospace, Inc. (f/k/a Leonard's Metal, Inc.), a Missouri corporation (the
"Company") an aggregate of 30,000 shares of the common stock, $0.02 par value
per share (the "Shares"), for an aggregate purchase price of $600,000.00, with
an appropriate adjustment by the Company in the number of Shares for any change
by reason of any stock dividend, stock split or exchange of shares or
recapitalization of the Company. LeGrand acknowledges this Subscription shall
expire 120 days from the date hereof.
2. Representations and Warranties. LeGrand represents and warrants to,
and agrees with, the Company, as of the date hereof and the date of the closing,
as follows:
(a) LeGrand is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D ("Regulation D") promulgated
under the Securities Act of 1933, as amended, and rules and regulations
thereunder ("Act"). Specifically, LeGrand is an executive officer of
the Company.
(b) LeGrand is a bona fide resident of the State of Missouri
and is legally competent to execute this Subscription Agreement.
(c) LeGrand has been actively engaged in the conduct of the
Company's business and affairs and, accordingly, is fully familiar with
the Company and its business, plans and financial condition.
(d) LeGrand has such knowledge and experience in finance,
securities, investments and other business matters so as to be able to
protect his interests in connection with this transaction.
(e) LeGrand understands the various risks of an investment in
the Company contemplated hereby and can afford to bear such risks,
including (but not limited to) the risk of losing LeGrand's entire
investment.
(f) LeGrand will cause the IRA to acquire the Shares for the
IRA's account for investment and not with a view to the sale or
distribution thereof or the granting of any participation therein, and
has no present intention of distributing or selling to others any of
such interest or granting any participation therein.
(g) LeGrand acknowledges and agrees that the representations,
warranties and agreements made by LeGrand herein shall survive the
execution, delivery and performance of this Agreement and the purchase
of the Shares.
<PAGE>
(h) LeGrand acknowledges and agrees that the Shares will be
subject to the restrictions set forth in Sections 4 and 5 of this
Subscription Agreement, a shareholder agreement with the Company (the
"Shareholder Agreement") and voting trust agreement dated November 11,
1996 (the "Voting Trust Agreement") and agrees to execute the
Shareholder Agreement and Voting Trust Agreement upon the issuance of
the Shares.
3. Indemnification. LeGrand acknowledges that he understands the
meaning and legal consequences of the representations and warranties contained
in Section 2 of this Subscription Agreement, and agrees to indemnify and hold
harmless the Company and its officers, directors, employees, agents and
controlling persons, past, present or future from and against any and all loss,
damage or liability due to or arising out of a breach of any such representation
or warranty.
4. Transferability. Neither this Agreement, nor any interest of LeGrand
or the IRA herein, is assignable or transferable by LeGrand or the IRA, in whole
or in part, except by operation of law. None of the Shares subscribed for or the
rights relating thereto may be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of by the IRA, or LeGrand, and LeGrand agrees
not to sell, assign, transfer, pledge, hypothecate or otherwise dispose of such
Shares or rights, during a period of restriction extending from the date of
issuance of the Shares and ending on April 30, 2000 ("Period of Restriction").
At the end of the Period of Restriction (the "Termination Date"), such
restriction on transfer shall lapse and the Shares, if not previously forfeited
pursuant to Section 5 hereof, will become subject to (i) a right of first
refusal pursuant to Section 4.B. of this Agreement, and (ii) such limitations on
transfer, if any, as may exist under the Shareholder Agreement, the Voting Trust
Agreement, any other agreement binding upon LeGrand, the IRA or applicable law.
5. Possible Forfeiture Prior to Termination Date. If LeGrand ceases to
be employed by the Company or any of its Subsidiaries prior to the Termination
Date for any reason other than his disability or death, the IRA shall thereupon
immediately forfeit any and all such Shares, and the full ownership of such
Shares shall thereupon revert to the Company. Upon such forfeiture the IRA shall
be entitled to receive from the Company and the Company shall be obligated to
pay an amount equal to the lesser of (i) the purchase price originally paid by
the IRA, or (ii) the per share value of the Company's common stock determined by
an independent appraiser in conformity with the Business Valuation Standard of
the American Society of Appraisers and the Uniform Standards of Professional
Appraisal Practice, which shall be based on the appraisal most recently
completed prior to the date of the Termination Date, multiplied by the number of
shares being sold. Such payment by the Company shall be made either (i) by
cashier's check or (ii) at the Company's option, by paying twenty percent (20%)
of the amount by cashier's check and by delivering to the IRA the Company's note
(the "Note") in the principal amount of the remainder of the payment. The Note
shall be dated as of the date of the consummation of the aforesaid purchase,
shall become payable in five (5) equal, consecutive annual installments
beginning on the first anniversary of the consummation of the aforesaid
purchase, and shall bear interest (payable annually) on the unpaid balance at
the lowest annual rate allowable under applicable provisions of the Internal
Revenue Code of 1986, as amended, to prevent any portion of the principal
payments from being treated as imputed interest.
-2-
<PAGE>
6. Miscellaneous.
A. This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
B. Except as otherwise specifically provided herein, any
notice or other communication required or permitted to be given hereunder shall
be in writing and shall be mailed by registered or certified mail, return
receipt requested, or sent by Federal Express, Express Mail or similar next
business day delivery service, or delivered (in person or by telecopy, telex or
similar telecommunications equipment) against receipt or confirmation to the
party to whom it is to be given: (i) if to the Company, at the address set forth
on the first page hereof, (ii) if to LeGrand, at the address set forth on the
signature page hereof, or (iii) in either case, to such other address as the
party shall have furnished in writing in accordance with the provisions of this
Section 6.B. Notice to the estate of any party shall be sufficient if addressed
to the party as provided in this Section 6.B. Any notice or other communication
given as provided in this Section 6(b) shall be deemed given at the time of
receipt thereof.
C. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, the successors and assigns of the Company, the
permitted successors and assigns of the IRA, and the successors, assigns, heirs
and personal representatives of LeGrand.
D. 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.
E. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri, without giving effect to
principles governing conflicts of law.
F. This Agreement does not create, and shall not be construed
as creating, any rights enforceable by any person not a party to this Agreement
(except as provided in Sections 3 and 6.B. hereof).
The parties have executed this Agreement as of the day and year this
subscription has been accepted by the Company, as set forth below.
Accepted this 27th day of
___________________________________ April, 1998:
Lawrence J. LeGrand, the Beneficial
Owner of the Lawrence J. LeGrand
IRA Rollover Account LMI Aerospace, Inc.
(f/k/a Leonard's Metal, Inc.)
Social Security No.________________
By: __________________________________
908 Claymark Dr. Ronald S. Saks, President
St. Louis, MO 63131
-3-
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 April 27,
1998), in the Registration Statement (Form S-1 No. 333-51357) and related
Prospectus of LMI Aerospace, Inc. for the registration of 2,300,000 shares of
its common stock.
/s/ Ernst & Young LLP
St. Louis, Missouri
June 4, 1998
The Board of Directors
LMI Aerospace, Inc.
We consent to the reference to our firm under the heading "Selected Consolidated
Financial Information."
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
June 5, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 604
<SECURITIES> 0
<RECEIVABLES> 9,745
<ALLOWANCES> 0
<INVENTORY> 9,128
<CURRENT-ASSETS> 778
<PP&E> 29,014
<DEPRECIATION> 12,566
<TOTAL-ASSETS> 36,883
<CURRENT-LIABILITIES> 8,545
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 18,292
<TOTAL-LIABILITY-AND-EQUITY> 36,883
<SALES> 16,335
<TOTAL-REVENUES> 16,335
<CGS> 11,502
<TOTAL-COSTS> 11,502
<OTHER-EXPENSES> 1,883
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258
<INCOME-PRETAX> 2,697
<INCOME-TAX> 1,038
<INCOME-CONTINUING> 1,659
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