As filed with the Securities and Exchange Commission on April 29, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
LMI AEROSPACE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Missouri 3728 43-1309065
(State or Other Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number Identification Number)
Incorporation or
Organization)
3600 Mueller Road, St. Charles, Missouri 63302
(314) 946-6525
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Lawrence E. Dickinson
Chief Financial Officer
P.O. Box 900, St. Charles, Missouri 63302
(314) 946-6525
Fax: (314) 949-1576
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies of all correspondence to:
Douglas J. Bates, Esq. Steven Schwartz, Esq.
Gallop, Johnson & Neuman, L.C. Much Shelist Freed Denenberg
101 South Hanley Road, 16th Floor Ament Bell & Rubenstein, P.C.
St. Louis, Missouri 63105 200 N. LaSalle Street, Suite 2100
(314) 862-1200 Chicago, Illinois 60601-1095
Fax: (314) 862-1219 (312) 346-3100
Fax: (312) 621-1750
Approximate date of commencement of proposed sale to public. As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or investment reinvestment plans, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
======================================================================================================================
Amount Proposed Maximum Proposed Maximum
Title Of Each Class Of To Be Offering Price Aggregate Offering Amount Of
Securities To Be Registered Registered(1) Per Share(2) Price(2) Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.02
per share 2,645,000 $14.00 $37,030,000 $10,924
======================================================================================================================
<FN>
(1) Includes 345,000 shares which the Underwriters have the option to
purchase from the Company to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee.
</FN>
</TABLE>
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>
SUBJECT TO COMPLETION, DATED APRIL 29, 1998
2,300,000 Shares
[LOGO]
LMI AEROSPACE, INC.
Common Stock
All of the 2,300,000 shares of Common Stock, par value $0.02 per share
(the "Common Stock"), offered hereby (the "Offering"), are being offered by LMI
Aerospace, Inc., a Missouri corporation (the "Company"). Prior to the Offering,
there has been no public market for the Common Stock. It is currently estimated
that the initial public offering price will be between $12.00 and $14.00 per
share. See "UNDERWRITING" for information relating to the factors considered in
determining the initial public offering price. The Company has filed an
application to designate the Common Stock for quotation on the Nasdaq National
Market under the proposed symbol "LMIA."
For a discussion of certain risks that should be considered by
prospective purchasers of the Common Stock offered hereby, see "RISK FACTORS"
commencing on page 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
Underwriting
Price to Discounts and Proceeds
Public Commissions(1) to Company(2)
- -------------------------------------------------------------------------------
Per Share....... $ $ $
Total (3)....... $ $ $
===============================================================================
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
aended (the "Securities Act"). See "UNDERWRITING."
(2) Before deducting estimated expenses of the Offering of $550,000, all of
which will be paid by the Company.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
an aggregate of 345,000 additional shares of Common Stock at the price to
the public less underwriting discounts and commissions for the purpose of
covering over-allotments, if any. If the Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $___, $___ and $___, respectively. See
"UNDERWRITING."
The Common Stock is being offered by the Underwriters, subject to prior
sales, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders, in whole or in part. It is expected that the
delivery of certificates representing the Common Stock will be made against
payment therefor on or about ____________________, 1998.
EVEREN Securities, Inc. George K. Baum & Company
The date of this Prospectus is ________________, 1998
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
2
<PAGE>
Caption
1. The Company is a leading fabricator, finisher and integrator of formed,
close tolerance aluminum and specialty alloy components used in aircraft,
such as those shown below.
2. A leading edge wing skin manufactured by the Company being installed at a
Boeing facility.
3. Coordinate Measuring Machine (CMM), a CNC multi-axis touch probe machine
used for measuring close tolerances. Shown here measuring critical
characteristics of leading edge components for the Boeing 737 Next
Generation.
4. The Company's Zimmerman, CNC, 5-axis router mill is shown above.
5. Door panel component manufactured by the Company for a Lockheed Martin
F-16.
6. Wing leading edge slat being stretch formed on the Company's CNC leading
edge press.
7. The Company manufactures and assembles 21 detail parts to produce this 747
window frame.
8. The Company is a leading fabricator, finisher and integrator of formed,
close tolerance aluminum and specialty alloy components used in aircraft,
such as those shown above.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK TO
COVER SYNDICATE SHORT POSITIONS, OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF
THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
3
<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 2.29 to 1 stock
dividend payable on June 1, 1998 to shareholders of record on May 1, 1998.
Unless otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised. Unless the context
otherwise requires, references to the Company are to LMI Aerospace, Inc., a
Missouri corporation, and its wholly-owned subsidiaries, Leonard's Metal, Inc.,
a Missouri corporation, and LMI Finishing, Inc., an Oklahoma corporation.
The Company
LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of
formed, close tolerance aluminum and specialty alloy components for use by the
aerospace industry. For approximately 50 years the Company has been engaged in
manufacturing components for a wide variety of aerospace applications.
Components manufactured by the Company include leading edge wing slats, flaps
and lens assemblies; cockpit window frame assemblies; fuselage skins and
supports; and passenger and cargo door frames and supports. The Company
maintains multi-year contracts with leading original equipment manufacturers
("OEMs") and primary subcontractors ("Primes") of commercial, corporate,
regional and military aircraft. Such contracts, which govern virtually all of
the Company's sales, designate the Company as the sole supplier of the aerospace
components sold under the contracts. Customers include Boeing, Lockheed Martin,
Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The
Company manufactures approximately 14,000 parts for integration into such models
as Boeing's 737, 747, 757, 767 and 777 commercial aircraft, Gulfstream's G-IV
and G-V corporate aircraft, Canadair's RJ regional aircraft, and Lockheed
Martin's F-16 and C-130 military aircraft.
In addition to supplying quality components, the Company provides its
customers with value-added services, including engineered tool design,
production and repair; heat treating; chemical milling; assembly; and metal
finishing processes, such as polishing and painting. The Company believes that
such value-added services provide significant benefits to its customers
including: (i) reduced administrative costs resulting from the Company's ability
to serve as a single point of purchase for a wide array of required products and
services, (ii) faster, more efficient production rates, and (iii) greater
consistency in meeting scheduled delivery dates. As a result, the Company
believes that its value-added services are an increasingly important factor in
the selection of the Company to provide aerospace components.
For the five-year period ended December 31, 1997, the Company's revenue
increased at a compound annual rate of 32% from $18.4 million to $55.1 million.
During the same period operating income increased from $279,000 to $9.6 million.
Net income, which was generally breakeven from 1993 to 1995, increased to $1.2
million in 1996 and $5.3 million in 1997. At December 31, 1997, the Company's
backlog of customer orders scheduled for delivery within the next twelve months
increased to a record level of $40.5 million from $34.1 million at December 31,
1996.
The Company believes that it is well positioned to benefit from several
industry trends, including: (i) increased new aircraft production; (ii)
increased outsourcing by OEMs and Primes; (iii) a decrease in the number of
preferred suppliers of aerospace components; and (iv) increased consolidation of
aerospace component suppliers.
4
<PAGE>
The Industry
The aerospace components industry is enjoying favorable trends driven
by strong growth in production of new commercial, corporate and regional
aircraft. Aircraft manufacturers are currently experiencing record levels of new
orders. The market for new commercial aircraft is estimated at $50 billion, the
market for corporate jet aircraft is estimated at $6 billion and the market for
regional jet aircraft is estimated at $3 billion.
According to Boeing's 1997 Current Market Outlook (the "Boeing
Report"), annual deliveries of commercial aircraft can be expected to
increase from approximately 400 in 1996 to more than 700 in 1998,
increasing the worldwide fleet of aircraft from 11,500 at the end of
1996 to over 16,000 at the end of 2001 and over 23,000 at the end of
2016. Additionally, expenditures for new commercial aircraft production
are expected to total approximately $490 billion for the period from
1996 to 2006. Such increases result from the need of aircraft operators
to accommodate a projected 75% increase in global air travel through
the year 2006. The demand for commercial aircraft is rapidly increasing
as a result of the following: (i) increasing profitability of airline
operators; (ii) a worldwide increase in miles flown by existing
aircraft; and (iii) the need to modify or replace older aircraft to
comply with more stringent governmental noise and safety regulations.
According to the Allied Signal Annual Business Aviation Outlook dated
September 1997 (the "Allied Report"), 2,300 new corporate jet aircraft
are expected to be delivered from 1997 through 2001, a 61% increase
over the previous five-year period. The demand for corporate aircraft
is rapidly increasing as a result of the following: (i) the
introduction of new, larger and more efficient aircraft; (ii) the
growing popularity of fractional aircraft ownership; (iii) the minimal
availability of used aircraft; (iv) the need for long-range flights to
expanding international markets; (v) the increased demand for more
expedient travel; and (vi) the continued surge in corporate
profitability and the U.S. stock market.
Regional jets, 32-70 seat passenger jets, are the most rapidly growing
market segment in commercial aircraft. Annual deliveries are estimated
to double from 96 units in 1997 to more than 210 by 2000. The demand
for regional jets is rapidly increasing as a result of the following:
(i) ability to pull passengers into major airline hubs or bypass hubs
altogether; (ii) expanded frequency of service on routes served by
larger jets; (iii) break even load factors are much lower on regional
airlines than on majors; (iv) extended range relative to previously
utilized regional turboprops; and (v) ability to service routes which
would otherwise be unprofitable if served by larger jets.
In addition to demand related to production of new aircraft, the
aerospace components industry is benefiting from an increasing demand
for aftermarket components resulting from the growing number of
aircraft in service.
Growth Strategy
The Company's primary objective is to expand its position as a leading
components supplier to the aerospace industry through the application of a
comprehensive business strategy combining various customer service, operating
and growth objectives.
Capitalize on Favorable Industry Trends. The Company believes its
strong market position and alignment with many of the leading OEMs and Primes
will enable it to benefit from several industry trends, allowing it to increase
production capabilities and expand operations to meet anticipated increases in
demand. The Company believes that it is well-positioned to take advantage of the
current trends and expected growth in the aerospace components industry as a
result of its ability to maintain consistent on-time delivery, its key customer
relationships, its status as a supplier of value-added content, its ability to
deliver consistent component quality, the active involvement of its employees
and its geographic proximity to its customers. See "BUSINESS--Competitive
Strengths."
Pursue Strategic Acquisitions. The Company seeks to leverage its core
competencies in existing and related markets by identifying and pursuing
complementary acquisitions in the aerospace industry that offer strategic value,
such as cost savings, increased manufacturing capacity, increased process
5
<PAGE>
capability and/or new customer relationships. The Company believes that the
fragmented nature of the industry for aerospace components should provide the
Company with additional opportunities to exploit industry consolidation trends.
Expand Aftermarket Presence. The Company intends to increase its
penetration of the aerospace components aftermarket by expanding its product and
service offerings in response to the inventory needs of aftermarket
participants, tailoring its delivery procedures to meet the specific
requirements of this market and increasing its sales and marketing efforts to
increase awareness by such participants of the Company's capabilities.
Diversify Customer Base. The Company believes that opportunities exist
to establish additional relationships with OEMs, Primes and distributors of
aerospace products not currently supplied by the Company. In addition, the
Company is currently marketing its capabilities to unserved business units of
its current customers.
Expand Integration Capabilities. The Company intends to grow by
increasing the array of manufacturing, assembly and finishing services which it
can offer existing and prospective customers by expanding its capability to
integrate parts into higher level aerospace components. The Company believes
that such integration capability will enhance its reputation as a single point
of purchase for the aerospace industry. Furthermore, the Company believes that
by expanding its integration capabilities, it will increase its relative
importance to its customers and expand its revenue content per plane.
The Company's executive offices are located at 3600 Mueller Road, St.
Charles, Missouri 63302, and its telephone number is (314) 946-6525.
The Offering
Common Stock offered by
the Company..................... 2,300,000 shares (1)
Common Stock to be outstanding
after the Offering.............. 8,208,471 shares (1) (2)
Use of Proceeds ................ To repay certain debt, pursue strategic
acquisitions, expand manufacturing capacity,
finance working capital requirements, and
fund other general corporate purposes. See
"USE OF PROCEEDS."
Proposed Nasdaq National
Market Symbol................... LMIA
(1) Does not include up to 345,000 shares of Common Stock issuable upon
full exercise of the Underwriters' over-allotment option.
(2) Based on shares outstanding as of March 31, 1998. Excludes
1,271,585 shares of Common Stock reserved, as of the date of this
Prospectus, for issuance in connection with the Company's stock based
compensation plan. Also excludes 131,600 new shares of Common Stock
issued on May 1, 1998, as compensation to, or purchased by, Lawrence J.
LeGrand, Chief Operating Officer of the Company. See "MANAGEMENT --
Benefit Plans," "CAPITALIZATION" and "PRINCIPAL SHAREHOLDERS."
Forward-Looking Statements
Any forward-looking statements set forth in this Prospectus are
necessarily subject to significant uncertainties and risks. When used in this
Prospectus, the words "believes," "anticipates," "intends," "plans," "projects,"
"estimates," "expects" and similar expressions are intended to identify
forward-looking statements. Actual results could be materially different from
those reflected in such forward-looking statements as a result of various
factors, including, but not limited to, those matters discussed under the
caption "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS". Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
6
<PAGE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
(in thousands, except Shares and per share data)
1993(1) 1994 1995 1996 1997
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................ $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080
Cost of sales.................... 15,041 17,274 20,366 26,725 38,932
------ ------ ------ ------ ------
Gross profit..................... 3,342 3,437 5,058 8,291 16,148
Selling, general &
administrative expense......... 3,063 3,337 3,883 5,256 6,549
------ ----- ----- ----- -----
Income from operations........... 279 100 1,175 3,035 9,599
Interest expense................. (347) (522) (1,038) (1,123) (1,020)
Other (expense) income(2), net... 293 263 (48) 15 10
----- ------ ------- ------ ------
Income (loss) before income
taxes......................... 225 (159) 89 1,927 8,589
Provisions for income taxes...... 381 (62) 52 740 3,306
------ -------- ------ ------ ------
Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283
======= ======= ======= ======= =======
Net income (loss) per common
share:(3)
Basic......................... $ (0.03) $(0.02) $0.01 $0.21 $0.91
Diluted....................... $ (0.03) $(0.02) $0.01 $0.20 $0.89
Weighted average shares
outstanding.................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700
Other Financial Data:
EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788
Capital expenditures............. 1,732 4,746 1,736 1,316 3,856
Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3%
EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4%
7
<PAGE>
December 31, 1997
-----------------
(in thousands)
Actual As Adjusted(5)
Balance Sheet Data: ------ --------------
Cash and equivalents............. $ 244 $ 23,591
Working capital.................. 11,256 35,104
Total assets..................... 33,269 56,977
Total long-term debt, excluding
current portion ............... 9,274 5,864
Stockholders' equity............. 16,751 44,008
<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
material. Pro forma net income of $5,398 (versus historical net income
of $5,283 shown above) is the amount net income would have been if the
$3.9 million debt anticipated to be retired with the offering proceeds
had been retired at the beginning of the period. Pro forma net income
per common share of $0.66 and $0.66, basic and diluted, respectively,
reflects the increase in the number of shares of Common Stock to be sold
in the Offering, and the increase in net income due to the debt
retirement.
(4) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator used by many investors and analysts to analyze and
compare companies on the basis of operating performance. EBITDA as
presented may not be comparable to similarly titled indicators reported
by other companies because not all companies necessarily calculate EBITDA
in an identical manner and therefore it is not necessarily an accurate
means of comparison between companies. EBITDA is not intended to
represent cash flows or funds available for management's discretionary
use for the periods listed nor has it been presented as an alternative to
operating income as an indicator of operating performance and should not
be considered in isolation or as a substitute for indicators of
performance prepared in accordance with generally accepted accounting
principles.
(5) Adjusted to give effect to the receipt of the net proceeds from the sale
by the company of 2,300,000 shares of Common Stock to be sold in this
Offering (at an assumed initial public offering price of $13.00 per
share) and the application of the estimated net proceeds to working
capital and repayment of a portion of certain debt (after deduction of
underwriting discounts and commissions and estimated offering expenses
payable by the Company) as set forth in "USE OF PROCEEDS" and
"CAPITALIZATION."
</FN>
</TABLE>
8
<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. See "BUSINESS -- Customers." As a result, the Company's business,
financial condition or results of operations could be materially adversely
affected by the decision of a single customer to reduce or terminate its orders
with the Company. In addition, there can be no assurance that sales to customers
that have in the past accounted for significant sales individually or as a group
will continue, or if continued, will reach or exceed historical levels in any
future periods.
Aerospace Industry
The Company derives all of its sales and operating income from the
services and components that it provides to its customers in the aerospace
industry. As a result the Company's business is directly affected by certain
characteristics and trends of the aerospace industry that affect its customers,
such as (i) fluctuations in the aerospace industry's business cycle, (ii)
varying fuel and labor costs, (iii) intense price competition and regulatory
scrutiny, (iv) certain trends including a possible decrease in aviation
activity, a decrease in outsourcing by aircraft manufacturers or the failure of
projected market growth to materialize or continue and (v) changes in military
budgeting and procurement for certain military aircraft. In the event that such
characteristics and trends adversely affect customers in the aerospace industry,
they would reduce the overall demand for the Company's products and services,
thereby decreasing the Company's sales and operating income. There can be no
assurance that characteristics and trends that might affect the aerospace
industry will not adversely affect the Company's results of operations. See
"BUSINESS -- Industry Outlook."
Dependence Upon Key Management Personnel
The Company's long-term success and growth strategy depend on its
senior management. The Company has entered into written employment agreements
with all of its senior management personnel and maintains key man life insurance
policies on the lives of certain of such personnel. However, the loss of service
of one or more of the Company's senior management personnel could have a
material adverse effect on the Company's business, financial condition or
results of operation. See "MANAGEMENT."
Need to Attract and Retain Qualified Personnel
The Company's success and future growth will also depend on
management's ability to attract, hire, train, integrate and retain qualified
personnel in all areas of its business. Competition for such personnel is
intense and the Company's inability to adequately staff its operations with such
personnel could render the Company less efficient, thereby slowing its rate of
production. If the Company is unable to attract, hire, train, integrate and
retain such qualified personnel, the Company's business, financial condition or
results of operations could be materially and adversely affected.
9
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Strategic Acquisitions
A key element of the Company's growth strategy is expansion through the
acquisition of complementary businesses involved in the aerospace industry. The
Company's ability to expand by acquisition is dependent on, and may be limited
by, the availability of suitable acquisition candidates and the Company's
capital resources. See "BUSINESS -- Growth Strategy," "USE OF PROCEEDS," and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Liquidity and Capital Resources." Acquisitions involve risks that
could adversely affect the Company's operating results, including assimilation
of the operations and personnel of acquired companies, the potential
amortization of intangible assets, the potential loss of key employees of the
acquired companies and the incurrence of substantial, additional indebtedness in
funding such acquisitions. Furthermore, although the Company will investigate
the business operations and assets of entities that it acquires, there may be
liabilities that the Company fails or is unable to discover, and for which the
Company as a successor owner or operator may be liable. The Company evaluates
acquisition opportunities from time to time, but the Company has not entered
into any commitments or binding agreements to date. There can be no assurance
that the Company will be able to consummate acquisitions on satisfactory terms,
or at all, or that it will be successful in integrating any such acquisitions
into its operations.
Competition
Components for new aircraft and replacement components for existing
aircraft are provided by a large fragmented group of companies, including
certain business units of or affiliated with the Company's customers. However,
the Company is unaware of any single company with which it competes in all of
the Company's processes. The Company believes that participants in the aerospace
components industry compete primarily with respect to reliability of delivery,
price and quality. The Company also believes that competition in its industry
will increase substantially as a result of industry consolidations and trends
toward favoring greater outsourcing of components and reducing the number of
preferred suppliers. Certain of the Company's competitors, including business
units affiliated with the Company's customers, have substantially greater
financial, production and other resources than the Company. These competitors
(i) may have the ability to adapt more quickly to changes in customer
requirements and industry conditions or trends, (ii) may have stronger
relationships with customers and suppliers and (iii) greater name recognition
than the Company. There can be no assurance that competitive pressures will not
materially and adversely affect the Company's business, financial condition or
results of operation. See "BUSINESS - Competition" and "-Industry Outlook."
Raw Materials
Most of the Company's aerospace components are manufactured from
aerospace quality aluminum sheet metal and extrusion. From time to time the
Company, and the aerospace components industry as a whole, has experienced
shortages in the availability of aerospace quality aluminum sheet metal and
extrusion. Such shortages could inhibit the Company's ability to deliver
products to its customers on a timely basis. In an attempt to secure adequate
supplies the Company has entered into a multi-year aluminum sheet metal supply
agreement with Aluminum Company of America ("ALCOA"), a dominant domestic
supplier of aerospace quality aluminum, and is negotiating similar agreements
regarding extrusion with Tiernay Metals, Inc., a distributor, and Universal
Alloy Corp., a producer. However, there can be no assurance that the Company
will be able to purchase sufficient aerospace quality aluminum sheet metal or
extrusion to meet its production needs in the future, or that such materials
will be available on satisfactory terms or at reasonable prices. Any such
material shortage or price escalation could have a material adverse effect on
the business, financial condition or results of operation of the Company. See
"BUSINESS - Suppliers and Procurement Practices."
Governmental Regulations; Environmental Compliance
The Company's operations are subject to extensive and frequently
changing federal, state and local laws and substantial regulation by government
agencies, including the United States Environmental Protection Agency ("EPA"),
the United States Occupational Safety and Health Administration ("OSHA") and the
Federal Aviation Administration ("FAA"). Among other matters these agencies
impose requirements that regulate the operation, handling, transportation and
disposal of hazardous materials generated or used by the Company during the
normal course of its operations, govern the health and safety of the Company's
employees and require the Company to meet certain standards and licensing
requirements for aerospace components. This extensive regulatory framework
10
<PAGE>
imposes significant compliance burdens and risks on the Company and, as a
result, may substantially affect its operational costs. See "BUSINESS -
Regulatory Matters."
In addition, the Company may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its facilities
without regard to whether or not the Company knew of, or caused, the release of
such substances. The Company believes that it currently is in material
compliance with applicable laws and regulations and is not aware of any material
environmental violations at any of its current or former facilities. There can
be no assurance, however, that its prior activities did not create a material
environmental situation for which the Company could be responsible or that
future uses or conditions (including, without limitation, changes in applicable
environmental laws and regulation, or an increase in the amount of hazardous
substances generated or used by the Company's operations) will not result in any
material environmental liability to the Company or result in a material adverse
effect to the Company's financial condition or results of operations. See
"BUSINESS - Regulatory Matters."
Product Liability
Although the Company is not engaged in the design of any part,
component or sub-assembly, the Company's business exposes it to possible claims
of personal injury, death or property damage which may result from the failure
or malfunction of any component or subassembly fabricated by the Company. The
Company currently has in place aviation products liability and premises
insurance, which the Company believes provides coverage in amounts and on terms
that are generally consistent with industry practice. The Company has not
experienced any product liability claims related to its products. However, the
Company may be subject to a material loss, to the extent that a claim is made
against the Company that is not covered in whole or in part by insurance, which
could have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, there can be no assurance that
insurance coverages can be maintained in the future at a cost acceptable to the
Company.
Discretionary Use of Proceeds
The Company has no specific plan for approximately $23.4 million of the
net proceeds of this Offering after the retirement of $3.9 million of Company
debt. The Company is raising such funds to increase its working capital and for
other general corporate purposes, including the acquisition of currently
unidentified complementary businesses. Consequently, the Board will have broad
discretion over the use of most of the net proceeds of this Offering for the
foreseeable future. See "USE OF PROCEEDS."
Natural Disasters
One of the facilities of the Company has experienced damage due to
floods in the past. Although the Company maintains standard blanket flood loss
insurance on all of its facilities, a flood or other natural disaster could have
a material adverse effect on its business or operating results.
Control by Principal Shareholders
Upon completion of this Offering directors and executive officers will
beneficially own approximately 52.7% of the then outstanding shares of Common
Stock (50.1% if the Underwriter's over-allotment option is exercised in full).
See "PRINCIPAL SHAREHOLDERS." As a result, such shareholders acting together
will have the ability to exercise effective voting control of the Company over
any matter being voted on by the Company shareholders, including the election of
all of the Company's directors and any merger, sale of assets or other change of
control of the Company. See "AUTHORIZED AND OUTSTANDING CAPITAL STOCK."
Absence of Prior Market; Determination of Offering Price
Prior to the Offering there has been no public market for the Common
Stock. Although the Company has applied for quotation of the Common Stock on the
Nasdaq National Market, there can be no assurance that an active or liquid
trading market will develop upon completion of the Offering or, if developed,
that it will be sustained. The initial public offering price of the Common Stock
was determined by negotiations among the Company and the Representatives and
does not necessarily bear any relationship to assets, book value, earnings
history or other established criteria of value. Investors may not be able to
resell their shares at or above the initial public offering price. See
"UNDERWRITING."
11
<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 the General and Business Corporation Law of
Missouri, which, under certain circumstances, may prohibit a business
combination between the Company and a shareholder owning 20% or more of the
outstanding voting power of the Company. This provision may have the effect of
delaying, deterring, or preventing certain potential acquisitions or a change in
control of the Company. See "AUTHORIZED AND OUTSTANDING CAPITAL STOCK -
Preferred Stock," " - Special Provisions of the Articles, Bylaws and Missouri
Law" and "PRINCIPAL SHAREHOLDERS."
Shares Eligible for Future Sale
Upon completion of the Offering, 702,885 shares of Common Stock will be
eligible for sale to the public by persons who are not "affiliates" of the
Company. All the remaining shares of Common Stock outstanding are "restricted"
within the meaning of Rule 144 under the Securities Act ("Rule 144") and may not
be sold in the absence of registration under the Securities Act or an exemption
therefrom. Moreover, all shares of Common Stock outstanding prior to this
Offering are subject to agreements which prohibit, without the prior consent of
the Representatives, the sale or other disposition of such shares prior to
December 31, 1998. Sales of substantial amounts of Common Stock in the public
market following the Offering, or the perception that such sales may occur,
could adversely affect the market price of the Common Stock. These factors also
could make it more difficult for the Company to raise funds through future
offerings of Common Stock. See "SHARES ELIGIBLE FOR FUTURE SALE."
Dilution
Purchasers of Common Stock in this Offering will experience immediate
and substantial dilution in the net tangible book value of the Common Stock. See
"DILUTION" and "PRINCIPAL SHAREHOLDERS."
Year 2000 Compliance
The Company has recently installed information systems and software in
all of its locations, other than at its Tulsa location, which possess the
capability of accurately processing dates including the year 2000 or any
subsequent year ("Year 2000 Compliant"). The Company has determined that it will
need to upgrade its software to render the Tulsa facility's systems Year 2000
Compliant and expects to complete such upgrade/replacement within the next 12
months. There can be no assurance that such upgrade/replacement will begin as
planned or, if begun, will be completed in a timely and cost-effective manner.
If the upgrade/replacement is not completed when planned, the inability of the
Tulsa location's software to accurately process dates may adversely affect the
Company's production schedule. The Company has not discussed these compliance
issues with its suppliers or customers and does not know whether such suppliers
12
<PAGE>
or customers are, or have taken any actions with respect to becoming, Year 2000
Compliant. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Year 2000 Compliance."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,300,000 shares
of Common Stock offered hereby are estimated to be $27.3 million ($31.4 million
if the Underwriters' over allotment option is exercised in full), after
deducting the estimated expenses of the Offering and assuming an initial public
offering price of $13.00 per share. The Company anticipates using such net
proceeds to repay certain debt, pursue strategic acquisitions, expand
manufacturing capacity, finance working capital requirements and fund other
general corporate purposes.
Specifically, the Company anticipates using $3.9 million of the
proceeds to retire $3.5 million of term debt with Magna Bank, N.A. (the "Bank")
and a mortgage for $0.4 million held by the Oklahoma Industrial Finance
Authority secured by the Company's Tulsa, Oklahoma facility.
Pending the use of the net proceeds from the sale of the shares of
Common Stock as described above, such funds will be used to reduce temporarily
the principal balance under the Company's credit facility, as amended, with the
Bank, dated as of March 30, 1998 (the "Credit Facility"), which provides for the
availability of up to $15.0 million of borrowings until March 31, 2000. At March
31, 1998, the outstanding principal balance under the Credit Facility was $1.5
million, the effective interest rate thereon was 7.09% and the unused
availability thereunder was approximately $13.5 million. After application of
the net proceeds of this Offering to the temporary repayment of the outstanding
principal balance on the Credit Facility, the Company intends to make additional
borrowings under the Credit Facility for the foregoing purposes.
The unused net proceeds from the sale of Common Stock and the Credit
Facility may be used to support the Company's strategies to acquire businesses
or develop additional products and services. Although the Company has had and
expects to have discussions with potential acquisition candidates it does not
have any present agreements or understandings with respect to any specific
acquisitions. Changes in the proposed use of net proceeds may be made in
response to, among other things, changes in the Company's plans and its future
revenues and expenditures, as well as changes in general industry conditions and
technology. Furthermore, no general corporate purpose has been specifically
identified by the Company at this time.
The Company believes that the net proceeds of this Offering, cash flow
from operations, trade credit and its existing line of credit will be sufficient
to meet its immediate cash needs and finance its plans for expansion for the
indefinite future. This belief is based upon certain assumptions regarding the
Company's business and cash flow as well as prevailing industry and economic
conditions. The Company's capital requirements may vary significantly, depending
on how rapidly management seeks to expand the business and the expansion
strategies elected.
DIVIDEND POLICY
Subsequent to the Offering the Company intends to retain any future
earnings for use in the operation and expansion of its business. As a result the
Company does not anticipate declaring any dividends on its Common Stock in the
foreseeable future. Any future determination with regard to the payment of
dividends will be at the discretion of the Board and will be dependent upon the
Company's future earnings, financial condition, capital requirements and other
relevant factors. Currently the Credit Facility prohibits the payment of cash
dividends on the Common Stock without the Bank's prior written consent.
13
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock as of
December 31, 1997, was approximately $16.6 million or $2.81 per share. Net
tangible book value per share represents the Company's total tangible assets
less total liabilities, divided by the total number of shares of Common Stock
outstanding.
After giving effect to the sale of the 2,300,000 shares of Common Stock
offered by the Company hereby and the receipt of the estimated net proceeds
therefrom of $27.3 million, the pro forma net tangible book value of the Company
as of December 31, 1997, would have been approximately $43.9 million or $5.35
per share. This represents an immediate increase in net tangible book value of
$2.54 per share to existing shareholders and an immediate dilution in net
tangible book value of $7.65 per share to investors in the Offering. The
following table illustrates the per share dilution as of December 31, 1997.
Assumed initial public offering price
per share ...................................... $ 13.00
Net tangible book value per share as
of December 31, 1997 ........................ $2.81
Increase per share attributable to
investors in the Offering ................... 2.54
-----
Pro forma net tangible book value per share
after the Offering ............................. 5.35
-------
Dilution in net tangible book value per share
to investors in the Offering ................... $ 7.65
=======
The following table sets forth on a pro forma basis as of December 31,
1997 the number of shares purchased from the Company, the total consideration
paid and the average price per share paid by the existing shareholders and
investors in the Offering:
<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 9.79% $ 1.82
Investors in the Offering ...... 2,300,000 28.0% 29,900,000 90.21% $13.00
--------- ---- ---------- -------
Total.................. 8,208,471 100.0% $ 33,146,224 100.0%
</TABLE>
The foregoing table excludes 131,600 new shares of Common Stock issued
on May 1, 1998 as compensation to or purchased by Lawrence J. LeGrand, Chief
Operating Officer of the Company, and assumes an initial public offering price
of $13.00 and that none of the currently outstanding rights to purchase Common
Stock will be exercised. At March 31, 1998, options to purchase 243,377 shares
at a weighted average exercise price of $2.41 per share were outstanding. To the
extent any of these options are exercised, there will be further dilution to
investors in the Offering. See "CAPITALIZATION" and Note 8 to the Consolidated
Financial Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth as of December 31, 1997, the cash and
cash equivalents, short-term debt and capitalization of the Company (i) on an
actual basis; and (ii) as adjusted to give effect to the sale by the Company of
2,300,000 shares of the Common Stock offered hereby and the application of the
estimated net proceeds therefrom. This table should be read in conjunction with
the Consolidated Financial Statements and the Notes thereto and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
included elsewhere in this Prospectus.
December 31, 1997
-----------------
(in thousands, except
share data)
Actual As Adjusted(1)
------ --------------
Cash and cash equivalents............................. $ 244 $ 23,591
====== ==========
Short-term debt, including current
portion of long-term debt . . . . ................ $ 817 $ 317
====== ==========
Long-term debt, less current portion................ $9,274 $ 5,864
------ ----------
Stockholders' equity:
Preferred Stock, $0.02 par value; 2,000,000
shares authorized; none issued or
outstanding actual and as adjusted............... -- --
Common Stock, $0.02 par value; 28,000,000
shares authorized, 5,908,471(2) issued and
outstanding actual; 8,208,471(2) issued and
outstanding as adjusted ......................... 118 164
Additional paid-in capital........................ 1,543 28,754
Retained earnings ................................ 15,090 15,090
------- --------
Total stockholders' equity.............. 16,751 44,008
------- --------
Total capitalization................. $26,024 $49,872
======= =======
(1) Reflects the sale by the Company of 2,300,000 shares of the Common Stock
offered hereby at an assumed public offering price of $13.00 per share less
underwriting discounts and commissions and estimated offering expenses and
the application of the estimated net proceeds therefrom. See "USE OF
PROCEEDS."
(2) Reflects shares of Common Stock outstanding as of December 31, 1997.
Excludes 1,271,585 shares of Common Stock reserved, as of the date of
this Prospectus, for issuance upon exercise of options granted under the
Company's stock based compensation plan. Also excludes 131,600 new shares
of Common Stock issued on May 1, 1998 as compensation to, or purchased by,
Lawrence J. LeGrand, Chief Operating Officer of the Company. See
"MANAGEMENT -- Benefit Plans."
15
<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 statement of operations and balance sheet data are
derived from the audited consolidated financial statements of the Company. The
consolidated financial statements for the years ended December 31, 1995, 1996
and 1997, have been audited by Ernst & Young LLP, independent auditors. The
selected consolidated financial data should be read in conjunction with the
consolidated financial statements of the Company, including the notes thereto,
and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
(in thousands, except Shares and per share data)
1993(1) 1994 1995 1996 1997
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales........................ $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080
Cost of sales.................... 15,041 17,274 20,366 26,725 38,932
------ ------ ------ ------ ------
Gross profit..................... 3,342 3,437 5,058 8,291 16,148
Selling, general &
administrative expense......... 3,063 3,337 3,883 5,256 6,549
------ ----- ----- ----- -----
Income from operations........... 279 100 1,175 3,035 9,599
Interest expense................. (347) (522) (1,038) (1,123) (1,020)
Other (expense) income(2), net... 293 263 (48) 15 10
----- ------ ------- ------ ------
Income (loss) before income taxes 225 (159) 89 1,927 8,589
Provision for income taxes......... 381 (62) 52 740 3,306
------ -------- ------ ------ ------
Net income (loss)................ $ (156) $ (97) $ 37 $ 1,187 $ 5,283
======= ======= ======= ======= =======
Net income (loss) per common
share(3):
Basic......................... $ (0.03) $(0.02) $0.01 $0.21 $0.91
Diluted....................... $ (0.03) $(0.02) $0.01 $0.20 $0.89
Weighted average shares
outstanding.................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700
16
<PAGE>
Other Financial Data:
EBITDA(4)........................ $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788
Capital expenditures............. 1,732 4,746 1,736 1,316 3,856
Gross profit margin.............. 18.2% 16.6% 19.9% 23.7% 29.3%
EBITDA margin.................... 10.2% 8.5% 12.2% 14.5% 21.4%
December 31,
---------------------------------------------------------------------
(in thousands)
1993 1994 1995 1996 1997
---- ---- ---- ---- -------------------------
Actual As Adjusted(5)
Balance Sheet Data: ------ --------------
Cash and equivalents............. $ 483 $ 151 $ 181 $ 205 $ 244 $ 23,591
Working capital.................. 6,111 6,933 8,919 8,626 11,256 35,104
Total assets..................... 18,724 25,454 27,370 29,046 33,269 56,977
Total long-term debt, excluding
current portion ............... 7,000 11,620 12,674 10,735 9,274 5,864
Stockholders' equity............. 9,220 9,147 9,966 11,161 16,751 44,008
<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
material. Pro forma net income of $5,398 (versus historical net income
of $5,283 shown above) is the amount net income would have been if the
$3.9 million debt anticipated to be retired with the offering proceeds
had been retired at the beginning of the period. Pro forma net income
per common share of $0.66 and $0.66, basic and diluted, respectively,
reflects the increase in the number of shares of Common Stock to be sold
in the Offering, and the increase in net income due to the debt
retirement.
(4) EBITDA represents earnings before interest, income taxes, depreciation
and amortization. EBITDA is presented because it is a widely accepted
financial indicator used by many investors and analysts to analyze and
compare companies on the basis of operating performance. EBITDA as
presented may not be comparable to similarly titled indicators reported
by other companies because not all companies necessarily calculate EBITDA
in an identical manner and therefore it is not necessarily an accurate
means of comparison between companies. EBITDA is not intended to
represent cash flows or funds available for management's discretionary
use for the periods listed nor has it been presented as an alternative to
operating income as an indicator of operating performance and should not
be considered in isolation or as a substitute for indicators of
performance prepared in accordance with generally accepted accounting
principles.
17
<PAGE>
(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>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Consolidated Financial Information," the Consolidated Financial Statements and
the Notes thereto and the other financial information included elsewhere in this
Prospectus.
History
The business of the Company was founded by the Leonard family in 1948.
For 50 years the Company has continued to grow as a supplier of precision metal
components to the aerospace industry. In January 1984, the present principal
shareholders of the Company acquired a controlling ownership and established a
strategy for growth and market expansion. Part of that strategy was to establish
facilities near the Company's principal customers. As a result, the Company
opened its Wichita, Kansas facility near Boeing Wichita in 1984 and in 1988,
opened its Auburn, Washington facility near Boeing Seattle. The Company
continued its expansion in 1989 by adding a second manufacturing center to its
principal location in St. Charles, Missouri to handle increasing work volume and
expand its technical capabilities. In 1995, the Company continued its strategy
of opening facilities near customers and expanded its value-added service
capability by establishing its chemical milling and metal finishing operation,
LMI Finishing, Inc., in Tulsa, Oklahoma in close proximity to Boeing North
American. As a result of its expansion and at the conclusion of the most recent
cyclical downturn in the aerospace industry, the Company was positioned to
capitalize on the rapid growth in production of commercial, corporate and
regional aircraft that began in 1995. In connection with the Company's
acquisition strategy, the Company changed its name to LMI Aerospace, Inc. and
established Leonard's Metal, Inc., a wholly-owned subsidiary, to operate the
present fabrication business of the Company.
Overview
LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of
formed, close tolerance aluminum and specialty alloy components for use by the
aerospace industry. The Company has been engaged in manufacturing components for
a wide variety of aerospace applications. Components manufactured by the Company
include leading edge wing slats, flaps and lens assemblies; cockpit window frame
assemblies; fuselage skins and supports; and passenger and cargo door frames and
supports. The Company maintains multi-year contracts with leading original
equipment manufacturers ("OEMs") and primary subcontractors ("Primes") of
commercial, corporate, regional and military aircraft. Such contracts, which
govern virtually all of the Company's sales, designate the Company as the sole
supplier of the aerospace components sold under the contracts. Customers include
Boeing, Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair,
DeHavilland and PPG. The Company manufactures approximately 14,000 parts for
integration into such models as Boeing's 737, 747, 757, 767 and 777 commercial
aircraft, Canadair'S RJ regional aircraft, Gulfstream's G-IV and G-V corporate
aircraft, and Lockheed Martin's F-16 and C-130 military aircraft.
18
<PAGE>
Net sales consist primarily of sales of aerospace components
manufactured or assembled by the Company to OEMs and Primes. Virtually all of
the Company's net sales are governed by multi-year contracts which designate the
Company as the sole supplier of the components supplied by the Company. Such net
sales are recorded when finished components are shipped. Included in cost of
sales are: (i) direct manufacturing costs of components sold, such as aluminum
sheet metal, extrusion and other materials; labor required to fabricate,
assemble and finish the components; and purchased outside services such as
forming, milling, painting and finishing not performed by the Company, and (ii)
manufacturing overhead, including indirect labor, fringe benefits, supplies,
maintenance, depreciation, insurance and other miscellaneous items. Selling,
general and administrative expenses consist primarily of compensation and
related benefits to certain administrative employees, communications and
professional fees.
For the five-year period ended December 31, 1997, the Company's revenue
increased at a compound annual rate of 32% from $18.4 million to $55.1 million.
During the same period, operating income increased from $279,000 to $9.6
million. Net income, which was generally breakeven from 1993 to 1995, increased
to $1.2 million in 1996 and $5.3 million in 1997. At December 31, 1997, the
Company's backlog of customer orders scheduled for delivery within the next
twelve months increased to a record level of $40.5 million from $34.1 million at
December 31, 1996.
In 1994, the Company implemented "lean manufacturing" techniques to
improve the efficiency and productivity of its operations. Through lean
manufacturing, the Company seeks to eliminate waste generated in the movement of
people, in the use of materials and products, in lengthy set-ups, in production
breaks and by misused space. The Company's lean manufacturing techniques
include: one piece work flow as opposed to batch processing, pull versus push
production control and scheduling systems, and simple, but disciplined,
housekeeping and organization techniques. The Company believes such techniques,
implemented through the Company's team structure and reinforced with employee
stock ownership and its incentive bonus programs, have contributed to its
improved performance.
Results of Operations
The following table sets forth selected statements of operations data
for the periods indicated expressed as a percentage of net sales:
Year Ended December 31,
--------------------------------------
1995 1996 1997
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 80.1 76.3 70.7
----- ----- -----
Gross profit 19.9 23.7 29.3
Selling, general and
administrative expense 15.3 15.0 11.9
----- ----- -----
Income from operations 4.6 8.7 17.4
Interest expense (4.1) (3.2) (1.8)
Other expense, net (0.2) -- --
----- ---- ----
Income before income tax 0.3 5.5 15.6
Provision for income taxes 0.2 2.1 6.0
--- ----- -----
Net income 0.1% 3.4% 9.6%
===== ===== =====
19
<PAGE>
Year Ended December 31, 1997 compared to Year Ended December 31, 1996
Net Sales. Net Sales for 1997 increased 57.3% to $55.1 million from
$35.0 million for 1996. This increase in net sales was primarily due (i) to
increased orders from customers for components historically fabricated by the
Company resulting from increased demand for commercial and corporate/regional
aircraft, (ii) orders for components not previously fabricated by the Company
and (iii) successful re-negotiation of prices for certain components and
assemblies fabricated for the Company's customers. Net sales also were favorably
impacted by the 1995 introduction of metal finishing services. The Company has
implemented several programs designed to increase its manufacturing capacity.
Gross Profit. Gross profit in 1997 increased 94.8% to $16.1 million (or
29.3% of net sales) from $8.3 million (or 23.7% of net sales) in 1996. This
improvement in gross profit was primarily due to: (i) the increase in sales
volume, resulting in a greater absorption of fixed costs, (ii) beneficial
impacts from the Company's employment of lean manufacturing techniques, (iii)
expanded employee training programs and (iv) targeted capital investment over
recent years.
Direct manufacturing cost of components sold increased to $17.2 million
(31.2% of sales) in 1997 from $11.1 million (31.7% of sales) in 1996.
Additionally, in manufacturing overhead, indirect labor and fringe benefits
included in cost of sales increased by $4.7 million to $14.4 million in 1997
(26.1% of net sales) from $9.7 million (27.7% of net sales) in 1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.2 million to $6.5 million (11.9% of net
sales) in 1997 from $5.3 million (15.0% of net sales) in 1996. Costs for wages,
salaries and related fringe benefits included in selling, general and
administrative expenses accounted for $1.0 million of this increase, rising to
$4.1 million (7.4% of net sales) in 1997 from $3.1 million (8.9% of net sales)
in 1996. Also included in 1996 selling, general and administrative expenses was
an estimated expense of $250,000 for legal and remediation costs related to a
parcel of property purchased by the Company in 1992 that was subsequently found
to contain limited environmental contaminants (the "Clean Up Costs"). The
Company believes that such expense was a one time cost. A portion of such costs
was related to legal fees incurred as a result of a lawsuit brought by the
Company against the former owners of the contaminated property for breach of
contract. As of the date of this Prospectus, no judgment had been rendered. The
remainder of such costs was primarily incurred as a result of certain monitoring
and clean up activities conducted by the Company in accordance with the Missouri
Department of Natural Resources Voluntary Cleanup Program (the "Voluntary
Compliance"). See Note 10 to the Consolidated Financial Statements.
Interest Expense. Interest expense decreased slightly to $1.0 million
in 1997 from $1.1 million in 1996. Such decrease resulted primarily from
decreased borrowings. In early 1998, the Company negotiated a new lending
agreement which replaced the outstanding revolving credit agreement,
subordinated debt, and demand note to a shareholder, substantially reducing the
Company's cost of borrowing.
Provision for Income Taxes. The effective income tax rate for 1997 and
1996 was 38.5% and 38.4%, respectively, resulting in total tax expense of $3.3
million in 1997 and $0.7 million in 1996.
Net Income. As a result of the foregoing the net income of the Company
increased 445.1% to $5.3 million (or 9.6% of net sales) in 1997 from $1.2
million (or 3.4% of net sales) in 1996.
Year Ended December 31, 1996 compared to Year Ended December 31, 1995
Net Sales. Net Sales increased 37.7% in 1996 to $35.0 million from
$25.4 million in 1995. This increase was driven by an overall improvement in the
commercial aircraft market and sales to a new customer in the corporate/regional
market.
Gross Profit. Gross profit in 1996 increased 63.9% to $8.3 million
(23.7% of net sales) from $5.1 million (19.9% of net sales) in 1995. This
improvement resulted from a dramatic turnaround in operations in the Company's
subsidiary in Tulsa, Oklahoma. The Company opened the subsidiary in 1995 and
experienced a negative gross profit of $0.4 million. During 1996, the subsidiary
earned a gross profit of $0.6 million, an improvement of $1.0 million. The
remaining improvement was due to better absorption of fixed expenses generated
by the increase in net sales.
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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.
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<PAGE>
The Company's ability to make scheduled principal or interest payments
or to refinance its indebtedness will depend upon its future operating
performance and cash flow, which are subject to prevailing economic conditions,
prevailing interest rate levels, and financial, competitive, business and other
factors, many of which are beyond its control, as well as the availability of
borrowings under the Credit Facility or successor facility.
The Company has historically made significant capital expenditures to
allow for growth. This trend is expected to continue in 1998 as the Company
plans additional capital investment of approximately $4.0 million. Also,
additional working capital will be needed pursuant to the strategic initiative
of the Company to provide higher value added capabilities through fabrication
and the subcontracting of components for assemblies required by its customers.
The Company's working capital needs are generally funded through cash
flows from operations and a revolving credit agreement. The Company generated
$2.7 million and $5.8 million in cash from operating activities in 1996 and
1997, respectively, which was used, in part, to finance investment in property,
plant and equipment of $1.3 million and $3.9 million, respectively in such
years. Also, in such periods, the Company used cash from operating activities to
pay down indebtedness.
The Company believes that its existing financing facilities together
with its cash flow from operations will provide sufficient capital to fund
operations, make the required debt repayments and meet anticipated capital
spending needs. However, there can be no assurance that the Company will
continue to generate sufficient cash flow at or above current levels. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its indebtedness, it may be required to refinance all or a portion of
its existing indebtedness or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained at all or on favorable terms.
Year 2000 Compliance
Many information systems and software were designed and developed
without consideration to the impact of the next millennium and accordingly, may
not be Year 2000 Compliant. As a result of a recent upgrade/replacement, the
information systems and software at all of the Company's locations, other than
Tulsa, are Year 2000 Compliant. The Company will need to upgrade and/or replace
the software used by the Tulsa facility in order to render such systems Year
2000 Compliant. The Company expects to complete implementation of the
upgrade/replacement within the next 12 months and estimates the cost will not be
material. The Company has not discussed these compliance issues with its
suppliers or customers and does not know whether such suppliers or customers
are, or have taken any actions with respect to becoming, Year 2000 Compliant.
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BUSINESS
General
LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of
formed, close tolerance aluminum and specialty alloy components for use by the
aerospace industry. For approximately 50 years, the Company has been engaged in
manufacturing components for a wide variety of aerospace applications.
Components manufactured by the Company include leading edge wing slats, flaps
and lens assemblies; cockpit window frame assemblies; fuselage skins and
supports; and passenger and cargo door frames and supports. The Company
maintains multi-year contracts with leading original equipment manufacturers
("OEMs") and primary subcontractors ("Primes") of commercial, corporate,
regional and military aircraft. Such contracts, which govern virtually all of
the Company's sales, designate the Company as the sole supplier of the aerospace
components sold under the contracts. Customers include Boeing, Lockheed Martin,
Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland and PPG. The
Company manufactures approximately 14,000 parts for integration into such models
as Boeing's 737, 747, 757, 767 and 777 commercial aircraft, Gulfstream's G-IV
and G-V corporate aircraft, Canadair's RJ regional aircraft, and Lockheed
Martin's F-16 and C-130 military aircraft.
In addition to supplying quality components the Company provides its
customers with value-added services, including engineered tool design,
production and repair; heat treating; chemical milling; assembly; and metal
finishing processes, such as polishing and painting. The Company believes that
such value-added services provide significant benefits to its customers
including: (i) reduced administrative costs resulting from the Company's ability
to serve as a single point of purchase for a wide array of required products and
services, (ii) faster, more efficient production rates, and (iii) greater
consistency in meeting scheduled delivery dates. As a result, the Company
believes that its value-added services are an increasingly important factor in
the selection of the Company to provide aerospace components.
For the five-year period ended December 31, 1997, the Company's revenue
increased at a compound annual rate of 32% from $18.4 million to $55.1 million.
During the same period operating income increased from $279,000 to $9.6 million.
Net income, which was generally breakeven from 1993 to 1995, increased to $1.2
million in 1996 and $5.3 million in 1997. At December 31, 1997, the Company's
backlog of customer orders scheduled for delivery within the next twelve months
increased to a record level of $40.5 million from $34.1 million at December 31,
1996.
The Company believes that it is well positioned to benefit from several
industry trends, including: (i) increased new aircraft production; (ii)
increased outsourcing by OEMs and Primes; (iii) a decrease in the number of
preferred suppliers of aerospace components; and (iv) increased consolidation of
aerospace component suppliers.
Industry Outlook
The aerospace components industry currently is enjoying favorable
trends driven by strong growth in production of new commercial, corporate and
regional aircraft. As OEMs searched for cost cutting opportunities during the
aerospace industry recession of the early part of this decade, aerospace
component manufacturers, including the Company, were forced to accept
lower-priced, smaller orders to maintain market share, which resulted in lower
profit margins. However, in recent years, aerospace component manufacturers have
benefitted as production rates in the aerospace industry have increased. These
increased production rates have created capacity constraints among OEMs and
Primes, resulting in longer lead times for scheduled product delivery.
Accordingly, OEMs and Primes are actively seeking to negotiate multi-year
contracts with qualified aerospace components suppliers, like the Company, in an
attempt to assure adequate production capacity for required components.
The Company believes that there are numerous barriers to entry into the
aerospace components industry. These barriers include: (i) proven expertise in
close tolerance manufacturing techniques; (ii) required compliance with
increasingly stringent quality standards imposed by OEMs and Primes; (iii)
implementation of the publicly announced plans of OEMs and Primes to reduce the
number of preferred suppliers of aerospace components; and (iv) significant
initial capital investment and tooling requirements necessary for the
manufacture of certain aerospace components.
The Company believes the following trends are affecting the aerospace
components industry:
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Increased Demand for New Aircraft. Aircraft manufacturers are currently
experiencing record levels of new orders. The market for new commercial aircraft
is estimated at $50 billion, the market for corporate jet aircraft is
estimated at $6 billion and the market for regional jet aircraft is estimated
at $3 billion.
According to Boeing's 1997 Current Market Outlook (the "Boeing
Report"), annual deliveries of commercial aircraft can be expected to
increase from approximately 400 in 1996 to more than 700 in 1998,
increasing the worldwide fleet of aircraft from 11,500 at the end of
1996 to over 16,000 at the end of 2001 and over 23,000 at the end of
2016. Additionally, expenditures for new commercial aircraft production
are expected to total approximately $490 billion for the period from
1996 to 2006. Such increases result from the need of aircraft operators
to accommodate a projected 75% increase in global air travel through
the year 2006. The demand for commercial aircraft is rapidly increasing
as a result of the following: (i) increasing profitability of airline
operators; (ii) a worldwide increase in miles flown by existing
aircraft; and (iii) the need to modify or replace older aircraft to
comply with more stringent governmental noise and safety regulations.
According to the Allied Signal Annual Business Aviation Outlook dated
September 1997 (the "Allied Report"), 2,300 new corporate jet aircraft
are expected to be delivered from 1997 through 2001, a 61% increase
over the previous five-year period. The demand for corporate aircraft
is rapidly increasing as a result of the following: (i) the
introduction of new, larger and more efficient aircraft; (ii) the
growing popularity of fractional aircraft ownership; (iii) the minimal
availability of used aircraft; (iv) the need for long-range flights to
expanding international markets; (v) the increased demand for more
expedient travel; and (vi) the continued surge in corporate
profitability and the U.S. stock market.
Regional jets, 32-70 seat passenger jets, are the most rapidly growing
market segment in commercial aircraft. Annual deliveries are estimated
to double from 96 units in 1997 to more than 210 by 2000. The demand
for regional jets is rapidly increasing as a result of the following:
(i) ability to pull passengers into major airline hubs or bypass hubs
altogether; (ii) expanded frequency of service on routes served by
larger jets; (iii) break even load factors are much lower on regional
airlines than on majors; (iv) extended range relative to previously
utilized regional turboprops; and (v) ability to service routes which
would otherwise be unprofitable if served by larger jets.
In addition to demand related to production of new aircraft, the
aerospace components industry is benefiting from an increasing demand
for aftermarket components resulting from the growing number of
aircraft in service.
Increased Outsourcing. Suppliers of aerospace components, including the
Company, have benefitted from an accelerating trend for OEMs and Primes to
outsource a greater percentage of the components required to produce new
aircraft. Boeing has indicated that it intends to increase from 48% to 52% the
portion of each aircraft purchased from outside sources. Outsourcing allows OEMs
and Primes to focus their resources on assembly and integration by employing the
expertise of aerospace components suppliers, such as the Company, which have
developed specialized tooling and manufacturing and finishing techniques and
have achieved economies of scale unavailable to individual OEMs and Primes. Such
a focus benefits the OEMs and Primes by: (i) increasing the production rates
achievable by the OEMs and Primes through the integration of higher level
sub-assemblies and components, and (ii) limiting their capital investment by
eliminating the need for sophisticated equipment, machinery and systems required
to manufacture certain components. As OEMs and Primes continue to become more
cost and value conscious, the Company anticipates that the trend toward
outsourcing will continue to accelerate.
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<PAGE>
Reduction in Number of Preferred Suppliers. In an attempt to increase
quality and service, reduce purchasing costs and streamline purchasing
decisions, OEMs and Primes have formed relationships with an increasingly
smaller number of preferred suppliers. The Company believes that during the last
few years OEMs and Primes have significantly reduced the number of component
suppliers with which they do business. In each case to date where the Company
had an established relationship, the Company has benefitted from such reduction
in suppliers. The Company believes that due to its strong customer relationships
and its long-standing reputation for quality and reliability, OEMs and Primes
will continue to select the Company as one of their preferred suppliers.
Industry Consolidation. Suppliers of aerospace components have been
undergoing consolidation. The Company believes that several factors are
contributing to this consolidation, including: (i) the high level of
fragmentation within the industry; (ii) the consolidation of the OEM and Prime
industry; (iii) an effort by OEMs and Primes to reduce their supplier bases; and
(iv) the increased demands placed on suppliers to provide value-added content
and services.
Competitive Strengths
The Company has been providing products and services to the aerospace
industry for approximately 50 years and believes it has gained a reputation for
consistent high quality and reliability. Because of its strong market position,
the Company believes that it enjoys broader name recognition, closer customer
relations and greater business opportunities than are available to many of its
competitors. The Company also believes that it is well-positioned to take
advantage of the current trends and expected growth in the aerospace components
industry as a result of the following competitive strengths:
Consistent On-Time Delivery. The Company's manufacturing systems and
procedures undergo continuous review and refinement to ensure the timely and
consistent delivery of aerospace components to its customers. The Company's work
center teams, together with its process engineering group, employ lean
manufacturing techniques to design efficient administrative and manufacturing
processes in order to meet customers' component specifications and scheduling
requirements. These systems and procedures have allowed the Company to establish
a reputation for reliability with its customers and provided a foundation for
the Company's growth.
Key Customer Relationships. The Company actively seeks to develop close
relationships with its customers and as a result enjoys multi-year contracts
with many of its customers, including certain of the Boeing business units,
Lockheed Martin, Northrop Grumman, Learjet, Canadair and PPG. Such contracts,
which govern virtually all of the Company's sales, designate the Company as the
sole supplier of the aerospace components sold under the contracts. The Company
believes that its strong customer relationships provide it with a significant
competitive advantage in obtaining and securing new business opportunities.
Supplier of Value-Added Content. The Company manufactures formed, close
tolerance aluminum and specialty alloy components designed for a variety of
harsh, demanding environments, which often require high tensile strength,
toughness, durability and resistance to corrosion and metal fatigue. To meet
these demands and enhance its reputation as a single point of purchase to the
aerospace industry, the Company has developed significant capabilities to
deliver value-added content and services. Such capabilities include tool making,
heat treating, assembly, chemical milling and metal finishing processes such as
polishing and painting. The Company believes that such services provide
significant benefits to its customers including: (i) reduced administrative
costs resulting from the Company's ability to serve as a single point of
purchase for a wide array of required products and services, (ii) faster, more
efficient production rates, and (iii) greater consistency in meeting scheduled
delivery dates. As a result, the Company believes that its value-added services
are an increasingly important factor in the selection of the Company to provide
aerospace components.
Consistent Component Quality. The Company has implemented a series of
programs designed to maintain and continually improve the quality of the
components manufactured. The Company's quality assurance and control team is
composed of approximately 50 persons and is charged with implementing the
Company's vigorous auditing and testing program. In March 1998, the Company
25
<PAGE>
received certification of compliance with Boeing's new and stringent D1-9000
(Rev. A) quality standards. The Company believes that the substantial expense
necessary to meet the stringent quality demands of OEMs and Primes represents a
barrier to entry into the aerospace components industry.
Active Employee Involvement. The Company believes that it benefits
significantly from the creative and intellectual resources of its employees and
aggressively seeks to involve its employees in all aspects of its business.
Through continual education and training, stock ownership, incentive based
compensation (including profit sharing and bonus programs) and a work center
team organization, the Company has developed a skilled and flexible work force
capable of adapting quickly to the varied demands of its customers. The Company
further believes that such extensive employee involvement enables the Company to
continually improve its processes and efficiency, maintain consistent on-time
delivery, provide quality products and control costs.
Geographic Proximity to Customers. Consistent with its strategic plan,
as opportunities for significant growth have occurred, the Company has located
its facilities in close geographic proximity to the principal production
facilities of its customers. The Wichita facility is close to Boeing Wichita;
the Auburn facility is near Boeing Seattle; and the Tulsa facility is close to
Boeing North American. Geographic proximity to customers provides the Company
with opportunities for strengthening customer relationships by allowing for
quicker responses to customer demands. Customers' needs for offload work,
emergency spares and replacement components which require a very quick turn
time, can be met more easily and both shipping time and costs are reduced.
Additionally, close proximity facilitates interaction between the engineering
and production personnel of the Company and its customers and allows for a more
efficient resolution of production issues.
Growth Strategy
The Company's primary objective is to expand its position as a leading
components supplier to the aerospace industry through the application of a
comprehensive business strategy combining various customer service, operating
and growth objectives.
Capitalize on Favorable Industry Trends. The Company believes its
strong market position and alignment with many of the leading OEMs and Primes
will enable it to benefit from several industry trends, allowing it to increase
production capabilities and expand operations to meet anticipated increases in
demand.
Pursue Strategic Acquisitions. The Company seeks to leverage its core
capabilities in existing and new markets by identifying and pursuing
complementary acquisitions in the aerospace industry that offer strategic value,
such as cost savings, increased manufacturing capacity, increased process
capability and/or new customer relationships. The Company believes that the
fragmented nature of the industry for aerospace components should provide the
Company with additional opportunities to exploit industry consolidation trends.
Expand Aftermarket Presence. Historically the Company's components have
been supplied primarily for use in the construction of new aircraft. The Company
believes that a substantial opportunity exists for sales growth through greater
emphasis on the market for components used in the repair and maintenance of
existing aircraft. In 1997 industry sources estimated the global aviation
aftermarket to be $47 billion annually and projected that it would grow to $60
billion by the year 2000. The Company intends to increase its penetration of the
aerospace components aftermarket by expanding its product and service offerings
in response to the inventory needs of aftermarket participants, tailoring its
delivery procedures to meet the specific requirements of this market and
increasing its sales and marketing efforts to increase awareness by such
participants of the Company's capabilities.
Diversify Customer Base. The Company believes that opportunities exist
to establish additional relationships with OEMs, Primes and distributors of
aerospace products not currently supplied by the Company. In addition, the
Company is currently marketing its capabilities to unserved business units of
its current customers.
Expand Integration Capabilities. The Company intends to grow by
increasing the array of manufacturing, assembly and finishing services which it
can offer existing and prospective customers by expanding its capability to
integrate parts into higher level aerospace components. The Company believes
26
<PAGE>
that such integration capability will enhance its reputation as a single point
of purchase for the aerospace industry. Furthermore, the Company believes that
by expanding its integration capabilities it will increase its relative
importance to its customers and expand its revenue content per plane.
Customers
The Company manufacturers and supplies approximately 14,000 parts to
leading OEMs and Primes of commercial, corporate, regional and military
aircraft, primarily under multi-year contracts. Such contracts designate the
Company as the sole supplier of the aerospace components sold under the
contracts. Customers include the following leading OEMs and Primes:
Commercial Platforms
---------- ---------
Boeing 737 Classic, 737 Next Generation ("737NG"),
707, 727, 747, 757, 767 and 777
Northrop Grumman 747, 757 and 767
PPG 737NG, 747, 767, 777 and MD-80
National Machine 737NG
Canadair 767
Corporate and Regional
Gulfstream G-IV and G-V
Canadair Regional Jet and Challenger 604
Learjet Models 31, 45 and 60
DeHavilland CL415 and Dash-8
Boeing 737 Business Jet
Nordam Citation V, VII, VIII, Ultra, Bravo and Excel,
Lear 60, and Beech 400A
PPG Citation III, VII, X and Excel
Northrop Grumman G-IV
Military
Lockheed Martin F-16 and C-130
Boeing AWACS, F-18 and F-15
The Company has a long-standing relationship with Boeing, which has
steadily grown to include several Boeing business units, including Boeing
Seattle, Boeing North American, and Boeing Helicopter. During 1995, 1996 and
1997, direct sales of Boeing business units accounted for a total of
approximately 45%, 46% and 59% of the Company's sales, respectively. According
to industry sources, Boeing holds more than a 50% share of the worldwide
commercial aircaft market. Each of Boeing's business units operate to a
significant degree as autonomous manufacturers, and as such, the Company has
entered into one or more multi-year contractual relationships with many of the
Boeing business units with which it does business. In general, these agreements
provide for: (i) payment on a net 30 day basis; (ii) termination for convenience
upon 30 days notice; (iii) reasonable manufacturing lead time for delivery of
components; (iv) limitations on and specifications for the scope of work to be
performed; and (v) pricing of components by quotes. In addition, these contracts
are typically "requirements" contracts under which the purchaser commits to
purchase a given portion of its requirements of a particular component from the
Company. Specific orders are placed with the Company on a periodic basis
covering delivery dates as far in the future as the year 2000. The Company
believes that its relationship with Boeing extends beyond the expressed language
of the multi-year contracts and primarily is based on the perceived benefits of
the relationship.
Products
The Company is a leading fabricator, finisher and integrator of formed,
close tolerance aluminum and specialty alloy components for use by the aerospace
industry. For approximately 50 years, the Company has been engaged in
manufacturing components for a wide variety of aerospace applications. All
components are fabricated from designs prepared and furnished by its customers.
The following table describes some of the Company's principal products
(consisting of manufactured components and assemblies) and the models into which
they are integrated:
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Product Aircraft Platform
------- -----------------
Wing leading edge skins, flapskins 737 NG
Detail interior components Boeing 737
Classic, 737 NG, 707, 727, 747, 757,
767, 777 and C-130
Wing panels and floorbeams 747
Door assembly structural details 737
Classic, 737 NG, 747 and 757,
Challenger 604, Regional Jet, F-16
and C-130
Thrust reversers and engine G-IV, CL415, 737 Classic and 777
nacelles/cowlings
Cockpit window frames and landing 737NG, 747, 767, 777, Citation III,
light lens assembly VII and Excel, DC-8 and 9, MD-80,
KC-10 and F-16
Fuselage and wing skin Models 45 and 60
Dash-8
737 Classic, 737 NG, 747, 757, 767,
777, C-130 and F-16
Structural sheet metal & Various models
extruded components
Once a customer submits specifications for a product, the Company
utilizes its 40 person engineering and planning group to evaluate and develop
the tooling requirements, design the manufacturing process and prepare a product
flow plan. The Company utilizes an advanced computer assisted design system to
translate customer provided specifications into computer numerical control
("CNC") instructions for use with many of the Company's forming and milling
equipment.
Manufacturing Processes
The manufacturing facilities are organized on a work center basis
focusing on a particular manufacturing process. Each work center is staffed by a
team of operators who are supported by a supervisor, lead operators and quality
inspectors. Throughout each stage of the manufacturing and finishing processes,
the Company collects, maintains and evaluates data, including customer design
inputs, process scheduling, material inventory, labor, inspection results and
completion and delivery dates. The Company's information systems employ this
data in order to provide more accurate pricing and scheduling information to its
customers as well as to establish production standards used to measure internal
performance.
Consistent with the Company's strategy of continually emphasizing
quality, all employees participate in an on-going training program which
combines classroom, hands-on and on-the-job instruction. New employees attend an
extensive orientation seminar to acquaint them with the aerospace components
industry and the Company's quality expectations, history, mission, safety
procedures and other rules. To motivate employees to meet and exceed the
Company's production efficiency objectives, management has implemented a bonus
program under which the bonus amount payable by the Company is based on the
amount of sales per paid manhour and the value of product produced.
Furthermore, through the use of lean manufacturing techniques, the
Company seeks to eliminate waste generated in the movement of people, in the use
of materials and products, in lengthy set-ups, in production breaks and by
misused space. The Company's lean manufacturing methods include: (i) one piece
work flow as opposed to batch processing, (ii) pull versus push production
control and scheduling systems, and (iii) disciplined, housekeeping and
organization techniques. The Company believes that its training and motivation
programs, combined with extensive use of lean manufacturing techniques, have
greatly increased the Company's efficiency, manufacturing capacity and
profitability.
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In manufacturing close tolerance components, the Company uses several
forming processes to shape or "form" a "work piece" (aluminum, stainless steel
or titanium sheet metal and extrusion) into components by applying pressure
through impact, stretching or pressing the raw material (sheet metal or
extrusion) to cause conformance to a die. The shapes may be simple with a single
angle, bend or curve, or may be complex with compound contours having multiple
bends and angles. Some processes incorporate heat to soften the metal prior to
or during forming. Forming processes include: drop hammer, bladder press, sheet
metal and extrusion stretch, skin stretch, stretch draw, hot joggle and brake
forming.
The following are more detailed descriptions of several of the
Company's processes:
Drop Hammer Forming. The Company utilizes drop hammer forming to shape
work pieces by placing them between a mated die and a moving punch. The work
piece is placed on the working surface of the die and is formed into a component
through repeated impacts of the punch on the work piece. The impact causes the
work piece to take the shape of the punch and die. This process provides an
economical means of producing parts ranging in size from a few inches up to ten
feet in length with complex, compound contours. The Company has one of the
largest capacities for drop hammer forming in the aerospace components industry.
Bladder Forming. The bladder forming process (fluid cell press)
utilizes a bladder filled with hydraulic fluid which is placed under pressure to
form the component. The work piece is placed on top of a die which rests on a
table. A rubber blanket is then placed over the work piece and the table is
moved into the press. As the bladder is placed under pressure, it expands to
cover the rubber blanket and forces it and the work piece to conform to the
shape of the die. The Company employs bladder forming for components with formed
simple contours.
Stretch Forming. The stretch forming process involves the stretching
and wrapping of a work piece along the surface of a precisely shaped die. To
obtain the desired component shape, opposite ends of the material are held in
the jaws of the stretch form machine, then hydraulically stretched and wrapped
to conform to the working surface of the die. The Company utilizes several
different types of stretch form machines, each type designed to stretch form
extrusion, sheet metal or leading edge wing skins.
Hot Joggle. The Company uses the hot joggle process to create a
clearance step for intersecting parts. A work piece is placed between a mated
die and punch and is heated to a precise temperature to make it malleable enough
to set a form, but not hot enough to alter the temper of the metal. The joggle
press then creates the joggle by stepping down a surface from the original plane
of the work piece.
Cutting and Punching. Various cutting and punching processes such as
CNC turret punch, CNC laser cutting, CNC and conventional milling, are used for
cutting out the shapes of flat pattern parts. Cutting, trimming and drilling
functions such as CNC and conventional milling, five axis CNC routing and other
machine and hand routing methods are used to complete formed components by
trimming excess material, cutting and drilling holes. CNC processes utilize
computer programs (generated by Company employees from CAD models provided by
the customer) which direct the cutting, punching and/or drilling pattern of the
machine. Other trimming processes use dies, templates or fixtures as the guide
for trimming and/or drilling.
Most parts require heat treating after forming which helps to
strengthen and, then through controlled cooling, harden the material. This
process along with older dies and tools, can cause slight distortion which is
then modified with manual forming techniques also referred to as "line-up" or
"check and straighten." The Company's highly skilled craftsmen provide the
customer with great flexibility in utilizing customer's tools and small order
quantities often associated with spares production.
Value-Added Services
The Company offers its customers both cost and time savings by having
the process capabilities necessary for the production of most components from
start to finish.
29
<PAGE>
Tooling. While most of the dies, tools and fixtures needed in the
manufacturing process are owned and supplied by customers, the Company offers
its customers the ability to produce fiberglass route and drill tools, chemical
milling templates, kirksite extrusion and sheet stretch blocks, and other
original tooling. It also has extensive capabilities in the repair and rework of
tools and dies originally supplied by its customers. The Company supports the
tooling operations with its own foundry which pours lead and kirksite tops for
drop hammer dies.
Heat Treat and Age. Most components require heat treating and/or aging
as part of the production process. The heat treat process is used to alter the
temper of the material for increased formability and retention of the formed
shape. The process involves heating work pieces to a prescribed temperature,
usually in the range of 850 degrees to 950 degrees Fahrenheit, for a prescribed
period of time. Multiple components can be heat treated at one time, so long as
the prescribed process time and temperature are the same. After heating, the
components are immediately submerged in a glycol solution or water to rapidly
cool and suspend the hardening of the metal. The components are then
refrigerated at sub-zero temperatures to retard work hardening until the forming
process is completed. At ambient temperatures the metal slowly hardens. After
all forming, trimming and drilling processes are complete, most components go
through the age process, which involves slow heating at lower temperatures (up
to 400 degrees Fahrenheit), to accelerate the hardening of the metal to its
final temper.
CMM Inspection and Engineering. The computer controlled coordinate
measuring machine ("CMM") uses a computer operated touch probe to measure the
accuracy of angles, contours and other features on a tool or component relative
to customer defined models or coordinates permitting the Company to accurately
inspect close tolerance components. The CMM also is used to engineer a CAD model
from an existing part.
Chemical Milling. Chemical milling is used to reduce the amount of
material in specific places on a component in order to reduce weight within the
aircraft and to facilitate the mating of components. The working piece is first
coated (dipped or sprayed) with a maskant, which dries to a rubber-like finish
sealing the component. The Company uses a water based maskant which is much
safer for both employees and the environment than the traditional solvent based
maskant. After masking, the portion of the part to be reduced is scribed out by
tracing a template. These areas are then de-masked, and the part is dipped into
the chemical milling tank, containing an alkaline solution, for a prescribed
period of time. The solution then reduces the metal in the exposed areas.
Metal Finishing, Polishing and Painting. Through its Tulsa facility the
Company provides anodizing, painting, polishing and non-destructive testing. The
chromic acid anodizing process is performed prior to paint or polish to help
control rust, corrosion and part deterioration. Penetrant inspection is a
non-destructive inspection method during which components are dipped into a dye
solution which penetrates any small defects on the surface of the part and makes
them visible under ultra violet light.
Most components are painted or polished before final shipment. Paint is
applied according to customer specification; some components receive a simple
primary coat while others receive primary and finish coats. Skin quality
components such as those in the leading edge wing program are polished with
electric polishers and by hand to a mirror finish which is visible on the
exterior of the aircraft after final assembly.
Consistent with the Company's commitment to maintaining environmental
and employee safety, the Tulsa facility has a state-of-the-art air circulation
and filter system as well as its own waste water treatment equipment. Waste
water from both the anodizing and chemical milling processes pass through the
treatment equipment and all metals and toxic materials are removed, making the
water safe for disposal through the normal sewer system. The metals are
condensed into filter cakes which are then disposed of through certified
hazardous waste disposal vendors.
Assembly. The Company completes small and medium sized assemblies,
incorporating its manufactured parts and those produced by other vendors. In the
assembly process, the Company uses riveting, bolting, spot and fusion welding,
and bonding. Customer supplied and Company manufactured jigs and fixtures are
30
<PAGE>
used to ensure the proper alignment of edges and holes. The Company's new
information system and the expansion of its purchasing department further
increase its ability to acquire and track parts and hardware details from
multiple vendors to integrate with its own components into assemblies.
Backlog
At December 31, 1997, the Company had outstanding purchase orders
representing an aggregate invoice price of approximately $48.9 million, of which
$40.5 million is scheduled for delivery during fiscal 1998. Historically,
cancellations of such orders have been infrequent and immaterial, however OEMs
often modify purchase orders to accelerate or delay delivery dates. The level of
unfilled orders at any given time during the year will be materially affected by
the timing of the Company's receipt of orders and the speed with which those
orders are filled. Moreover, sales during any period may include sales which are
not part of the backlog at the end of the prior period. Accordingly, prospective
purchasers of Common Stock in this Offering should not place undue reliance on
the Company's backlog as an indication of sales for any future period.
The following table provides certain information with respect to the
Company's total backlog as of December 31, 1995, 1996 and 1997 and the portion
of backlog scheduled for delivery within 12 months of such dates:
As of December 31,
(in millions)
---------------------------------
1995 1996 1997
---- ---- ----
Total $23.3 $43.1 $48.9
Portion deliverable within 12 months 12.4 34.1 40.5
Suppliers and Procurement Practices
The Company's principal raw materials consist of aerospace-quality
aluminum sheet metal and extrusion which it purchases, along with specialized
services, from certain vendors. From time to time there have been shortages of
aerospace quality aluminum sheet metal and extrusion, resulting in temporary
increases in the cost of such raw materials and causing the Company to have
delays in production schedules. In an attempt to assure itself of adequate
supplies, the Company has entered into a multi-year aluminum sheet metal supply
agreement with ALCOA, a dominant domestic supplier of aerospace quality
aluminum, and is negotiating a similar agreement regarding extrusion with
Tiernay Metals, Inc., a distributor, and Universal Alloy Corp., a producer. To
mitigate the effect of fluctuations in the price of raw materials, the Company
has negotiated agreements with some of its customers, including certain Boeing
business units, permitting the Company to flow through a major portion of any
price change to its customers. Furthermore, Boeing is engaged in negotiations
with one or more aluminum suppliers which would entitle Boeing vendors, such as
the Company, to purchase aluminum from Boeing's supplier on terms and conditions
equal to those available to Boeing.
The Company believes that its sources of supply of non-aluminum
products and its relationships with its suppliers are satisfactory. While the
loss of any one supplier could have a material adverse effect on the Company
until alternative suppliers are located and have commenced providing products,
alternative suppliers exist for substantially all of the products and services
purchased by the Company.
The Company has developed procurement practices to ensure that all
supplies received conform to contract specifications. Through its computerized
material resource planning system, the Company is able to track inventories and
product ordering to optimize purchasing decisions. For cost, quality control and
efficiency reasons, the Company generally purchases supplies only from vendors
approved by the Company's customers and/or with whom the Company has on-going
relationships. The Company chooses its vendors primarily based on the quality of
the products and services supplied, record for on-time performance and the
specification of such vendors by the Company's customers as the preferred source
of supply. The Company regularly evaluates and audits its approved vendors based
on their performance.
31
<PAGE>
Quality Assurance and Control
The Company continually seeks to maintain high quality standards in the
processing of its products. Accordingly, the Company employs approximately 50
full time quality control and assurance personnel. Each work order introduced to
the Company's manufacturing facilities contains an inspection plan specifying
required inspection points. Quality inspectors are assigned to each work center
and are trained in the testing required in connection with products passing
through the assigned work center. Although a large percentage of the Company's
products are 100% inspected immediately prior to shipment by a customer employee
or a customer designated Company employee, Boeing has approved a sampling
inspection program for certain components using statistical process control data
maintained by the Company.
In March 1998, the Company became certified as compliant with Boeing's
new D1-9000 (Rev. A) quality assurance standard. During April 1998, the Company
distributed all revised procedures and integrated such new procedures with its
on-going employee training program and lean manufacturing techniques to assist
employees in becoming familiar with the new procedures. The Company has expanded
its existing internal audit program to ensure on-going compliance. In addition,
the Company intends to supplement its quality assurance and control program in
1999 with ISO 9002 certification of all of its facilities.
Sales and Marketing
Sales and Marketing
The Company's sales and marketing organization consists of six program
managers and two independent sales representatives. The Company's sales
personnel are devoted to maintaining and expanding customer relationships
through continual education of existing and potential customers with respect to
the Company's capabilities. Specifically, the Company is focused on expanding
its presence in the fabrication of aftermarket spare parts and components for
use in new corporate, regional and military aircraft. As a result, sales
personnel have focused their efforts on diversifying the Company's product mix
to include aerospace programs unrelated to new commercial aircraft production.
A majority of the Company's sales to existing customers are awarded
after receipt of a request for quotation ("RFQ"). On receipt, the RFQ is
preliminarily reviewed by a team consisting of members of the Company's senior
management, a program manager, an estimator and the plant manager. If the
Company determines that the program is adequately compatible with the Company's
capabilities and objectives, a formal response is prepared by a member of the
Company's estimator group. Although a substantial percentage of programs are
awarded on a competitive bid basis, the Company has recognized a trend favoring
direct pricing. In direct pricing programs, the customer submits an indicated
price offer for acceptance or rejection by the Company. The Company expects that
as customers seek to limit the number of suppliers, direct pricing will become
increasingly common.
Competition
Components for new aircraft and replacement components for existing
aircraft are provided by a large fragmented group of companies, including
certain business units affiliated with the Company's customers. However, the
Company believes that the trends in the aerospace industry favor greater
outsourcing of components and reducing the number of preferred suppliers. Under
written multi-year contracts with its customers governing virtually all of the
Company's sales, the Company is designated as the sole supplier of the aerospace
components sold under such contracts. The Company is unaware of any competitor
with which it competes in all of the Company's processes.
The Company believes that participants in the aerospace components
industry compete primarily with respect to reliability of delivery, price and
quality. Certain of the Company's competitors, including business units
affiliated with the Company's customers, have substantially greater financial,
production and other resources than the Company. These competitors may have the
ability to adapt more quickly to changes in customer requirements, may have
stronger relationships with customers and suppliers and greater name recognition
than the Company. Moreover, certain of the Company's customers may determine to
directly manufacture a greater percentage of required components.
32
<PAGE>
Regulatory Matters
The aerospace industry is highly regulated in the U.S. by the Federal
Aviation Administration and is regulated in other countries by similar agencies
to ensure that aviation products and services meet stringent safety and
performance standards. The FAA prescribes standards and licensing requirements
for aircraft components, including those fabricated by the Company. Because the
Company fabricates to meet specifications and designs created by its customers,
it is not required to obtain any licenses or approvals from the FAA. The Company
is subject, however, to inspection and audit by the FAA and to quality control
and assurance programs instituted by many of its customers.
The Company is also subject to various federal, state, local and
foreign environmental requirements, including those relating to discharges to
air, water and land, the handling and disposal of solid and hazardous waste, and
the cleanup of properties affected by hazardous substances. In addition, certain
environmental laws, such as CERCLA and similar state laws, impose strict,
retroactive, and joint and several liability upon persons responsible for
releases or potential releases of hazardous substances. The Company has not
incurred, nor does it expect to incur, significant costs to address any releases
or potential releases. It is possible, however, given the retroactive nature of
CERCLA liability, that the Company will from time to time receive notices of
potential liability relating to current or former activities.
The Company has been and is in substantial compliance with
environmental requirements and believes it has no liabilities under
environmental requirements, except those which would not be expected to have a
material adverse effect on the Company's business, results of operations, or
financial condition. However, some risk of environmental liability is inherent
in the nature of the Company's business and the Company might in the future
incur material costs to meet current or more stringent compliance, cleanup or
other obligations pursuant to environmental requirements. See "RISK FACTORS---
Governmental Regulations; Environmental Compliance."
Employees
As of December 31, 1997, the Company had 716 employees, of whom seven
were engaged in executive positions, 138 were engaged in administrative
positions and 571 were in manufacturing operations. None of the Company's
employees is subject to a collective bargaining agreement, and the Company has
not experienced any material business interruption as a result of labor disputes
since it was formed. The Company believes that it has an excellent relationship
with its employees.
The Company strives to continuously train and educate its employees
thereby enhancing the skill and flexibility of its work force. Through the use
of internally developed programs, which include formal classroom and on-the-job,
hands-on training, and independently developed programs, the Company seeks to
attract, develop and retain the personnel necessary to achieve the Company's
growth and profitability objectives.
33
<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 56,943 Owned
St. Charles, MO Offices and Manufacturing Center
3030-3050 N. Hwy 94 Manufacturing Center and Storage 92,736 Owned
St. Charles, MO
3000-3010 N. Hwy 94 Assembly and Storage 24,400 Leased(1)
St. Charles, MO
204 H Street NW Manufacturing Center 45,328 Leased(2)
Auburn, WA
101 Western Ave. So. Manufacturing Center 79,120 Leased(3)
Auburn, WA
2629-2635 Esthner Ct. Manufacturing Center 34,377 Owned
Wichita, KS
2621 W. Esthner Ct. Administrative Offices and 19,545 Leased(4)
Wichita, KS Storage
2104 N. 170th St. E. Ave. Finishing Facility 75,000 Owned
Tulsa, OK
<FN>
(1) Subject to a yearly rental amount of $52,186 expiring on February 28,
2004.
(2) Subject to a yearly rental amount of $162,200 expiring on December 31,
1999.
(3) Subject to a graduated yearly rental amount from $264,100 in 1998 to
$418,800 in 2005. Such lease expires as of June 30, 2005, but the
Company retains the option to extend the lease until June 30, 2008 at
the monthly rate of $39,090.
(4) Subject to a yearly rental amount of $55,200 expiring on June 30,
2000. The Company retains two options to extend the lease term for an
additional 36 months each with a yearly rental amount of $60,000 and
$63,600, respectively.
</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 is not a party to any legal proceedings, other than routine
claims and lawsuits arising in the ordinary course of its business. The Company
does not believe that such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on the Company's business.
34
<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
Set forth below are biographies of each director and each executive
officer of the Company.
Joseph Burstein has been a director, the Chairman of the Board and
Secretary of the Company since 1984. Prior to his association with the Company,
Mr. Burstein was President of Associated Transports, Inc. Mr. Burstein is an
entrepreneur and has had an interest in several businesses, including two travel
agencies and a 100% interest in Chestnut Mountain Ski Resort, Galena, Illinois.
Mr. Burstein graduated from the University of Nebraska.
Ronald S. Saks has served as President and as a director of the Company
since 1984. Prior to his employment with the Company, Mr. Saks was an Executive
Vice President with Associated Transports, Inc. for eight years and was a Tax
Manager with Peat Marwick Mitchell & Co., now known as KPMG Peat Marwick LLP,
for the eight years prior thereto. Mr. Saks obtained his Bachelor's degree in
Business Administration from Washington University in 1966. He also studied
engineering at the Massachusetts Institute of Technology, and completed an
Executive Education program at Stanford University. Mr. Saks is a Certified
Public Accountant.
Lawrence J. LeGrand became Chief Operating Officer and a director of
the Company in April 1998. His previous 24 years were spent with KPMG Peat
Marwick, LLP, where he became a partner in 1980. Mr. LeGrand is a Certified
Public Accountant and has extensive experience in mergers and acquisitions
where he has represented both publicly held and privately owned buyers and
sellers. Mr. LeGrand graduated with a Bachelor's degree in Commerce and Finance
from St. Louis University in 1973 and presently serves as the Vice Chairman of
the Board of Trustees of St. Louis University.
Lawrence E. Dickinson has been the Chief Financial Officer of the
Company since 1993. He served as a Financial Analyst and Controller for LaBarge,
Inc. from 1984 to 1993 and as a Cost Accountant with Monsanto from 1981-1984.
Mr. Dickinson received his Bachelor's degree in Accounting from the University
of Alabama and received his Master's degree in Business Administration from
Washington University in 1994.
Duane E. Hahn joined the Company in 1984 and served as the Assistant
General Manager until 1988, at which time he moved to Auburn, Washington to set
up and manage the Auburn facility as Vice President and General Manager. In
1996, Mr. Hahn became the Vice President of Manufacturing and Regional Manager
of the Company. Prior to joining the Company, Mr. Hahn served as a supervisor
for Associated Transport, Inc. Mr. Hahn received his Associate's Degree from
Nebraska Technical College in 1971. Mr. Hahn has extensive continuing education
experience in lean manufacturing, just-in-time, and other world class
manufacturing techniques. Mr. Hahn became a director of the Company in October
1990.
35
<PAGE>
Robert T. Grah joined the Company in 1984 as Production Control
Manager. Mr. Grah has held various management positions with the Company
including Purchasing and Contracts Manager, Maintenance Manager, Facilities
Manager, and was promoted to his current position as General Manager of LMI
Finishing, Inc. in 1996. Prior to joining the Company, Mr. Grah was a supervisor
for Associated Transport, Inc., and a manager for Beneficial Finance. Mr. Grah's
education has included Florissant Valley Community College, and numerous
continuing education courses in management, Total Preventative Maintenance, and
various environmental and technical subjects.
Phillip A. Lajeunesse joined the Company in 1988 as the Corporate
Quality Assurance Manager. In 1990, he became the Plant Manager of the Company's
St. Charles facility, and in 1996, he became the General Manager of the Wichita
facility. Prior to joining the Company, Mr. Lajeunesse was a supervisor for
Kaman Aerospace for nine years, and for six years was a supervisor for United
Nuclear Corporation. Mr. Lajeunesse obtained an Associate's degree in Chemical
Engineering from Thames Valley State Technical College in 1973, an Associate's
degree in Business Administration from Bryant College in 1984, and a Master's of
Business Administration from Washington University in 1994.
Bradley L. Nelson joined the Company as a Production Supervisor in the
Auburn facility in 1990. In 1994, he was promoted to Manufacturing Manager, and
in 1996 he assumed his current position as General Manager of the Auburn
facility. Previously, Mr. Nelson was Production Manager for Fabrication
Technologies from 1989 to 1990, the owner of Totem Lake Service Center from 1984
to 1989, and Plant Manager for Tonoro Growers from 1981 to 1984. Mr. Nelson's
continuing education courses include general management and manufacturing
management and methods.
Ernest R. Bailey joined the Company in 1997 as the General Manager of
the St. Charles facility. From 1996 to 1997, Mr. Bailey was the General Manager
for North American Machining Products, Inc. From 1994 to 1996, he was the Plant
Manager for Precision Machine Works, and from 1987 to 1993, he was the General
Manager for Rohr, Inc., in Auburn, Washington. His background also includes
administration and management experience at Kenworth Truck Company, KME
Manufacturing, and Heath Tecna, Inc. Mr. Bailey obtained his Associate's degree
in Business Administration from Green River Community College in 1976, and his
Bachelor's degree in Business Administration from Pacific Western University in
1995.
Sanford S. Neuman is an Assistant Secretary and has been a director of
the Company since 1984. Mr. Neuman is a founding member of the St. Louis,
Missouri law firm of Gallop, Johnson & Neuman, L.C. and has been engaged in the
private practice of law for more than 30 years. Mr. Neuman graduated from
Washington University in 1956 with a Bachelor's degree in Business
Administration. Mr. Neuman received his law degree from Washington University in
St. Louis in 1959 and his L.L.M. in taxation from New York University in 1961.
The Bylaws provide for a Board consisting of five members, each of whom
serves in such capacity for a three-year term or until his successor has been
elected and qualified, subject to earlier resignation, removal or death. The
number of directors comprising the Board may be increased or decreased by
resolution adopted by the affirmative vote of a majority of the Board; however,
the Bylaws provide that the number of directors cannot be less than three or
more than nine. The Articles and Bylaws provide for three classes of
directorships serving staggered three-year terms such that approximately
one-third of the directors are elected at each annual meeting of shareholders.
The term of office of Mr. Neuman will continue until the 1999 annual meeting of
shareholders, the term of office of Mr. LeGrand and Mr. Hahn will continue until
the 2000 annual meeting of shareholders and the term of office of Mr. Saks and
Mr. Burstein will continue until the 2001 annual meeting of shareholders.
Director's Compensation
The Company intends to pay each director who is not an employee of the
Company $1,500 for each Board meeting or committee meeting attended, and will
reimburse all directors for out-of-pocket expenses incurred in connection with
their attendance at Board and committee meetings. No director who is an employee
of the Company will receive compensation for services rendered as a director.
36
<PAGE>
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>
Summary Compensation Table
<CAPTION>
Annual Compensation
Name and Principal Position ------------------------------------------
- --------------------------- Other
Year Salary Bonus Compensation(1)
---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Ronald S. Saks...................... 1997 $150,000 $246,266 $1,795
President and CEO
Duane E. Hahn....................... 1997 105,000 209,748 1,795
Vice President
Phillip A. Lajeunesse............... 1997 92,500 102,300 1,795
General Manager (Wichita, KS)
Robert T. Grah...................... 1997 69,999 81,736 1,732
General Manager (Tulsa, OK)
Bradley L. Nelson................... 1997 69,999 76,636 1,716
General Manager (Auburn, WA)
</TABLE>
37
<PAGE>
Option Grants. The following table sets forth certain information with
respect to grants of stock options pursuant to the Company's 1989 Employee
Incentive Stock Option Plan (the "Option Plan") to each of the Named Officers
during the year ended December 31, 1997. No stock appreciation rights were
granted to the Named Officers during such year.
<TABLE>
Options/SAR Grants in Last Fiscal Year
Individual Grants
-----------------
<CAPTION>
Percent Of
Total Total Potential Realizable
Number Of Options/ Value At Assumed Rates
Securities SARs Of Stock Price
Underlying Granted To Appreciation For
Options/ Employees Exercise Option Term (1)
SARs In Fiscal Or Base Expiration ---------------
Name Granted Year Price ($/Sh) Date 5% 10%
- ---- ------- ---- ------------ ---- -------- ----
<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.
Aggregated Option/SAR Exercises In Last Fiscal Year
And Fiscal Year-End Options/SAR Values
Number Of Securities
Underlying Unexercised Value Of Unexercised
Options/SARs In-The-Money Options/SARs
At Fiscal Year End At Fiscal Year End(1)
---------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Duane E. Hahn 57,575 0 $157,180 0
Bradley L. Nelson 24,675 0 59,055 0
Robert T. Grah 16,450 0 44,908 0
Phillip A. Lajeunesse 16,450 0 44,908 0
(1) The fair market value at year end used for this purpose is deemed to be
$4.63, based on an independent valuation obtained by the Company as of
November 30, 1997 adjusted for the 2.29 to 1 stock dividend.
38
<PAGE>
Employment Arrangements with Named Officers
On January 1, 1997, the Company entered into an employment agreement
with Ronald Saks providing for his employment as President and Chief Executive
Officer. The agreement is for a six year period that automatically extends for
successive one year periods. Mr. Saks' employment agreement provides for an
annual base salary in 1997 of $150,000 and of $240,000 for the remaining years
of his contract payable in equal monthly installments. Mr. Saks is also entitled
to a bonus based on the performance of the Company (the "Performance Bonus") if
its annual net income as of the last day of each fiscal year is more than $5
million. Such bonus is capped at $120,000.
As of May 1, 1998, the Company entered into an employment agreement
with Mr. LeGrand providing for his employment as the Chief Operating Officer of
the Company. The agreement will terminate on December 31, 2002 and is
automatically extended for successive one-year periods. Mr. LeGrand's employment
agreement provides for an annual base salary of $225,000 payable in equally
monthly installments during the period May 1, 1998 through December 31, 2000.
The agreement provides for a Performance Bonus if the Company's annual net
income as of the last day of each fiscal year is more than $5 million. Such
bonus is capped at $150,000.
On January 1, 1998, the Company entered into an employment agreement
with Duane E. Hahn providing for his employment as the Vice President and
Regional Manager for the Company's facilities located in Auburn, Washington,
Wichita, Kansas, and at the location of the LMI Finishing, Inc. plant in Tulsa,
Oklahoma. The agreement is for a two year period that automatically extends for
successive one year periods. Mr. Hahn's employment agreement provides for a base
salary of $150,000 payable in equal monthly installments. Mr. Hahn is also
entitled to a Performance Bonus if the Company's annual net income as of the
last day of each fiscal year is more than $5 million. Such bonus is capped at
$75,000.
On January 1, 1998, the Company entered into an employment agreement
with Robert T. Grah providing for his employment as the General Manager for LMI
Finishing Inc.'s facility in Tulsa, Oklahoma. The agreement is for a two year
period that automatically extends for successive one year periods. Mr. Grah's
employment agreement provides for a base salary of $105,000 for the calendar
year 1998 and $115,000 for the calendar year 1999, with each amount payable in
equal monthly installments. Mr. Grah is also entitled to a Performance Bonus if
the Company's annual net income as of the last day of each fiscal year is more
than $5 million. Such bonus is capped at $70,000.
On January 1, 1998, the Company entered into an employment agreement
with Phillip A. Lajeunesse providing for his employment as the General Manager
for the Company's facility in Wichita, Kansas. The agreement is for a two year
period that automatically extends for successive one year periods. Mr.
Lajeunesse's employment agreement provides for a base salary of $125,000 in 1998
and $135,000 in 1999 payable in equal monthly installments. Mr. Lajeunesse is
also entitled to a Performance Bonus if the Company's annual net income as of
the last day of each fiscal year is more than $5 million. Such bonus is capped
at $50,000.
On January 1, 1998, the Company entered into an employment agreement
with Bradley L. Nelson providing for his employment as the General Manager for
the Company's facility in Auburn, Washington. The agreement is for a two year
period that automatically extends for successive one year periods. Mr. Nelson's
employment agreement provides for a base salary of $105,000 for the calendar
year 1998 and $115,000 for the calendar year 1999, with each amount payable in
equal monthly installments. Mr. Nelson is also entitled to a Performance Bonus
if the Company's annual net income as of the last day of each fiscal year is
more than $5 million. Such bonus is capped at $70,000.
All such employment agreements provide that in addition to the base
salary and formula based Performance Bonus, the employees may receive such
additional bonus as the Board may authorize, and shall also participate in any
health, accident and life insurance programs and other benefits available to the
employees of the Company. The employment agreements also provide that the
employees are entitled to an annual paid vacation as well as the use of an
automobile.
Each employment agreement described above may be terminated upon: (i)
the termination of the Corporation, (ii) the death or severe disability of the
employee, or (iii) 10 days written notice by the Company to the employee upon
breach or default by the employee of any term of the agreement.
39
<PAGE>
Benefit Plans
Profit Sharing and Savings Plan. The Leonard's Metal, Inc. Profit
Sharing and Savings Plan and Trust (the "Profit Sharing Plan") is a qualified
defined contribution plan which contains both a profit sharing feature and a
"cash or deferred arrangement" that allows active participants to take advantage
of Section 401(k) of the Internal Revenue Code ("Section 401(k)"). All employees
of the Company who have completed 1,000 hours of service become Profit Sharing
Plan participants.
Pursuant to the profit sharing provisions of the Profit Sharing Plan,
the Company makes annual discretionary contributions to the Profit Sharing Plan
in amounts determined by the Board. Pursuant to the methods described in such
plan, the Company's annual discretionary contribution is allocated equally among
all active participants. The cash or deferred arrangement of the Profit Sharing
Plan is designed to qualify under Section 401(k). It permits participants to
defer payment of between 1% and 15% of such participant's compensation in a
tax-advantaged manner. To encourage systematic savings by Profit Sharing Plan
participants, the Company may make matching contributions to active
participants. Currently, the Company makes matching contributions equal to 50%
of an active participant's compensation deferred up to a maximum matching
contribution of $225 per eligible participant.
Participants are at all times fully vested in amounts in their cash or
deferred accounts (i.e., 401(k) contributions), matching amounts made by the
Company, amounts rolled over from other eligible retirement plans for the
benefit of the participant and certain amounts previously withdrawn by a
participant which are later restored to the Profit Sharing Plan. For
discretionary contributions made to the Profit Sharing Plan by the Company,
participants vest in their account balances in 10% increments upon completion of
their first year with the Company and continue in such increments up to the
completion of the fourth year of service and vest in 20% percent increments upon
completion of the fifth, sixth and seventh years of service, with full vesting
upon completion of seven years of service.
1989 Employee Incentive Stock Option Plan. In December 1989, the
Company adopted the Incentive Stock Option Plan (the "Option Plan") for key
employees and officers of the Company or any wholly-owned subsidiary. The
purpose of the Option Plan is to encourage the ownership of the stock of the
Company and to provide additional incentive for participants to promote the
success of the Company and to encourage them to remain in its employ. The Option
Plan is administered by the Board which has broad authority in such
administration. Awards to employees are in the form of options to purchase
Common Stock. Each option is evidence by a stock option agreement stating the
number of shares of common stock to which it pertains, price as fixed by the
Board, and the terms and conditions under which the option may be exercised, as
determined by the Board. The Option Plan provides that such options may be
issued on the condition that any purchases of stock thereunder shall be for
investment purposes and not with a view to resale or distribution. The Option
Plan further provides that upon the occurrence of certain events, the Option
Plan will automatically terminate and all outstanding options granted under the
Option Plan shall terminate, provided that the Board will have the right to
accelerate the time in which options may be exercised prior to such termination.
The Company reserves an aggregate of 1,271,585 shares of common stock for
issuance under the Option Plan. The Company granted options to the following
executive officers under the Option Plan:
Name Number of Shares Subject to Options
---- -----------------------------------
Duane E. Hahn 57,575
Lawrence J. LeGrand 32,900
Bradley L. Nelson 24,675
Robert T. Grah 16,450
Phillip A. Lajeunesse 16,450
Lawrence E. Dickinson 9,810
Ernest R. Bailey 4,935
40
<PAGE>
CERTAIN TRANSACTIONS
From time to time the Company has engaged in various transactions with
certain of its directors, executive officers and other affiliated parties. The
following paragraphs summarize certain information concerning certain
transactions and relationships which have occurred during the past three fiscal
years or are currently proposed.
The Joseph Burstein Revocable Trust U/T/A August 20, 1983, for which
Joseph Burstein, the Chairman of the Board, is the trustee, loaned $250,000 to
the Company as evidenced by a promissory note dated August 10, 1995. Such
indebtedness bore interest at a rate of 10.5% per annum and was payable on
demand. Such indebtedness and accrued interest thereon was paid in full on March
31, 1998.
In May 1996, NSS Leasing, Inc. ("NSS"), controlled by Mr. Burstein,
entered into a lease agreement with the Company by which NSS leased certain
equipment to the Company. Such lease agreement contained terms and conditions no
less favorable to the Company than could have been obtained from an unaffiliated
third party. During 1996 and 1997, the Company paid NSS $30,336 and $74,413,
respectively, pursuant to the terms of such lease. Of the amount paid in 1997,
$59,250 constituted the purchase price of the buy-out for such equipment.
In August 1996, a trust of which no affiliate of the Company was a
beneficiary, loaned $300,000 to the Company as evidenced by a subordinated
promissory note dated August 15, 1996 (the "Trust"). Lawrence J. LeGrand is the
trustee of such Trust. Such indebtedness bore interest at a rate of 11% per
annum and was payable on March 15, 1999. The indebtedness and accrued interest
thereon was paid in full on March 31, 1998. Mr. LeGrand became a director of the
Company on April 17, 1998, and Chief Operating Officer of the Company on May 1,
1998.
The terms of each of the foregoing transactions were negotiated on an
arm's-length basis. All future transactions between the Company and its
officers, directors, principal shareholders and affiliates will be approved by a
majority of the independent and disinterested outside directors.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock by (i) each shareholder who is known by the
Company to own beneficially more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each executive officer named in the Summary
Compensation Table, and (iv) all directors and executive officers as a group.
Unless otherwise specified, the address of all shareholders is the principal
address of the Company set forth in the Prospectus.
41
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Beneficially Owned Beneficially Owned
Name of Shares Prior to Shares After
Beneficial Owner the Offering Percent the Offering Percent
---------------- ------------------ ------- ----------------- -------
<S> <C> <C> <C> <C>
Ronald S. Saks(1) 4,731,651 78.3% 2,840,559 34.1%
The Guaranty Trust Company of
Missouri, as trustee for the 931,359 15.4 931,359 11.2
Profit Sharing Plan(2)
Sanford S. Neuman(4) 660,000 10.9 282,940 3.4
Joseph and Geraldine Burstein(3) 599,296 9.9 599,296 7.2
Gary R. Saks(5) 367,519 6.1 367,519 4.4
Duane E. Hahn(6) 354,543 5.9 354,543 4.3
Lawrence J. LeGrand 263,200 4.4 263,200 3.2
Robert T. Grah(8) 78,150 1.3 78,150 *
Phillip A. Lajeunesse(9) 54,367 * 54,367 *
Bradley L. Nelson(10) 29,511 * 29,511 *
All directors & executive officers
as a group (10 in group) 5,415,922 87.3 4,559,696 53.6
<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 (230,300); (v) Duane E. Hahn (238,525); (vi) Saks Family 1993
Trust (21,385); and (vii) Robert T. Grah (31,255). Mr. Saks has resigned
as voting trustee of Voting Trust No. 1 effective on the date on which the
Registration Statement, of which this Prospectus is a part, is declared
effective. As a result, Voting Trust No. 1 will terminate on such date in
accordance with its terms.
(2) All such shares of Common Stock are held for the benefit of the
Profit Sharing Plan. The shares subject to the Profit Sharing Plan include
shares beneficially owned by: (i) Duane E. Hahn (58,443); (ii) Robert T.
Grah (30,445); (iii) Phillip A. Lajeunesse (13,242); and (iv) Bradley L.
Nelson (4,836). The address of the Guaranty Trust Company of Missouri is
7707 Forsyth Boulevard, St. Louis, Missouri 63105.
42
<PAGE>
(3) All such shares of Common Stock are held of record by Voting Trust No. 1
for the benefit of Joseph Burstein Revocable Trust U/T/A dated August 20,
1983 for which Mr. Burstein and Mrs. Burstein are Co-Trustees. The
Bursteins' address is 536 Fairways, St. Louis, Missouri 63141.
(4) Includes 282,940 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. Neuman. Also includes 377,060 shares of Common
Stock held of record by the Leonard's Metal Inc. Voting Trust dated
December 31, 1996 ("Voting Trust No. 2") for which Mr. Neuman is the
Trustee. Pursuant to the terms of Voting Trust No. 2, Mr. Neuman has the
unqualified exclusive right and power to exercise all voting rights with
respect to the stated shares except for (a) the right to sell or otherwise
dispose of the shares or take any action in conflict with any Shareholder
Agreement and (b) the right to take any corporate action which requires
approval or consent by the holders of at least two-thirds (2/3) of the
outstanding voting shares under the provisions of Chapter 351 of the
Missouri Revised Statutes without first obtaining the consent of the
holders representing the beneficial ownership of not less than two-thirds
(2/3) of the shares of Common Stock which are subject to the terms of
Voting Trust No. 2. Mr. Neuman has resigned as voting trustee of Voting
Trust No. 2 effective on the date on which the Registration Statement, of
which this Prospectus is a part, is declared effective. As a result, Voting
Trust No. 2 will terminate on such date in accordance with its terms. Mr.
Neuman's address is 101 South Hanley, St. Louis, MO 63105.
(5) Includes 21,385 shares of Common Stock held of record by Voting Trust No. 1
for the benefit of The Saks Family 1993 Trust for which Gary Saks is the
Trustee. Also includes 328,039 shares of Common Stock held of record by
Voting Trust No. 2 for the benefit of The Saks Family 1993 Trust and trusts
established for the benefit of the children of Ronald Saks, all for which
Gary Saks is Trustee, and 18,095 shares held of record by Voting Trust
No. 2 for the children of Ronald Saks under the Missouri Transfers to
Minors law for which Gary Saks is the Custodian.
(6) Includes 238,525 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. Hahn. Also includes 58,443 shares of Common Stock
held of record by The Guaranty Trust Company of Missouri for the benefit of
Mr. Hahn. Also includes 57,575 shares of Common Stock issuable upon the
exercise of an immediately exercisable option to purchase such shares. Mr.
Hahn's address is 204 H Street, N.W., Auburn, Washington 98001.
(7) Includes 230,300 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. LeGrand. Also includes 32,900 shares of Common
Stock issuable upon the exercise of immediately exercisable options to
purchase such shares.
(8) Includes 31,255 shares of Common Stock held of record by Voting Trust No. 1
for the benefit of Mr. Grah. Also includes 30,445 shares of Common
Stock held of record by The Guaranty Trust Company of Missouri for the
benefit of Mr. Grah. Also includes 16,450 shares of Common Stock
issuable upon the exercise of immediately exercisable options to purchase
such share. Mr. Grah's address is 2104 N. 170th Street E. Avenue, Tulsa,
Oklahoma 74116.
(9) Includes 24,675 shares of Common stock held of record by Voting Trust No. 1
for the benefit of Mr. Lajeunesse. Also inclues 13,242 shares of Common
Stock held of record by The Guaranty Trust Company of Missouri for the
benefit of Mr. Lajeunesse. Also includes 16,450 shares of Common Stock
issuable upon the exercise of immediately exercisable options to purchase
such shares. Mr. Lejeunesse's address is 2629 Esthner Court, Wichita,
KS 67213.
(10) Includes 4,836 shares of Common Stock held of record by The Guaranty Trust
Company of Missouri for the benefit of Mr. Nelson. Also includes 24,675
shares of Common Stock issuable upon the exercise of immediately
exercisable options to purchase such shares. Mr. Nelson's address is 204 H
Street, N.W., Auburn, Washington 98001.
</FN>
</TABLE>
43
<PAGE>
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Upon completion of the Offering the Articles will provide for an
authorized capital of 30,000,000 shares, consisting of 2,000,000 shares of
preferred stock, $0.02 par value per share (the "Preferred Stock"), and
28,000,000 shares of Common Stock. Based on shares outstanding as of March 31,
1998, upon the consummation of the Offering, 8,208,471 shares of Common Stock
and no shares of Preferred Stock will be outstanding. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Articles.
Common Stock
The holders of Common Stock are entitled to cast one vote for each
share held of record on all matters to be voted on by the Shareholders,
including the election of directors. There is no cumulative voting with respect
to the election of directors. As a result, the holders of Common Stock entitled
to exercise more than 50% of the voting rights in an election of directors can
elect all of the directors then standing for election if they choose to do so.
The holders of Common Stock are entitled to receive dividends when and if
declared by the Board out of legally available funds. In the event of the
liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock are entitled to share ratably in all remaining assets
which are available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. No holder of any share of Common Stock or any other
security of the Company, either now or hereafter authorized or issued, shall
have any preferential or preemptive right to acquire additional shares of Common
Stock or any other security of the Company other than such, if any, as the Board
may in its discretion from time to time determine. All of the outstanding shares
of Common Stock are, and the shares of Common Stock offered hereby will be when
issued for the consideration set forth in this Prospectus, fully paid and
non-assessable.
Preferred Stock
The Articles authorize the Board to establish one or more series of
Preferred Stock and to determine, with respect to any series of Preferred Stock,
the terms, rights and preferences of such series, including voting, dividend,
liquidation, conversion, redemption and any other relative rights, preferences
and limitations. The authorized shares of Preferred Stock will be available for
issuance without further action by the Company's shareholders, unless such
action is required by applicable law or other rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. Although the Company has no present intention of doing so, it could
issue a series of Preferred Stock that could discourage, impede, delay or
prevent a transaction which would result in a change in control of the Company,
regardless of whether some of the Company's stockholders might believe such a
transaction to be in their best interest.
Certain Effects of Authorized but Unissued Stock
Upon the completion of the Offering, there will be 18,174,944 shares of
Common Stock, which excludes the 1,271,585 shares of Common Stock reserved for
issuance upon exercise of options granted under the Option Plan, 345,000 shares
of Common Stock reserved for issuance upon exercise of the Underwriters'
over-allotment option and 2,000,000 shares of Preferred Stock available for
future issuance without stockholder approval. These additional shares may be
issued for a variety of proper corporate purposes, including raising additional
capital, corporate acquisitions and implementing employee benefit plans. Except
as contemplated by the Option Plan and Profit Sharing Plan, the Company does not
currently have any plans to issue additional shares of Common Stock or Preferred
Stock. See "MANAGEMENT--Benefit Plans."
44
<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.
45
<PAGE>
Calling Shareholder Meetings; Action by Shareholders Without a Meeting
Matters to be acted upon by the shareholders at special meetings are
limited to those which are specified in the notice thereof. A special meeting of
shareholders may be called by the Board or the President of the Company. As
required by Missouri law, the Bylaws provide that any action by written consent
of shareholders in lieu of a meeting must be signed by the holders of all
outstanding shares of Common Stock.
The foregoing provisions contained in the Articles and Bylaws are designed
in part to make it more difficult and time consuming to obtain majority control
of the Board or otherwise to bring a matter before shareholders
without the Board's consent, and therefore to reduce the vulnerability of the
Company to an unsolicited takeover proposal. These provisions are designed to
enable the Company to develop its business in a manner which will foster its
long-term growth without the threat of a takeover not deemed by the Board to be
in the best interests of the Company and its shareholders, and to reduce, to the
extent practicable, the potential disruption entailed by such a threat. However,
these provisions may have an adverse effect on the ability of shareholders to
influence the governance of the Company and the possibility of shareholders
receiving a premium above the market price for their securities from a potential
acquirer who is unfriendly to management.
Indemnification of Directors and Officers
Sections 351.355(1) and (2) of The General and Business Corporation Law of
the State of Missouri provide that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful, except that, in the case of an action or suit by or in the right of
the corporation, the corporation may not indemnify such persons against
judgments and fines and no person shall be indemnified as to any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of the person's duty to the
corporation, unless and only to the extent that the court in which the action or
suit was brought determines upon application that such person is fairly and
reasonably entitled to indemnity for proper expenses. Section 351.355(3)
provides that, to the extent that a director, officer, employee or agent of the
corporation has been successful in the defense of any such action, suit or
proceeding or in defense of any claim, issue or matter therein, the person shall
be indemnified against expenses, including attorney's fees, actually and
reasonably incurred by such person in connection with such action, suit or
proceeding. Section 351.355(7) provides that a corporation may provide
additional indemnification to any person indemnifiable under subsection (1) of
(2), provided such additional indemnification is authorized by the corporation's
articles of incorporation or an amendment thereto or by a shareholder-approved
bylaw or agreement, and provided further that no person shall thereby be
indemnified against conduct which was finally adjudged to have been knowingly
fraudulent, deliberately dishonest or willful misconduct or which involves an
accounting for profits pursuant to Section 16(b) of the Exchange Act. Article 9
of the Articles permits the Company to enter into agreements with its directors,
officers, employees and agents to provide such indemnification as deemed
appropriate. Article 9 also provides that the Company may extend to its
directors and executive officers such indemnification and additional
indemnification.
46
<PAGE>
The Company may procure and maintain a policy of insurance under which the
directors and officers of the Company will be insured, subject to the limits of
the policy, against certain losses arising from claims made against such
directors and officers by reason of any acts or omissions covered under such
policy in their respective capacities as directors or officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Transfer Agent
The transfer agent and registrar for the Common Stock will be American
Stock Transfer & Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
8,340,071 shares of Common Stock. Of these shares, only those offered for sale
in the Offering and approximately 702,885 currently held by existing
non-affiliate shareholders will be tradable without restriction under the
Securities Act. The remaining 5,337,186 shares of Common Stock held by existing
shareholders are "restricted" within the meaning of Rule 144 promulgated under
the Securities Act. Subject to compliance with the provisions of Rule 144 and
agreements with the Underwriters, all of such shares will be eligible for sale
to the public, notwithstanding the fact that such shares have not been
registered under the Securities Act.
In general, under Rule 144 as currently in effect, an affiliate of the
Company, or a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least one year but less than two
years, will be entitled to sell in any three month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of
Common Stock or (ii) the average weekly trading volume during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission (the "Commission"). Sales under Rule 144
are subject to certain requirements relating to manner of sale, notice and
availability of current information about the Company. A person (or persons
whose shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned his or her shares for at least two years is entitled to
sell such shares under Rule 144(k) without regard to the limitations described
above.
All shares of Common Stock outstanding prior to this Offering are
subject to an agreement which prohibits the sale of shares of Common Stock prior
to December 31, 1998. The agreements will have no effect on the date on which
shares become eligible for sale under Rule 144.
The Company intends to file a registration statement on Form S-8 under
the Securities Act covering approximately 1,271,585 shares of Common Stock
reserved for issuance under the Option Plan. See "MANAGEMENT--Benefit Plans."
Such registration statement is expected to be filed as soon as practicable after
the date of this Prospectus and will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to affiliates, be available for sale
in the open market, except to the extent that such shares are subject to vesting
restrictions. As of March 31, 1998, options to purchase 243,377 shares were
granted and outstanding.
47
<PAGE>
No predictions can be made of the effect, if any, that future market sales
of shares of Common Stock or the availability of such shares for sale will have
on the market price prevailing from time to time. Sales of substantial amounts
of Common Stock, or the perception that such sales might occur, could adversely
affect prevailing market prices.
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting
Agreement, the syndicate of underwriters named below (the "Underwriters"), for
whom EVEREN Securities, Inc. and George K. Baum & Company are acting as
Representatives (the "Representatives"), have severally agreed, to purchase from
the Company, and the Company has agreed to sell, the respective number of shares
of Common Stock set forth opposite the names of such Underwriters below:
Number of
Name Shares of Common Stock
---- ----------------------
EVEREN Securities, Inc. .........................
George K. Baum & Company ........................
---------
Total .................................. 2,300,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to purchase all
of the shares of Common Stock offered hereby (other than the shares of Common
Stock covered by the over-allotment option described below) if any are
purchased.
The Company has been advised by the Underwriters that they propose to
offer the Common Stock to the public initially at the price set forth on the
cover page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price, less a concession not in excess of $ per share of
Common Stock. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share of Common Stock to certain other
dealers. After the initial public offering, the price to the public, the
concession and the discount to dealers may be changed. The Representatives have
informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.
The Offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the Common Stock.
The Company has granted to the Underwriters an option, exercisable for
the 45 days from the date of this Prospectus, to purchase up to an aggregate of
345,000 additional shares of Common Stock at the initial price to public, less
the underwriting discounts and commissions, solely to cover over-allotments, if
any. To the extent that the Underwriters exercise such option, each Underwriter
may be committed, subject to certain conditions, to purchase a number of
additional shares of Common Stock proportionate to such Underwriter's initial
commitment pursuant to the Underwriting Agreement.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
Subject to certain exceptions, the Company, and all shares of Common
Stock outstanding immediately prior to the completion of this Offering are
subject to agreements which prohibit, without the prior written consent of
EVEREN Securities, Inc., the offer, sale, contract to sell, grant of any option
to purchase or other disposition of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock or the
transfer in any other manner of all or a portion of the economic consequences
associated with the ownership of any such Common Stock prior to December 31,
1998.
48
<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).
49
<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
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.
Ernst & Young LLP
St. Louis, MO
April 20, 1998, except
Note 12, as to which
the date is ________, 1998
The foregoing report is the form that will be signed upon the completion of the
restatement of capital accounts described in Note 12 to the financial
statements.
/S/ Ernst & Young LLP
St. Louis, MO
April 20, 1998
F-2
<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.
<TABLE>
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
<CAPTION>
Year ended December 31
1995 1996 1997
-------------------------------------------------------------
<S> <C> <C> <C>
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
=============================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
LMI Aerospace, Inc.
<TABLE>
Consolidated Statements of Stockholders' Equity
(Amounts in thousands, except share and per share data)
<CAPTION>
Additional Total
Common Stock Paid-In Retained Treasury Stockholders'
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 - 2 - 3 5
stock
Issuance of 80,977 shares of stock 2 295 - - 297
Exercise of options to purchase
3,290 shares of stock - 5 - - 5
Net income - - 5,283 - 5,283
========================================================================
Balance at December 31, 1997 $118 $1,543 $15,090 $ - $16,751
========================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
LMI Aerospace, Inc.
<TABLE>
Consolidated Statements of Cash Flows
(Amounts in thousands)
<CAPTION>
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
netnet cash provided by operating activities:
net cash provided by (used in) operating
activities:
Depreciation and amortization 1,964 2,012 2,179
Deferred income taxes 50 214 14
Changes in operating assets and liabilities:
Trade accounts receivable (911) (595) (1,472)
Inventories (1,083) (1,544) (1,506)
Prepaid expenses and other assets (145) (232) 63
Income taxes 2 513 (85)
Accounts payable and accrued expenses 71 1,129 1,299
-------------------------------------------------------
Net cash provided by (used in) operating activities (15) 2,684 5,775
Investing activities
Additions to property, plant, and equipment (1,736) (1,316) (3,856)
Proceeds from sale of property, plant, and equipment 9 12 143
equipment
Proceeds from sale of investments 183 - -
-------------------------------------------------------
Net cash used in investing activities (1,544) (1,304) (3,713)
Financing activities
Proceeds from issuance of long-term debt 1,075 3,550 3,782
Principal payments on long-term debt (268) (4,914) (6,112)
Purchase of outstanding stock for treasury (38) (58) -
Proceeds from sale of treasury stock 143 15 5
Proceeds from exercise of stock options - 51 5
Proceeds from issuance of common stock 677 - 297
-------------------------------------------------------
Net cash (used in) provided by financing activities 1,589 (1,356) (2,023)
activities
-------------------------------------------------------
Net increase in cash and cash equivalents 30 24 39
Cash and cash equivalents, beginning of year 151 181 205
=======================================================
Cash and cash equivalents, end of year $ 181 $ 205 $ 244
=======================================================
Supplemental disclosures of cash flow information:
cash paid during the year for:
Interest paid $ 1,061 $ 1,191 $ 996
Income taxes paid $ - $ 14 $ 3,378
=======================================================
</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
Sales to the Company's three largest customers accounted for 74 percent, 73
percent, and 81 percent of the Company's revenues in 1995, 1996, and 1997.
Accounts receivable balances related to these three customers were 77 percent
and 83 percent in 1996 and 1997, respectively.
Direct sales to the Company's largest customer accounted for 45 percent, 46
percent, and 59 percent of the Company's revenues in 1995, 1996, and 1997.
Accounts receivable balances related to direct sales to this customer were 52
percent and 62 percent in 1996 and 1997, respectively. In addition, indirect
sales to the Company's largest customer accounted for 19 percent, 20 percent,
and 17 percent of the Company's sales in 1995, 1996, and 1997, respectively.
In 1997, the Company purchased approximately 50 percent of the materials used in
production from three suppliers.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
F-7
<PAGE>
1. Accounting Policies (continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts due from banks, and all
highly liquid investment instruments with an initial maturity of three months or
less.
Inventories
Inventories are stated at the lower of cost or market using actual cost for raw
materials and work-in-process and average cost for finished goods. Inventories
include certain deferred production costs related to long-term production
contracts. These costs are included in cost of sales over the life of the
contract based on a units-of-delivery method.
Revenue Recognition
Revenues are recorded when services are performed or when products are shipped,
except for long-term construction contracts which are recorded on the
percentage-of-completion method based on a units-of-delivery method. Sales from
long-term construction contracts were less than 10 percent of total sales for
each year in the three-year period ended in 1997. The billings in excess of
costs, under long-term construction contracts, are $321 as of December 31, 1997
and are included in accrued expenses. Billings in excess of costs were
immaterial as of December 31, 1996.
Property and Equipment
Property and equipment are stated at cost. Equipment under capital leases is
stated at the present value of the minimum lease payments. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
related assets. Equipment held under capital leases and leasehold improvements
are amortized using the straight-line method over the shorter of the lease term
or estimated useful life of the asset. Estimated useful lives for buildings and
machinery and equipment are 20 years and 4 to 10 years, respectively.
Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement and
income tax basis of the Company's assets and liabilities.
F-8
<PAGE>
1. Accounting Policies (continued)
Stock-Based Compensation
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company
has elected to continue to measure its cost of stock-based compensation under
the provisions of Accounting Principles Board (APB) Opinion No. 25 and provide
the pro forma disclosure provisions of SFAS No. 123.
Financial Instruments
Fair values of the Company's fixed rate long-term obligations approximate their
carrying value, as the rates approximate those which could be obtained by the
Company for similar issues with similar maturities. The Company's other
financial instruments have fair values which approximate their respective
carrying values, due to their short maturities or variable rate characteristics.
Earnings per Common Share
In 1997, the Company adopted SFAS No. 128, Earnings per Share, which replaced
the calculation of primary and fully diluted earnings per share with basic and
fully diluted earnings per share. All earnings per share amounts for all periods
have been presented or, where appropriate, restated to conform to SFAS No. 128.
Earnings per share are computed by dividing net income (loss) by the weighted
average number of common shares outstanding during the applicable periods. The
weighted average number of common shares outstanding was 5,529,483, 5,779,833,
and 5,836,700 in 1995, 1996, and 1997, respectively. In order to compute diluted
earnings per common share, the Company included weighted average dilutive stock
options outstanding which totaled 15,552, 11,150, and 76,104 in 1995, 1996, and
1997, respectively.
F-9
<PAGE>
2. Inventories
Inventories consist of the following:
1996 1997
------------------------------------------
Raw materials $2,142 $2,990
Work in process 4,065 3,875
Finished goods 988 1,836
==========================================
$7,195 $8,701
==========================================
3. Property, Plant, and Equipment
Property, plant, and equipment at December 31 consist of the following:
1996 1997
------------------------------------------
Land $ 638 $ 638
Buildings 7,010 7,405
Machinery and equipment 16,127 18,899
Leasehold improvements 307 426
Construction in progress 224 298
------------------------------------------
24,306 27,666
Less accumulated depreciation (10,309) (12,014)
==========================================
$ 13,997 $ 15,652
==========================================
Depreciation expense (including amortization expense on capital leases) recorded
by the Company totaled $1,812, $1,907, and $2,058, for 1995, 1996, and 1997,
respectively.
4. Demand Note Payable to Stockholder
The Company is obligated to a stockholder for a $250 demand note payable. The
note accrues interest quarterly at 10.5 percent per annum. In March 1998, the
note was paid. See Note 5.
F-10
<PAGE>
5. Long-Term Debt
<TABLE>
Long-term debt consists of the following:
<CAPTION>
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>
The Company has a Credit and Security Agreement with Norwest Business Credit,
Inc. for a revolving credit facility up to $6,500 subject to a borrowing base
calculation and secured by the working capital of the Company. Interest is
payable monthly on the facility at the prime rate plus .5 percent, 9 percent at
December 31, 1997. The facility matures on February 13, 1999 and requires
compliance with certain nonfinancial and financial covenants, including debt
service coverage, minimum book net worth, leverage ratio, and current ratio.
The Industrial Revenue Bond (IRB) bears interest at a variable rate, which is
based on the existing market rates for comparable outstanding tax-exempt bonds
(4.3 percent and 4.1 percent at December 31, 1996 and 1997, respectively), not
to exceed 12 percent. The IRB is secured by a letter of credit, and Magna Bank,
which holds 100 percent participation in the letter of credit, has a security
interest in certain equipment. The balance at December 31, 1997 matures in
November 2000.
F-11
<PAGE>
5. Long-Term Debt (continued)
On August 15, 1996, the Company executed a 9.75 percent term note payable for
$2,600 with Magna Bank N.A. (Magna Bank) secured by certain Company-owned real
estate. The term note payable was amended on January 17, 1997 requiring the
Company to make principal payments of $1,300 in 1997. Interest is payable
monthly on the term note payable at 9.75 percent per annum.
During 1997, the Company refinanced $2,500 of the IRB and the remaining $1,000
of the 9.75 percent term note payable and executed a new 9.0 percent term note
payable for $3,500 with Magna Bank secured by certain Company-owned real estate.
Accordingly, the $2,500 which was scheduled to mature on November 1, 1997 has
been classified as long-term debt at December 31, 1996. The term note payable
requires monthly principal and interest payments of $45, and any remaining
principal balance is due upon maturity in November 2000. The term note payable
contains certain nonfinancial and financial covenants, including leverage ratio,
current ratio, and minimum tangible net worth.
The real estate note payable with the Oklahoma Industrial Finance Authority
requires monthly principal and interest payments through May 2009 and bears
interest at the lender's prime rate adjusted quarterly based on the last day of
the previous quarter (8.25 percent at December 31, 1996 and 8.5 percent at
December 31, 1997). The real estate note payable is secured by a mortgage on the
property.
The Company entered into various notes payable for the purchase of certain
equipment. The notes are payable in monthly installments including interest
ranging from 8.25 percent to 9.56 percent through November 2002. The notes
payable are secured by equipment.
The Company issued subordinated debentures during 1996 which bear interest at 11
percent, payable monthly. The debentures are unsecured and mature on March 15,
1999.
All of the Company's property, plant and equipment is pledged under the above
agreements.
F-12
<PAGE>
5. Long-Term Debt (continued)
The aggregate maturities of long-term debt as of December 31, 1997 are as
follows:
Year ending December 31:
1998 $ 567
1999 2,655
2000 5,805
2001 307
2002 220
Thereafter 287
==================
$ 9,841
==================
On March 31, 1998, the Company secured a $15,000 unsecured line of credit with
Magna Bank to fund short-term working capital needs. The Company drew upon the
line in March 1998 to retire certain outstanding debt balances, including the
Norwest revolving line of credit ($1,281 at December 31, 1997), demand notes to
former shareholders ($250 at December 31, 1997), and the subordinated debentures
($800 at December 31, 1997). The credit facility prohibits the payment of cash
dividends on the common stock without the lender's prior written consent.
6. Leases
The Company leases certain facilities and equipment under various noncancelable
operating lease agreements which expire at various dates throughout 2005. At
December 31, 1997, the future minimum lease payments under operating leases with
initial noncancelable terms in excess of one year are as follows:
Year ending December 31:
1998 $ 610
1999 673
2000 495
2001 464
2002 479
Thereafter 1,143
==================
$3,864
==================
Rent expense totaled $206, $364, and $539 in 1995, 1996, and 1997, respectively.
F-13
<PAGE>
7. Defined Contribution Plans
The Company has a noncontributory profit sharing plan and a contributory 401(k)
plan which covers substantially all full-time employees. Employees are eligible
to participate in both plans after reaching 1,000 hours of accredited service.
Contributions to the profit sharing plan are at the discretion of management and
become fully vested to the employees after seven years. Contributions by the
Company to the profit sharing plan totaled $0, $41, and $150 for 1995, 1996, and
1997, respectively. Contributions by the Company to the 401(k) plan are based
upon a percentage of employee contributions, up to a maximum of $225 per
employee. The Company's contributions to the 401(k) plan totaled $50, $36, and
$78 for 1995, 1996, and 1997, respectively.
8. Stock Options
The Company has an Employee Incentive Stock Option Plan (the Plan), which
provides options for up to 1,398,250 shares to be granted to key employees at
exercise prices greater than or equal to the fair market value per share on the
date the option is granted. All options vest immediately upon grant. Stock
option activity under the Plan is as follows:
<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
F-14
<PAGE>
8. Stock Options (continued)
No. 25 in accounting for its stock option plans, and accordingly, no
compensation cost has been recognized for stock options granted. Had the Company
determined compensation cost based on the fair value at the grant date under
SFAS No. 123, the effect on earnings would be immaterial.
9. Income Taxes
The temporary differences between the tax basis of assets and liabilities and
their financial reporting amounts that give rise to the deferred tax assets and
deferred tax liabilities are as follows:
1996 1997
---------------------------------------
Deferred tax asset:
Accrued vacation $ 122 $ 158
Inventory 142 186
Accrued environmental expenses 58 13
Alternative minimum tax credit 60 -
Other accrued expenses 15 135
Other 10 10
---------------------------------------
Total deferred tax assets 407 502
Deferred tax liabilities:
Depreciation (934) (1,074)
Other (56) (25)
---------------------------------------
Total deferred tax liabilities (990) (1,099)
---------------------------------------
Net deferred tax liability $(583) $ (597)
=======================================
The Company's income tax provision consisted of the following for the year ended
December 31:
1995 1996 1997
--------------------------------------------------------
Federal:
Current $ 2 $471 $2,937
Deferred 43 182 (17)
--------------------------------------------------------
45 653 2,920
State:
Current - 55 355
Deferred 7 32 31
--------------------------------------------------------
$52 $740 $3,306
========================================================
F-15
<PAGE>
9. Income Taxes (continued)
The federal corporate statutory rate is reconciled to the Company's effective
income tax rate as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-----------------------------------------------------------
<S> <C> <C> <C>
Federal taxes $ 30 $653 $2,920
State and local taxes,
net of federal
benefit
benefit 9 57 258
Other 13 30 128
===========================================================
Provision for income taxes $52 $740 $3,306
===========================================================
</TABLE>
At December 31, 1995, the Company had a net operating loss carryforward of $789
which was fully utilized in 1996. At December 31, 1996, the Company had an
alternative minimum tax credit carryforward of $60 which was fully utilized in
1997.
10. Commitments and Contingencies
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position.
During January 1992, the Company entered into an agreement for the purchase of
certain real estate. The agreement contained a representation and warranty of
the seller that the property did not suffer from environmental contamination.
Environmental contamination was subsequently identified on the property, and
during 1996, the Company accrued $250 for remediation and related legal costs.
During 1997, the remediation was substantially completed. The Company incurred
total costs of $140 related to this matter, and $75 of the reserve was reversed
in 1997. As of December 31, 1997, the Company has certain monitoring
requirements related to the property, for which an accrued expense of $35 is
included in accrued expenses. In 1996 and 1997, the related income effects were
classified as selling, general, and administrative expense in the consolidated
statements of operations.
F-16
<PAGE>
<TABLE>
11. Quarterly Financial Data (Unaudited)
<CAPTION>
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
(1) Includes a charge of $250 for environmental remediation - see Note 10.
</TABLE>
12. Subsequent Event - Initial Public Offering
On , 1998, the Company's Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission relating to
an initial public offering of 2,300,000 shares of the Company's unissued common
stock (345,000 additional shares if the underwriters' over-allotment option is
exercised). In connection with the initial public offering, the Company effected
a 2.29-for-one stock dividend of the Company's common stock. All references in
the accompanying financial statements to the number of shares of common stock
and per common share amounts have been retroactively adjusted to reflect the
stock dividend. In addition, the Company's capital structure was changed to
reflect 28,000,000 shares of common stock and 2,000,000 shares of preferred
stock authorized.
F-17
<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
Explanatory Note: The following per share data does not reflect the
proposed 2.29 to 1 stock dividend.
On August 10, 1995, the Company issued 8,000 shares to the Ronald S.
Saks Revocable Trust U/T/A dated June 21, 1991 for $50,240, 16,000 to Sanford
Neuman for $100,480 and 26,400 to the Joseph Burstein Revocable Trust U/T/A
dated August 20, 1983 for $165,792, all of which issuances were effected under
Section 4(2) of the Securities Act.
On November 13, 1995, the Company issued in the aggregate 57,375 shares
to the Guaranty Trust Company of Missouri as trustee for the Profit Sharing Plan
for $360,315 under Rule 701 of the Securities Act.
On October 2, 1997, the Company issued 25,028 shares to the Guaranty
Trust Company of Missouri as trustee for the Profit Sharing Plan for $302,088
under Rule 701 of the Securities Act.
On December 31, 1997, as a result of an exercise of part of an option
granted to a shareholder, the Company issued 1,000 shares to Ronald S. Saks as
Voting Trustee under Voting Trust No. 1 for an aggregate exercise price of
$5,810 under Section 4(2) of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules
Exhibits
See Exhibit Index on page E-1
Financial Statement Schedules
See Index to Financial Statements on Page F-1
Item 17. Undertakings
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the undersigned Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<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 29th day of April, 1998.
LMI AEROSPACE, INC.
(Registrant)
By
Ronald S. Saks
President and Chief Executive Officer
Each of the undersigned hereby appoints Ronald S. Saks and Lawrence E.
Dickinson, and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all amendments
and exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform any and all acts and things
whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons and in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Ronald S. Saks Chief Executive Officer, April 29, 1998
- -------------------------- President, and Director
Ronald S. Saks
/s/ Joseph Burstein Chairman of the Board, April 29, 1998
- -------------------------- Secretary and Director
Joseph Burstein
/s/ Lawrence J. LeGrand Chief Operating Officer April 29, 1998
- -------------------------- and Director
Lawrence J. LeGrand
/s/ Lawrence E. Dickinson Chief Financial Officer April 29, 1998
- --------------------------
Lawrence E. Dickinson
/s/ Duane Hahn Vice President, Regional April 29, 1998
- -------------------------- Manager and Director
Duane Hahn
/s/ Sanford S. Neuman Assistant Secretary and April 29, 1998
- -------------------------- Director
Sanford S. Neuman
<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. .....
9.1* Voting Trust Agreement dated November 11, 1996 ........
9.2* Voting Trust Agreement No. 2 dated December 31, 1996 ..
10.1 1989 Stock Option Plan, including all amendments ......
10.2 Employment Agreement, dated January 1, 1997, between
the Registrant and Ronald S. Saks ...................
10.3 Employment Agreement, effective as of May 1, 1998,
between the Registrant and Lawrence J. LeGrand ......
10.4* Employment Agreement, dated January 1, 1998, between
the Registrant and Duane E. Hahn ....................
10.5 Employment Agreement, dated January 1, 1998, between
the Registrant and Phillip A. Lajeunesse ............
10.6 Employment Agreement, dated January 1, 1998, between
the Registrant and Robert T. Grah ...................
10.7 Employment Agreement, dated January 1, 1998, between
the Registrant and Bradley L. Nelson ................
10.8* Lease Agreement, dated November 25, 1991, between the
Registrant and Roy R. Thoele and Madonna J. Thoele,
including all amendments (Leased premises at 3000
Highway 94 North)....................................
10.9* Lease Agreement, dated June 28, 1988, between the
Registrant and J & R Sales, including all
amendments (Leased premises at 204 H Street).........
10.10* Lease Agreement, dated May 6, 1997, between the
Registrant and Victor Enterprises, LLC, including
all amendments Leased premises at 101 Western
Avenue S)............................................
10.11* Lease Agreement, dated February 1, 1995, between the
Registrant and RFS Investments (Leased premises at
2621 West Esthner Court).............................
10.12 Profit Sharing and Savings Plan and Trust, including
all amendments ......................................
10.13 Loan Agreement between the Registrant and Magna Bank,
N.A., dated August 15, 1996, including all
amendments ..........................................
E-1
<PAGE>
10.14* Indenture of Trust and Loan Agreement, both with the
Industrial Development Authority of St. Charles
County, Missouri and dated as of September 1, 1990....
10.15* General Terms Agreement, Special Terms Agreement and
Warranty Agreements, dated ____________________,
between the Registrant and Boeing Seattle.............
10.16* Master Purchase Order and General Conditions, dated
________________, between the Registrant and Boeing
North American........................................
10.17* Master Purchase Order and General Conditions, dated
________________, between the Registrant and Boeing
Wichita...............................................
10.18* Master Purchase Order and General Conditions, dated
________________, between the Registrant and Northrop
Grumman...............................................
16.1 Letter from KPMG Peat Marwick, LLP as to statements
regarding change in certified accountants.............
21.1 List of Subsidiaries of the Registrant .................
23.1 Consent of Gallop, Johnson & Neuman, L.C.
(contained in Exhibit 5.1 hereto).....................
23.2 Consent of Ernst & Young LLP, independent auditors ....
24 Power of Attorney (on signature page of initial
filing of Form S-1)...................................
27.1 Financial Data Schedule ................................
- --------------------
* To be filed by amendment.
E-2
2,300,000 Shares
LMI AEROSPACE, INC.
Common Stock
June ____, 1998
UNDERWRITING AGREEMENT
EVEREN Securities, Inc.
George K. Baum & Company
<PAGE>
2,300,000 Shares
LMI AEROSPACE, INC.
Common Stock
($0.02 par value)
UNDERWRITING AGREEMENT
June ___, 1998
EVEREN Securities, Inc.
George K. Baum & Company
As Representatives of
the Several Underwriters
c/o EVEREN Securities, Inc.
77 West Wacker Drive
Chicago, Illinois 60601-1994
Ladies and Gentlemen:
LMI Aerospace, Inc., an Illinois corporation (the "Company"), confirms
its agreement with the several underwriters listed in Schedule I hereto (the
"Underwriters"), for whom EVEREN Securities, Inc., and George K. Baum & Company
(collectively, the "Representatives") have been duly authorized to act as
representatives, as follows:
1. The Shares. Subject to the terms and conditions set forth in this
agreement (this "Agreement"), the Company proposes to issue and sell 2,300,000
shares of the Company's Common Stock, $0.02 par value (the "Common Stock"), to
the several Underwriters. Such 2,300,000 shares of Common Stock proposed to be
sold by the Company are hereinafter referred to as the "Firm Shares." The
Company also proposes to issue and sell to the several Underwriters up to
345,000 additional shares of Common Stock (the "Additional Shares") if requested
by the Underwriters as provided in Section 3 hereof. The Firm Shares and the
Additional Shares are herein collectively called the "Shares." The Shares are
more fully described in the Registration Statement and Prospectus referred to
below. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Registration Statement and Prospectus.
2. Registration Statement and Prospectus. The Company has prepared and
filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 (File No. 333-______), including a
prospectus, relating to the Shares. The registration statement, as amended at
the time when it became or becomes effective, including all financial schedules
and exhibits thereto and all of the information (if any) deemed to be part of
the registration statement at the time of its effectiveness pursuant to Rule
430A under the Act ("Rule 430A"), is hereinafter referred to as the
"Registration Statement"; the prospectus in the form first provided to the
Underwriters by the Company in connection with the offering and sale of the
Shares (whether or not required to be filed pursuant to Rule 424(b) under the
Act ("Rule 424(b)")) is hereinafter referred to as the "Prospectus," except that
if any revised prospectus shall be provided to the Underwriters by the Company
for use in connection with the offering of the Shares that differs from the
Prospectus (whether or not any such revised prospectus is required to be filed
by the Company pursuant to Rule 424(b) under the Act), the term "Prospectus"
shall refer to the revised prospectus from and after the time it is first
provided to the Underwriters for such use; and each preliminary prospectus
included in the Registration Statement prior to the time it became or becomes
effective is herein referred to as a "Preliminary Prospectus."
<PAGE>
3. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to the terms and
conditions hereof, (i) the Company agrees to issue and sell to the Underwriters
2,300,000 Firm Shares at a price of $_____ per Share (the "Purchase Price"); and
(ii) each Underwriter agrees, severally and not jointly, to purchase from the
Company, at the Purchase Price, the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to the terms and conditions hereof, (i) the Company
agrees to issue and sell to the Underwriters, at the Purchase Price, up to
345,000 Additional Shares; and (ii) the Underwriters shall have the right to
purchase, severally and not jointly, from time to time, up to an aggregate of
345,000 Additional Shares at the Purchase Price. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Additional Shares to be purchased from the Company as the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I bears
to the total number of Firm Shares.
The Company is advised by you that the Underwriters propose to make a
public offering of their prospective portions of the Shares as soon after the
Registration Statement and this Agreement become effective as in your judgment
is advisable. The Company is further advised that the Underwriters propose to
offer the Shares to the public initially upon the terms set forth in the
Prospectus. The Company is further advised that after the initial public
offering, the price to the public, the concession and the discount to dealers
may be changed.
For a period of 180 days from the date this Agreement becomes
effective, the Company will not, without the prior written consent of EVEREN
Securities, Inc. on behalf of the Underwriters (1) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
(other than [1,389,750] shares of Common Stock and/or related options issued or
issuable pursuant to the 1989 Employee Incentive Stock Option Plan described in
the Prospectus, or (2) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise.
The Company will cause each shareholder of the Company (each a
"Shareholder") to deliver to the Representatives an agreement pursuant to which
such Shareholder agrees that it will not, without the prior written consent of
EVEREN Securities, Inc. on behalf of the Underwriters, for a period of 180 days
from the date this Agreement becomes effective, (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly .or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, or (2) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise.
4. Agreements of the Company as to Delivery and Payment. The Company
agrees with each Underwriter that:
(a) Delivery to the Underwriters of and payment for the Firm Shares
shall be made at 10:00 A.M., New York City time, on the third full
business day (such time and date being referred to as the "Closing
Date") following the date of the initial public offering of the Firm
Shares, at such place as you shall designate.
2
<PAGE>
(b) Delivery to the Underwriters of and payment for any
Additional Shares to be purchased by the Underwriters shall be made at
such place as the Representatives shall designate, at 10:00 A.M., New
York City time, on such date or dates (individually, an "Option Closing
Date" and collectively, the "Option Closing Dates"), which may be the
same as the Closing Date but shall in no event be earlier than the
Closing Date, as shall be specified in a written notice from the
Representatives to the Company of the Underwriters' determination to
purchase a number, specified in said notice, of Additional Shares. Any
such notice may be given at any time within 45 days after the date of
this Agreement.
(c) Certificates for the Shares shall be registered in such
names and issued in such denominations as you shall request in writing
not later than two business days prior to the Closing Date or the
applicable Option Closing Date, as the case may be, and shall be made
available for inspection not later than 9:30 A.M., New York City time,
on the business day next preceding the Closing Date or the applicable
Option Closing Date, as the case may be. Certificates in definitive
form evidencing the Shares shall be delivered to you on the Closing
Date or the applicable Option Closing Date, as the case may be, with
any transfer taxes thereon payable upon initial issuance or the
transfer thereof duly paid by the Company for the respective accounts
of the Underwriters against payment of the Purchase Price therefor to
the order of the Company by a federal funds check of same day funds or
by wire transfer of same day funds.
5. Further Agreements of the Company.
The Company covenants and agrees with each Underwriter that:
(a) it will, if the Registration Statement has not heretofore
become effective under the Act, file an amendment to the Registration
Statement or, if necessary pursuant to Rule 430A under the Act, a
post-effective amendment to the Registration Statement, as soon as
practicable after the execution and delivery of this Agreement, and
will use its best efforts to cause the Registration Statement or such
post-effective amendment to become effective at the earliest possible
time; and the Company will comply fully and in a timely manner with the
applicable provisions of Rule 424(b) and Rule 430A under the Act and
will provide evidence satisfactory to you of such compliance;
(b) it will advise you promptly and, if requested by you,
confirm such advice in writing, (i) when the Registration Statement has
become effective, if and when the Prospectus is sent for filing
pursuant to Rule 424 under the Act and when any post-effective
amendment to the Registration Statement becomes effective, (ii) of the
receipt of any comments from the Commission or any state securities
commission or other regulatory authority that relate to the
Registration Statement or requests by the Commission for amendments to
the Registration Statement or amendments or supplements to the
Prospectus or for additional information, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, or of the suspension of qualification of the
Shares for offering or sale in any jurisdiction, or the initiation or,
to the best knowledge of the Company, threat of any proceedings for
such purpose by the Commission or any state securities commission or
other regulatory authority, and (iv) of the happening of any event or
information becoming known during the period referred to in paragraph
(e) below that makes any statement of a material fact made in the
Registration Statement untrue or that requires the making of any
3
<PAGE>
additions to or changes in the Registration Statement (as amended or
supplemented from time to time) in order to make the statements therein
not misleading or that makes any statement of a material fact made in
the Prospectus (as amended or supplemented from time to time) untrue or
that requires the making of any additions to or changes in the
Prospectus (as amended or supplemented from time to time) in order to
make the statements therein, not misleading; if at any time the
Commission shall issue or institute proceedings (or threaten to
institute any such proceedings) to issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue or institute
proceedings (or threaten to institute proceedings) to issue an order
suspending the qualification or exemption of the Shares under any state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(c) it will furnish to you without charge four signed copies
of the Registration Statement as first filed with the Commission and of
each amendment to it, including all exhibits filed therewith, and will
furnish to you and each Underwriter designated by you such number of
conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request;
(d) it will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it
becomes effective, or make any amendment or supplement to the
Prospectus of which you shall not previously have been advised and
provided a copy a reasonable period of time prior to the filing thereof
or to which you or your counsel shall reasonably object; and to prepare
and file with the Commission, promptly upon your reasonable request,
any amendment to the Registration Statement or supplement to the
Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause
the same to become promptly effective;
(e) promptly after the Registration Statement becomes
effective, and from time to time thereafter for such period as a
prospectus is required by the Act to be delivered in connection with
the sales by an underwriter or a dealer (in the opinion of your
counsel), it will furnish to each Underwriter and dealer without charge
as many copies of the Prospectus (and any amendment or supplement of
the Prospectus) as such Underwriter or dealer may reasonably request
for the purposes contemplated by the Act; the Company consents to the
use of the Prospectus and any amendment or supplement thereto by any
Underwriter or any dealer, both in connection with the offering or sale
of the Shares and for such period of time thereafter as the Prospectus
is required by the Act to be delivered in connection therewith;
(f) if during the period specified in paragraph (e) above any
event shall occur or information become known as a result of which in
the opinion of your counsel it becomes necessary to amend or supplement
the Prospectus in order to make the statements therein, in light of the
circumstances existing as of the date the Prospectus is delivered to a
purchaser, not misleading, or it is necessary to amend or supplement
the Prospectus to comply with any law, it will forthwith prepare and,
subject to paragraph 5(d) above, file with the Commission at the sole
expense of the Company an appropriate amendment or supplement to the
Prospectus so that the statements of any material facts in the
Prospectus, as so amended and supplemented, will not in light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the Act and all other applicable law and it
will furnish to the Underwriters and to such dealers as the
Underwriters shall specify, at the sole expense of the Company, such
number of copies thereof as such Underwriters or dealers may reasonably
request;
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(g) prior to any public offering of the Shares, it will
cooperate with you and counsel for the Underwriters in connection with
the registration, qualification or filing of notices of the offer and
sale of the Shares by the several Underwriters and by dealers under the
state securities or Blue Sky laws of such jurisdictions as you may
request and to continue such qualification in effect as long as
required for distribution of the Shares and to file such consents to
service of process or other documents as may be necessary in order to
effect such registration or qualification;
(h) it will not acquire any capital stock of the Company prior
to the exercise in full or termination or expiration of the option to
purchase the Additional Shares nor will the Company declare or pay any
dividend or make any other distribution upon the Common Stock payable
to shareholders of record on a date prior to the exercise in full or
termination or expiration of the option to purchase the Additional
Shares, except in either case as contemplated by the Prospectus;
(i) it will make generally available to its security holders
and furnish to the Underwriters as soon as reasonably practicable a
consolidated earnings statement covering a period of at least 12 months
beginning after the "effective date" (as defined in Rule 158 under the
Act) of the Registration Statement (but in no event commencing later
than 90 days after such date) that will satisfy the provisions of
Section 11(a) of the Act and Rule 158 thereunder;
(j) during the period of five years after the date of this
Agreement, it will furnish to you a copy (i) as soon as practicable
after the filing thereof, of each report filed by the Company with the
Commission, any securities exchange or the National Association of
Securities Dealers, Inc. ("NASD"); (ii) as soon as practicable after
the release thereof, of each material press release in respect of the
Company; (iii) as soon as available, of each report of the Company
mailed to shareholders; and (iv) as soon as available, such other
publicly available information concerning the Company as you may
reasonably request;
(k) it will use the net proceeds received by it from the sale
of the Shares being sold by it in the manner specified in the
Prospectus;
(l) it will cause the Shares to be listed, subject to notice
of issuance or sale, on The Nasdaq National Market (the "NASDAQ"); it
will comply with all registration, filing and reporting requirements of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
and the NASDAQ for so long as delivery of a Prospectus is required in
connection with the offering or sale of the Shares;
(m) Prior to the Closing Date and any Closing Date, as the
case may be, not to issue any press release or other communication
relating to the offering of the Shares, or hold any press conference
with respect to the Company, any subsidiary, the financial conditions,
results of operations, business, properties, assets, or liabilities of
any of them, or this offering, without prior written consent of EVEREN
Securities, Inc. which shall not be unreasonably withheld; and
(n) it will use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to
or after the Closing Date or any Option Closing Date, as the case may
be, and to satisfy all conditions precedent to the delivery of the
Shares.
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6. Representations and Warranties.
(a) The Company represents and warrants to each Underwriter
as of the date hereof, the Closing Date and each Option Closing Date
that:
(i) the Company has filed with the Commission the
Registration Statement, including the Prospectus, related to
the Shares; the Commission has not issued any order preventing
or suspending the use of any Preliminary Prospectus
Registration Statement or Prospectus relating to the proposed
offering of the Shares nor instituted or threatened any
proceedings for that purpose or for purpose of issuing a stop
order suspending effectiveness of the Registration Statement.
The Registration Statement, on the date it became or becomes
effective, each Preliminary Prospectus, on the date of the
filing thereof with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof
with the Commission (or if not filed, on the date provided by
the Company to the Underwriters in connection with the
offering and sale of the Shares) and at the Closing Date and
each Option Closing Date conformed or will conform with the
requirements of the Act and the rules and regulations
promulgated thereunder ("Rules and Regulations"); the
Registration Statement, on the date it became or becomes
effective, did not or will not contain an untrue statement of
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; each Preliminary Prospectus, on the date of the
filing thereof with the Commission, and the Prospectus and any
amendment or supplement thereto, on the date of filing thereof
with the Commission (or if not filed, on the date provided by
the Company to the Underwriters in connection with the
offering and sale of the Shares) and at the Closing Date and
each Option Closing Date did not and will not include an
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; the foregoing shall not apply
to statements in or omissions from the Preliminary Prospectus,
Registration Statement and the Prospectus made or omitted in
reliance upon, and in conformity with, information relating to
the Underwriters furnished in writing to the Company by or on
behalf of the Underwriters with your consent expressly for use
therein; the Company hereby acknowledges for all purposes
under this Agreement that (A) the statements set forth under
the caption "Underwriting" in the Prospectus, (B) the
stabilization legend on the gate-fold of the Prospectus and
(C) footnotes [1 and 3] and the last paragraph of text on the
cover page of the Prospectus constitute the only written
information furnished to the Company by or on behalf of the
Underwriters for use in the preparation of the Registration
Statement or the Prospectus or any amendment or supplement
thereto;
(ii) the Company's subsidiaries are Leonard's Metal,
Inc., a Missouri corporation ("Leonard's") and LMI Finishing,
Inc., a Missouri corporation ("Finishing"), (such subsidiaries
being collectively referred to herein as the "Subsidiaries");
and individually a "Subsidiary" each of the Company and its
Subsidiaries has been duly incorporated and is a validly
existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power
and authority to own or lease its respective properties and
assets and to conduct its respective business as described in
the Registration Statement and the Prospectus and is duly
qualified to do business in each jurisdiction in which it owns
or leases real property or in which the conduct of its
respective business or the ownership or leasing of property
requires such qualification, except where the failure to be
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so qualified, either individually or in the aggregate, would
not have a material adverse effect on the condition
(financial or otherwise), business, assets, prospects, net
worth or results of operations of the Company and its
Subsidiaries taken as a whole (a "Material Adverse Effect")
and no preceding has been instituted in any such jurisdiction
revoking, limiting, curtailing or seeking to revoke, limit or
curtail such power and authority or qualification;
(iii) the capitalization of the Company is, and upon
consummation of the transactions contemplated hereby and by
the Prospectus will be (as modified by the assumptions and
footnotes included in the "Capitalization" section of the
Prospectus), as set forth in the Registration Statement and
the Prospectus under the caption "Capitalization;" all of the
issued and outstanding shares of capital stock of the Company
have been duly authorized and are validly issued, are fully
paid and non-assessable and conform to the description thereof
in the Registration Statement and the Prospectus and were not
issued in violation of any preemptive rights or other rights
to subscribe for or purchase securities; except as set forth
in the Registration Statement and the Prospectus with respect
to the Company's 1989 Employee Incentive Stock Option Plan, no
options, warrants or other rights to purchase from the
Company, agreements or other obligations of the Company to
issue or other rights to convert any obligation into, or
exchange any securities for, shares of capital stock of or
ownership interests in the Company are outstanding; the
description of the Company's 1989 Employee Incentive Stock
Option Plan and the other options or rights granted and
exercised thereunder, as set forth in the Registration
Statement and the Prospectus, accurately presents the
information required to be shown under the Act with respect to
such options and rights; and all of the issued and outstanding
shares of capital stock of each Subsidiary have been duly and
validly authorized and issued and are fully paid and
non-assessable and are owned directly by the Company, free and
clear of all liens, encumbrances, security interests, equities
or claims;
(iv) subsequent to the respective dates as of which
information is given in the Registration Statement and
Prospectus, and except as described therein, (A) neither the
Company nor any Subsidiary has incurred any material
liabilities or obligations, direct or contingent, or entered
into any material transactions which are not in the ordinary
course of business or which could result in a material
reduction in the future earnings of the Company and the
Subsidiaries, (B) the Company has not purchased any of its
outstanding capital stock or declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock
or otherwise and the Company and the Subsidiaries are not in
default in the payment of principal or interest on any
outstanding debt obligations, (C) there has not been any
material adverse change in the Company's or any Subsidiary's
condition (financial or otherwise), business, affairs,
prospects or results of operations and (D) there has not been
any material change in the capital stock or the material
indebtedness of the Company or any Subsidiary;
(v) the Shares to be sold by the Company pursuant to this
Agreement have been duly and validly authorized and, when
issued, delivered and paid for pursuant to this Agreement,
will be validly issued, fully paid and nonassessable, and will
conform to the description thereof contained in the Prospectus
and the issuance of the Shares will not be subject to any
preemptive or similar rights;
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(vi) the Company has the requisite corporate power
and authority to enter into, execute and deliver this
Agreement and perform its obligations hereunder; this
Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the
Company enforceable in accordance with its terms, except (i)
as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) that rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws;
(vii) neither the Company nor any Subsidiary (i) is
in violation of its charter or by-laws (except for such
violation as would not have a Material Adverse Effect), (ii)
is in default in (nor has any event occurred that with notice
or lapse of time, or both, would be a breach of or a default
in) the performance of any obligation, agreement or condition
contained in any agreement, lease, contract, permit, license,
franchise agreement, mortgage, loan agreement, debenture,
note, deed of trust, bond, indenture or other evidence of
indebtedness or any other instrument or obligation
(collectively, "Obligations and Instruments") to which it or
any of its respective properties or assets is bound or
affected (except for such contravention or default as would
not have a Material Adverse Effect), (iii) is in violation of
any statute, judgment, decree, order, rule or regulation
(collectively, "Laws") applicable to it or any of its
respective properties or assets that, alone, or together with
other violations of Laws would result in a Material Adverse
Effect, and (iv) is charged with or, to the Company's
knowledge, under investigation with respect to, any material
violation of any such Laws (except for such violation as would
not have a Material Adverse Effect);
(viii) the execution, delivery and performance of this
Agreement and delivery of the Shares by the Company and
compliance by the Company with all the provisions hereof and
the consummation of the transactions contemplated hereby and
as described in the Prospectus under the caption "Use of
Proceeds" will not, alone or upon notice or the passage of
time or both (A) require any consent, approval, authorization,
license, certificate, permit or other order of any court,
regulatory body, administrative agency or other governmental
body or third party, including any party to any material
Obligation or Instrument, except such as may be required under
the Act and the securities or Blue Sky laws of the various
states or by the NASD, (B) result in the creation or
imposition of any lien, charge or encumbrance upon any of the
properties or assets of the Company or any Subsidiary pursuant
to the terms and provisions of any Obligation or Instrument
(except for such creation or imposition as would not have a
Material Adverse Effect), (C) conflict with or constitute a
breach or default under any Obligation or Instrument to which
the Company or any Subsidiary is a party or by which any of
their properties or assets is bound, (except for such
conflict, breach or default as would not have a Material
Adverse Effect) and would impair materially the ability of the
Company to perform its obligation hereunder or thereunder, or
(D) assuming compliance with the Act and all applicable state
securities or Blue Sky laws, violate or conflict with any Laws
applicable to the Company or any of its properties or assets
(except for such violation or conflict as would not have a
Material Adverse Effect);
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<PAGE>
(ix) except as set forth in the Prospectus, there is
no action, suit, proceeding, inquiry or investigation,
governmental or otherwise before any court, arbitrator or
governmental agency or body (collectively, "Proceedings")
pending to which the Company or any Subsidiary is a party or
to which any of its respective properties or assets are
subject, that, if determined adversely, could reasonably be
expected to result in a Material Adverse Effect, or that could
reasonably be expected to materially and adversely affect the
properties or assets of the Company and its Subsidiaries,
taken as a whole, or that seeks to restrain, enjoin, prevent
the consummation of or otherwise challenge the issuance or
sale of any of the Shares to be sold hereunder or the
consummation of the transactions described in the Prospectus
under the caption "Use of Proceeds", and, to the best
knowledge of the Company, no such Proceedings are threatened
or contemplated; no action has been taken with respect to the
Company, and, to the best knowledge of the Company, no
statute, rule or regulation or order has been enacted, adopted
or issued by any governmental agency that suspends the
effectiveness of the Registration Statement, prevents or
suspends the use of any Preliminary Prospectus or the
Prospectus or suspends the sale of the Shares in any
jurisdiction; no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction
has been issued with respect to the Company that could
reasonably be expected to prevent the issuance of the Shares,
in any manner invalidate this Agreement, suspend the
effectiveness of the Registration Statement, prevent or
suspend the use of any Preliminary Prospectus or the
Prospectus or suspend the sale of the Shares in any
jurisdiction; and every request of the Commission, or any
securities authority or agency of any jurisdiction, for
additional information (to be included in the Registration
Statement or the Prospectus or otherwise) has been complied
with in all material respects;
(x) neither the Company nor any Subsidiary has
violated any foreign, federal, state or local law or
regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Law") the
violation of which in such case or in the aggregate would have
a Material Adverse Effect; no property owned or leased by the
Company or any Subsidiary is contaminated with any waste or
hazardous substances the presence of which would result in a
Material Adverse Effect, nor would the Company or any
Subsidiary be deemed an "owner or operator" of a "facility" or
"vessel" that owns, possesses, transports, generates,
discharges or disposes of a "hazardous substance" as those
terms are defined in ss.9601 of the Comprehensive Response
Compensation and Liability Act of 1980, U.S.C. ss.9601 et seq.
(except that the Company and its Subsidiaries dispose in the
ordinary course of its business certain materials that may be
classified as or contain "hazardous substances"; the disposal
of such products (A) is in material compliance with all
applicable laws as of the date hereof and (B) has not and will
not result in a Material Adverse Effect);
(xi) neither the Company nor any Subsidiary is in
violation of any foreign, Federal, state or local law relating
to discrimination in the hiring, promotion or pay of employees
nor any applicable foreign, Federal or state wages and hours
9
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laws, nor any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or the rules and regulations
promulgated thereunder ("ERISA") or similar foreign laws, the
violation of which in each case or in the aggregate would
result in a Material Adverse Effect; no "reportable event" (as
defined in ERISA) has occurred with respect to any "pension
plan" (as defined in ERISA) which in each case or in the
aggregate-would result in a Material Adverse Effect; neither
the Company nor any Subsidiary has incurred any material
liability under (i) Title IV of ERISA with respect to the
termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended;
(xii) each of the Company and its Subsidiaries has
such permits, licenses, consents, certificates, orders,
franchises and authorizations of governmental or regulatory
authorities or third parties ("Permits"), including, without
limitation, under any applicable Environmental Laws, as are
necessary to own, lease and operate its respective properties
and assets and to conduct its respective businesses, except
where the failure to have any such Permit would not have a
Material Adverse Effect; each of the Company and its
Subsidiaries has fulfilled and performed all of its respective
material obligations with respect to such Permits and, to the
best knowledge of the Company, no event has occurred that
allows, or after notice or lapse of time, or both would allow,
revocation or termination thereof or result in any other
material impairment of the rights of the holder of any such
Permit;
(xiii) neither the Company nor any Subsidiary is, nor
intends to conduct its business in a manner in which it would
become, an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company
Act");
(xiv) except as otherwise set forth in the
Prospectus, each of the Company and its Subsidiaries has good
and marketable title, free and clear of all liens, claims,
encumbrances and restrictions (except liens for taxes not yet
due and payable and except for such liens, claims,
encumbrances and restrictions as do not materially affect the
value of such property and do not materially interfere with
the use made of such property) to all property and assets
described in the Registration Statement as being owned by it;
all leases to which each of the Company and its Subsidiaries
is a party are subsisting, valid and binding and no default of
the Company or any Subsidiary has occurred or is continuing
thereunder that might result in a Material Adverse Effect; and
each of the Company and its Subsidiaries has peaceful and
undisturbed possession under all such leases to which it is a
party as lessee with such exceptions as do not materially
interfere with the use made thereof by the Company or such
Subsidiary;
(xv) each of the Company and its Subsidiaries
maintains insurance in such amounts and covering such risks as
is adequate for the conduct of their respective businesses and
the value of their respective properties and as is customary
for companies engaged in similar businesses in similar
industries;
(xvi) KPMG Peat Marwick LLP, for the years 1993 and
1994, and Ernst & Young LLP for the years 1995 and subsequent,
are each an independent public accounting firm with respect to
the Company and its Subsidiaries as required by the Act;
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(xvii) the consolidated financial statements of the
Company, together with related notes and schedules of the
Company, included in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), are
accurate and present fairly the consolidated financial
position, results of operations and cash flows of the Company
and its Subsidiaries at the indicated dates and for the
indicated periods; such financial statements, schedules and
related notes have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied
throughout the periods involved (except as disclosed in the
Prospectus) as certified by the independent accountants named
in clause (xvi) above, and all adjustments necessary for a
fair presentation of results for such periods have been made
and any unaudited financial statements have been prepared on
the basis described in the Prospectus; and the summary and
selected financial and operating data included in the
Registration Statement and the Prospectus presents fairly the
information shown therein and have been compiled on the basis
described in the Prospectus; and the other financial and
statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement
thereto) is, in all material respects, accurately presented
and prepared on a basis consistent with such financial
statements and the books and records of the Company;
(xviii) no holder of any security of the Company has
any right to require inclusion of any such security in the
Registration Statement; there are no preemptive rights with
respect to the Offering being made by the Prospectus;
(xix) except as disclosed in the Registration
Statement and the Prospectus, no labor dispute with the
employees of the Company or any Subsidiary exists, or to the
best knowledge of the Company, is imminent, that could result
in a Material Adverse Effect; and neither the Company nor any
Subsidiary has received notice of any existing or imminent
labor disturbance by the employees of any of its principle
suppliers, customers, manufacturers or contractors that could
result in any Material Adverse Effect;
(xx) the Company has filed or caused to be filed, or
has properly filed extensions for, all foreign, federal, state
and local income, value added and franchise tax returns and
has paid all taxes and assessments shown thereon as due,
except for such taxes and assessments as are disclosed or
adequately reserved against and that are being contested in
good faith by appropriate proceedings, promptly instituted and
diligently conducted; all material tax liabilities are
adequately provided for on the books of the Company and its
Subsidiaries, and there is no material tax deficiency that has
been asserted against the Company or any Subsidiary that is
not so provided for;
(xxi) the Company and its Subsidiaries own or
possess, or can readily acquire on reasonable terms, the
patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and or
unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks and trade names
(collectively, "Patents and Proprietary Rights") currently
employed by them in connection with the businesses they now
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operate except where the failure to so own, possess or acquire
such Patents and Proprietary Rights would not have a Material
Adverse Effect; and neither the Company nor any Subsidiary has
received any notice and is not otherwise aware of any
infringement of or conflict with asserted rights of others
with respect to any Patent or Proprietary Rights that, if the
subject of any unfavorable decision, ruling or finding, singly
or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect; and neither the Company nor any
Subsidiary is obligated or under any liability whatsoever to
pay any royalty fee or other similar payment in respect of any
Patents and Proprietary Rights;
(xxii) neither the Company nor any of the Company's
executive officers, directors or affiliates (as defined under
the Act) has taken or will take, directly or indirectly, any
action designed to or which has constituted or that might
reasonably be expected to cause or result, under the Exchange
Act or otherwise, in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of the Shares;
(xxiii) each of the Company and its Subsidiaries
maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are
executed in accordance with management's authorizations, (ii)
transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's authorization,
and (iv) the recorded accountability for inventory is compared
with the existing inventory at reasonable intervals and
appropriate action is taken with respect to any differences;
(xxiv) there is no (i) material contract, document,
agreement or transaction to which the Company or any
Subsidiary is a party, or that involved or involves the
Company or any Subsidiary or any of its respective properties
or assets or (ii) local or governmental proceeding pending or,
to the best knowledge of the Company, threatened, to which the
Company or any Subsidiary is a party or to which any of their
respective property is subject that is required to be
described in or filed as an exhibit to the Registration
Statement or the Prospectus by the Act or the Rules and
Regulations that have not been so described or filed;
(xxv) other than as contemplated in this Agreement,
the Company has not incurred any liability for any finder's or
broker's fee or agent's commission in connection with the
execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby;
(xxvi) except as disclosed in the Prospectus, to the
best of its knowledge, the Company owns and has the
unrestricted right to use all trade secrets, including
know-how, customer lists, inventions, designs, processes,
computer programs and technical data necessary to manufacture,
operate and sell all products and services sold or developed
and proposed to be sold by it as described in the Prospectus,
free and clear of any rights, liens and claims of others. To
the best of its knowledge, the Company is not using any
material confidential information or trade secrets of any
former employer of any of its past or present employees;
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(xxvii) the Company has not, since the end of its
last fiscal year for which certified financial statements of
the Company were included in the Prospectus: (a) failed to pay
any dividend or sinking fund installment on preferred stock;
or (b) defaulted (i) on any installment or installments of
indebtedness for borrowed money, or (ii) on any rental on one
or more long term leases which defaults in the aggregate are
material to the financial position of the Company; and
(xxviii) the Company's Common Stock, including the
Shares, is eligible for trading on the NASDAQ National Market
System.
(b) Any certificate signed by any officer of the Company and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty made by the Company to each Underwriter as
to the matters covered thereby and shall be deemed incorporated herein
in its entirety and shall be effective as if such representation and
warranty were made herein.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each of
the Underwriters and each person, if any, who controls each of the
Underwriters within the meaning of Section 15 of the Act or Section 20
of the Exchange Act (the "indemnified parties") from and against any
and all losses, claims, damages, liabilities and judgments caused by,
arising out of, related to or based upon any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), including the
information deemed to be part of the Registration Statement at the time
of effectiveness pursuant to Rule 430A, if applicable, or the
Prospectus or any Preliminary Prospectus or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or
judgment arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or
any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any Underwriter
through EVEREN Securities, Inc. expressly for use therein. The Company
acknowledges that the only written information furnished to the Company
by or on behalf of any Underwriter for use in such documents is set
forth in Sections 6(a)(i) above.
(b) In case any action shall be brought against any of the
indemnified parties, based upon any Preliminary Prospectus, the
Registration Statement or the Prospectus or any amendment or supplement
thereto and with respect to which indemnity may be sought against the
Company, such indemnified party shall promptly notify the Company in
writing (but the failure so to notify shall not relieve the Company of
any liability that they may otherwise have to such indemnified parties
under this Section 7 (although the Company's liability to an
indemnified party may be reduced on a monetary basis to the extent, but
only to the extent, they have been prejudiced by such failure on the
part of such indemnified party)) and the Company shall promptly assume
the defense thereof, including the employment of counsel satisfactory
to such indemnified party and payment of all fees and expenses. The
indemnified parties shall each have the right to employ separate
counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel shall have
been specifically authorized by the Company, (ii) the Company shall
have failed to assume promptly the defense or to employ counsel
reasonably satisfactory to such indemnified party or (iii) the named
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parties to any such action (including any impleaded parties) include
both the indemnified party and the Company and such indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to one or more of the indemnified parties that are
different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense
of such action on behalf of such indemnified party, it being
understood, however, that the Company shall not, in connection with any
one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local
counsel) for the indemnified parties, which firm shall be designated in
writing by EVEREN Securities, Inc., and that all such fees and expenses
shall be reimbursed promptly as they are incurred). The Company shall
not be liable for any settlement of any such action effected without
its written consent, which consent shall not be unreasonably withheld,
but if settled with the written consent of the Company, the Company
agrees to indemnify and hold harmless the indemnified parties from and
against any and all loss or liability by reason of such settlement.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by
the second sentence of this paragraph, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more
than 10 business days after delivery by registered or certified mail to
the proper address for notice to such indemnifying party of the
aforesaid request (whether or not such delivery is accepted) and (ii)
such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional and
complete release in writing of such indemnified party from any and all
liability on claims that are the subject matter of such proceeding,
which such settlement shall be in form and substance satisfactory to
the indemnified party. The indemnification provided in this Section 7
will be in addition to any liability which the Company may otherwise
have.
(c) The Underwriters agree, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers
who sign the Registration Statement and any person controlling the
Company within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act, to the same extent as the foregoing indemnity from
the Company to the Underwriters but only with reference to information
stated in or omitted from the Registration Statement, the Prospectus or
any Preliminary Prospectus in reliance upon, and in conformity with,
information relating to the Underwriters furnished in writing to the
Company by or on behalf of the Underwriters with your consent expressly
for use therein. In case any action shall be brought against the
Company, any of the Company's directors, any such officers or any
person controlling the Company based on the Registration Statement, the
Prospectus or any Preliminary Prospectus and in respect of which
indemnity may be sought against the Underwriters, the Underwriters
shall have the rights and duties given to the Company by Section 7(b)
hereof (except that if the Company shall have assumed the defense
thereof, such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of
such Underwriter), and the Company, its directors, any such officers
and any person controlling the Company shall have the rights and duties
given to the "indemnified parties" by Section 7(b) hereof.
(d) To provide for just and equitable contribution, if an
indemnified party makes a claim for indemnification pursuant to Section
7 (subject to the limitations hereof) but it is found in a final
judicial determination, not subject to further appeal, that such
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indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, then
each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages,
liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and the Underwriters on the other from the offering of the Shares or
(ii) if the allocation provided in clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering and sale of
the Shares (before deducting expenses) received by the Company on the
one hand, and the total underwriting discounts and commissions received
by the Underwriters on the other, bears to the total price to the
public of the Shares, in each case as set forth in the table on the
cover page of the Prospectus. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission or the alleged omission to state a material fact relates
to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7(d) were
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such Underwriter has
otherwise paid or been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligation in this Section 7(d) to contribute are several in proportion
to the respective amount of Shares purchased hereunder by each
Underwriter and not joint.
8. Conditions to the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Shares on the
Closing Date and the Additional Shares on any Option Closing Date are subject to
the fulfillment of each of the following conditions on or prior to the Closing
Date and each Option Closing Date:
(a) All the representations and warranties of the Company
contained in this Agreement and in any certificate delivered hereunder
shall be true and correct on the Closing Date and each Option Closing
Date with the same force and effect as if made on and as of the Closing
Date or Option Closing Date, as applicable. The Company shall not have
failed at or prior to the Closing Date or Option Closing Date, as
applicable, to perform or comply in all respects with any of the
agreements herein contained and required to be performed or complied
with by the Company at or prior to the Closing Date.
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(b) If the Registration Statement is not effective at the time
of the execution and delivery of this Agreement, the Registration
Statement shall have become effective (or, if a post-effective
amendment is required to be filed pursuant to Rule 430A under the Act,
such post-effective amendment shall have become effective) not later
than 9:30 A.M., New York City time, on the date of this Agreement or
such later time as you may approve in writing or, if the Registration
Statement has been declared effective prior to the execution and
delivery hereof in reliance on Rule 430A, the Prospectus shall have
been filed as required hereby, if necessary; and at the Closing Date
and each applicable Option Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and
no proceedings for that purpose shall have been commenced or shall be
pending before or, to the best knowledge of the Underwriters or the
Company, threatened by the Commission; every request for additional
information on the part of the Commission shall have been complied with
to the Underwriters' satisfaction.
(c) The legality and sufficiency of the authorization,
issuance and sale or transfer and sale of the Shares hereunder, the
validity and form of the certificates representing the Shares, the
execution and delivery of this Agreement and all corporate proceedings
and other legal matters incident thereto, and the form of the
Registration Statement and the Prospectus (except financial statements)
shall have been approved by counsel for the Underwriters exercising
reasonable judgment, and no Underwriter shall have advised the Company,
based on information received after the date hereof, that the
Registration Statement or the Prospectus, or any amendment or
supplement thereto, contains an untrue statement of material fact, or
omits to state a fact that in your opinion is material and is required
to be stated therein or is necessary to make the statements therein not
misleading.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred any material change, or any
material development involving a prospective change, in or affecting
the condition (financial or otherwise), results of operations,
business, prospects or properties of the Company and its Subsidiaries
that, in the judgment of the Representatives, makes it impractical or
inadvisable to proceed with the public offering or purchase of the
Shares as contemplated hereby.
(e) You shall have received an agreement from all of the
executive officers and directors of the Company and all of the other
Shareholders, who in the aggregate hold 100% of the shares of Common
Stock of the Company outstanding immediately prior to the completion of
the Offering of the Shares, whereby each such Person agrees to be bound
by an agreement to the same effect as the covenants set forth in the
last paragraph of Section 3 of this Agreement (the "Lock-Up
Agreements").
(g) You shall have received an opinion (satisfactory to you
and your counsel) dated the Closing Date or the Option Closing Date, as
the case may be, of Gallop, Johnson & Neuman, L.C., counsel for the
Company, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Missouri with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus; and the Company has been duly
qualified to do business as a foreign corporation under the
corporation law of, and is in good standing as such in, every
jurisdiction where the ownership or leasing of property, or
the conduct of its business requires such qualification except
where the failure so to qualify would not have a Material
Adverse Effect and, to the best of such counsel's knowledge,
no proceeding has been instituted in any such jurisdiction
revoking, limiting, curtailing or seeking to revoke, limit or
curtail, such power and authority or qualification;
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(ii) each Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under
laws of the jurisdiction of its incorporation with corporate
power and authority to own its properties and conduct its
business as described in the Prospectus; and each Subsidiary
has been duly qualified to do business as a foreign
corporation under the corporation law of, and is in good
standing as such in, every jurisdiction where the ownership or
leasing of property, or the conduct of its business requires
such qualification except where the failure so to qualify
would not have a Material Adverse Effect and, to the best of
such counsel's knowledge, no proceeding has been instituted in
any such jurisdiction revoking, limiting, curtailing or
seeking to revoke, limit or curtail, such power and authority
or qualification;
(iii) the Company has all necessary corporate power
and authority to enter into and perform this Agreement, and
the performance of the Company's obligations hereunder has
been duly authorized by all necessary corporate action; this
Agreement has been duly executed and delivered by and on
behalf of the Company, and, assuming due authorization,
execution and delivery of this Agreement by the Underwriters,
constitutes a legal, valid and binding agreement of the
Company enforceable in accordance with its terms, except (i)
as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general equity
principles and (ii) that rights to indemnity or contribution
hereunder may be limited by Federal or state securities laws
or the public policy underlying such laws; no approval,
consent, order, authorization, designation, license,
certificate, permit, declaration or filing by or with any
regulatory, administrative or other governmental body or, to
the best of such counsel's knowledge, third party (including
any party to any material Obligation or Instrument), is
necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions
contemplated herein (other than as may be required by the NASD
or as required by state securities or Blue Sky laws, as to
which such counsel need express no opinion) except such as
have been obtained or made, with counsel specifying the same;
(iv) all of the issued and outstanding capital stock
of each Subsidiary has been duly authorized, validly issued
and is fully paid and nonassessable, and the Company owns
directly or indirectly all of the outstanding capital stock of
each Subsidiary; all of the issued shares of each Subsidiary
have been duly and validly authorized and issued, and except
as set forth in the Registration Statement, such shares are
owned free and clear of any claims, liens, encumbrances,
equities or security interests;
(v) the Company has the capitalization set forth in the
Prospectus (except for subsequent issuances, if any, pursuant
to stock options or other rights referred to in the
Prospectus), and all of the issued shares of capital stock of
the Company conform as to legal matters to the description
thereof in the Registration Statement and Prospectus; to the
best of such counsel's knowledge, except as set forth in the
Registration Statement, no options, warrants, preemptive
rights or other rights to convert any obligation into, or
exchange any securities for or to subscribe for or to purchase
shares of capital stock or ownership interests in the Company
are outstanding;
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(vi) the issued and outstanding capital stock of the
Company has been duly authorized and validly issued and is
fully paid and nonassessable and was not issued in violation
of or subject to any preemptive rights or other rights to
subscribe for or purchase securities;
(vii) to the best of such counsel's knowledge,
neither the filing of the Registration Statement or any
amendment thereto nor the offer and sale of the Shares to the
Underwriters as contemplated by this Agreement gives rise to
any rights, nor do any rights exist, for or relating to the
registration under the Act of any securities of the Company,
except as otherwise disclosed in this Agreement or the
Prospectus;
(viii) the Registration Statement has become
effective under the Act and no stop order suspending the
effectiveness of the Registration Statement has been issued
and, to the best of such counsel's knowledge, no proceedings
for that purpose are pending or have been initiated or
threatened by the Commission; and the Registration Statement
(including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant
to Rule 430A, if applicable), the Prospectus and each
amendment or supplement thereto, as of their effective or
issue dates, (except for the financial statements and other
statistical or financial data included therein, as to which
such counsel need express no opinion) complied as to form in
all material respects with the requirements of the Act and the
Rules and Regulations;
(ix) the statements made in the Registration
Statement under the captions "Capitalization," "Description of
Capital Stock,", "Business-Customers," "Management-Employment
Agreements with Executive Officers," "Management-Stock Option
Plans," "Management-Limitations on Directors' and Officers'
Liability," "Management-Anti-Takeover Provisions," "Certain
Transactions," "Shares Eligible for Future Sale" and Items 15
and 17 of Part II of the Registration Statement insofar as
they constitute summaries of documents referred to therein,
proceedings or matters of law are accurate summaries thereof;
(x) to the best of such counsel's knowledge, there
are no Proceedings required to be described in the Prospectus
that are not described, or of any contracts or documents of a
character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that were not described and filed as
required;
(xi) the certificates for the Shares to be delivered
hereunder are in due and proper form, and when duly
countersigned by the Company's transfer agent and delivered to
you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of
this Agreement, the Shares sold by the Company hereunder and
represented thereby will be duly authorized and validly
issued, fully paid and non-assessable and free and clear of
all liens and restrictions on transfer; the Shares and Common
Stock conform in all material respects as to legal matters to
the description thereof contained in the Prospectus;
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<PAGE>
(xii) except as disclosed in the Prospectus, the
execution and performance of this Agreement will not result in
the creation of any lien, charge or encumbrance upon any of
the properties or assets of the Company or any Subsidiary
pursuant to the terms and provisions of, or conflict with, or
contravene any of the provisions of, or result in a default
under, any agreement, franchise, license, indenture, mortgage,
deed of trust, or other instrument described in the
Registration Statement or filed as an exhibit thereto, of the
Company or any of its Subsidiaries or by which the property of
any of them is bound and which contravention or default would
have a Material Adverse Effect; or violate any of the
provisions of the charter or bylaws of the Company or any of
its Subsidiaries or, to the best of such counsel's knowledge,
violate any statute, order, rule or regulation of any
regulatory or governmental body having jurisdiction over the
Company and its Subsidiaries and which violation would have a
Material Adverse Effect;
(xiii) to the best of such counsel's knowledge, all
offers and sales of the Company's capital stock since June
___, 1995 were at all relevant times exempt from the
registration requirements of the Act and were duly registered
or the subject of an available exemption from the registration
requirements of the applicable state securities or blue sky
laws; and
(xiv) neither the Company, nor any Subsidiary is an
"investment company" subject to registration or regulation
under the Investment Company Act or a company controlled by an
"investment company" subject to such registration or
regulation.
In addition, such counsel shall state that they have
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants of the Company and
representatives of the Underwriters and their counsel, at
which the contents of the Registration Statement and the
Prospectus and related matters were discussed and, although
such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or unfairness of
the statements contained in the Registration Statement or the
Prospectus and has not made any independent verification
thereof, on the basis of the foregoing (relying as to factual
matters and materiality upon the statements of officers and
other representatives of the Company), (i) no facts have come
to such counsel's attention that lead such counsel to believe
that either the Registration Statement or any amendment
(including any post-effective amendment) thereto at the time
such Registration Statement or amendment became effective,
contained an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus or any amendment or supplement thereto as
of their respective dates and as of the Closing Date and any
applicable Option Closing Date contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading and (ii) the Registration
Statement and Prospectus (and any supplement or amendment
thereto) comply as to form in all material respects with the
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<PAGE>
Act and the Exchange Act, except that such counsel need
express no opinion with respect to the financial statements,
schedules and other financial data included in the
Registration Statement or the Prospectus.
The opinion of Gallop, Johnson and Neuman, L.C. described
above shall be rendered to you at the request of the Company and shall
so state therein.
(h) You shall have received an opinion of Much Shelist Freed
Denenberg Ament Bell & Rubenstein, P.C., counsel for the Underwriters,
dated the Closing Date or the Option Closing Date, as the case may be,
in form and substance reasonably satisfactory to you.
(i) You shall have received, in connection with the execution
of this Agreement and on the Closing Date and each Option Closing Date,
a "cold comfort" letter from Ernst and Young LLP, dated as of each such
date in form and substance satisfactory to you with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectus.
(j) You shall have received a consent from KPMG Peat Marwick
LLP in form and substance satisfactory to you.
(k) You shall have received from the Company a certificate,
signed by Ronald S. Saks and Lawrence E. Dickenson in their capacities
as Chief Executive Officer and Chief Financial Officer of the Company,
respectively, addressed to the Underwriters and dated the Closing Date
or Option Closing Date, as applicable, to the effect that:
(i) such officer has carefully examined the
Registration Statement and the Prospectus and all amendments
or supplements thereto and, in such officer's opinion, such
Registration Statement or such amendment as of its effective
date and as of the Closing Date, and the Prospectus or such
supplement as of its date and as of the Closing Date, did not
contain an untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in
such officer's opinion, since the effective date of the
Registration Statement, no event has occurred or information
become known that should have been set forth in an amendment
to the Registration Statement or a supplement to the
Prospectus which has not been so set forth in such amendment
or supplement;
(ii) the representations and warranties of the
Company set forth in Section 6(a) of this Agreement are true
and correct as of the date of this Agreement and as of the
Closing Date or the Option Closing Date, as the case may be,
and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date; and
(iii) the Commission has not issued an order
preventing or suspending the use of the Prospectus or any
preliminary prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending
the effectiveness of the Registration Statement has been
issued; and, to the best knowledge of the respective signers,
no proceedings for that purpose have been instituted or are
pending or contemplated under the Act.
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The delivery of the certificate provided for in this subparagraph shall
be and constitute a representation and warranty of the Company as to
the facts required in the immediately foregoing clauses (ii) and (iii)
of this subparagraph to be set forth in said certificate.
(l) You and Much Shelist Freed Denenberg Ament Bell &
Rubenstein, P.C., counsel for the Underwriters, shall have received on
or before the Closing Date or the Option Closing Date, as the case may
be, such further documents, opinions, certificates and schedules or
instruments relating to the business, corporate, legal and financial
affairs of the Company as you and they shall have reasonably requested
from the Company.
9. Effective Date of Agreement, Termination and Defaults. This
Agreement shall become effective upon, and shall not be deemed delivered until,
the later of (i) execution of this Agreement and (ii) when notification of the
effectiveness of the Registration Statement has been released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
and any exercise of the option to purchase Additional Shares may be canceled at
any time prior to any Option Closing Date by the Underwriters by written notice
to the Company if any of the following has occurred: (i) since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, any adverse change or development involving a prospective adverse
change in the condition, financial or otherwise, of the Company or any
Subsidiary or the condition (financial or otherwise), earnings, affairs,
management, business or prospects of the Company or any Subsidiary, whether or
not arising in the ordinary course of business, that would, in the
Representatives' sole judgment, make it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States that, in the Representatives' judgment, is material and adverse and
would, in the Representatives' judgment, make it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (iii) the
suspension or material limitation of trading in securities on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ or limitation on prices for
securities on any such exchange or the NASDAQ, (iv) the enactment, publication,
decree or other promulgation of any federal or state statute, regulation, rule
or order of any court or other governmental authority that in the
Representatives' opinion materially and adversely affects, or will materially
and adversely affect, the business or operations of the Company or any
Subsidiary, (v) the declaration of a banking moratorium by either federal or New
York, Missouri or Illinois state authorities, (vi) the taking of any action by
any Federal, state or local government or agency in respect of its monetary or
fiscal affairs that in the Representatives' opinion has a material adverse
effect on the financial markets in the United States or (vii) there shall be any
change in financial markets or in political, economic or financial conditions
which, in the opinion of the Representatives, either renders it impracticable or
inadvisable to proceed with the offering and sale of the Shares on the terms set
forth in the Prospectus or materially adversely affects the market for the
Shares.
If on the Closing Date or on any Option Closing Date, as the case may
be, any of the Underwriters shall fail or refuse to purchase the Firm Shares or
Additional Shares, as the case may be, which it has agreed to purchase hereunder
on such date, and the aggregate number of Firm Shares or Additional Shares, as
the case may be, that such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed, in the aggregate, 10% of the
total number of Shares that all Underwriters are obligated to purchase on such
date, each non-defaulting Underwriter shall be obligated, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I hereto
bears to the total number of Firm Shares or Additional Shares, as the case may
be, that all the non-defaulting Underwriters have agreed to purchase, or in such
other proportion as you may specify, to purchase the Firm Shares or Additional
Shares, as the case may be, that such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase on such date. If, on the Closing Date
or on the Option Closing Date, as the case may be, any of the Underwriters shall
fail or refuse to purchase the Firm Shares or Additional Shares, as the case may
be, in an amount that exceeds, in the aggregate, 10% of the total number of the
Shares, and arrangements satisfactory to you and the Company for the purchase of
such Shares are not made within 48 hours after such default, this Agreement
shall terminate without liability on the part of the non-defaulting Underwriters
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and the Company, except as otherwise provided in this Section 9. In any such
case that does not result in termination of this Agreement, either you or the
Company may postpone the Closing Date or the Option Closing Date, as the case
may be, for not longer than seven (7) days, in order that the required changes,
if any, in the Registration Statement and the Prospectus or any other documents
or arrangements may be effected. Any action taken under this paragraph shall not
relieve a defaulting Underwriter from liability in respect of any default of any
such Underwriter under this Agreement.
10. Costs and Expenses. Whether or not the transactions contemplated
hereby are consummated or this Agreement becomes effective or is terminated, the
Company shall pay all costs, fees, expenses and taxes incident to the
performance by the Company of its obligations hereunder, including (i) the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including financial statements and exhibits), each preliminary
Prospectus and all amendments and supplements to any of them prior to or during
the period specified in paragraph (e) above of Section 5, (ii) the word
processing, reproduction and distribution of this Agreement, the Master
Agreement among Underwriters and the Selected Dealer Agreement and any
supplements or amendments thereto in connection with the offering of the Shares
(including in each case any disbursements of counsel for the Underwriters
relating to the preparation and delivery of such documents but not including any
legal fees of counsel to the Underwriters), (iii) the filing of notices for the
offer and sale of the Shares under the securities or Blue Sky laws of the
several states, including in each case the disbursements of counsel for the
Underwriters but not including legal fees of counsel to the Underwriters,
relating to filings, (iv) filings and clearance with the NASD in connection with
the offering and sale of the Shares, (v) the listing of the Shares on the NASDAQ
National Market ("NASDAQ"), (vi) furnishing such copies of the Registration
Statement, each Preliminary Prospectus, the Prospectus and all amendments and
supplements thereto as may be requested for use in connection with the offering
or sale of the Shares by the Underwriters or by dealers to whom the Shares may
be sold, (vii) obtaining the opinion to be provided pursuant to Sections 8(g) of
this Agreement and (viii) the performance by the Company of all of its other
obligations under this Agreement. If the sale of the Shares provided for herein
is not consummated because the Underwriters exercise their right to terminate
this Agreement pursuant to Section 9 hereof and any of the following have
occurred during the term of this Agreement: (a) there has been any adverse
change in the condition (financial or otherwise), earnings, affairs, management,
business or prospects of the Company or any Subsidiary, or (b) the Company shall
refuse or be unable to comply with any provision hereof (except as the result of
a breach of this Agreement by the Underwriters), the Company will promptly
reimburse the Underwriters upon demand for all reasonable out-of-pocket expenses
(including the fees and disbursements of counsel for the Underwriters) that
shall have been incurred by the Underwriters in connection with the proposed
purchase and sale of Shares.
11. Effectiveness of Registration Statement. You and the Company will
use your and its best efforts to cause the Registration Statement to become
effective, if it has not yet become effective, and to prevent the issuance of
any stop order suspending the effectiveness of the Registration Statement and,
if such stop order be issued, to obtain as soon as possible the lifting thereof.
12. Miscellaneous. All communications hereunder will be in writing and,
if sent to the Underwriters will be mailed, delivered or telegraphed and
confirmed to you c/o EVEREN Securities, Inc., 77 West Wacker Drive, Chicago,
Illinois 60601-1994, Attention: Syndicate Department, with a copy to Much
Shelist Freed Denenberg Ament Bell & Rubenstein P.C., 200 North LaSalle Street,
Suite 2100, Chicago, Illinois 60601, Attention: Steven Schwartz; and if sent to
the Company will be mailed, delivered or telegraphed and confirmed to the
Company at its corporate headquarters with a copy to Gallop, Johnson & Neuman,
L.C., 101 South Hanley Road, 16th Floor, St. Louis, Missouri 63105, Attention:
Douglas J. Bates, or in any case to such other address as the person to be
notified may have requested in writing.
The indemnity and contribution provisions and other agreements,
representations and warranties of the Company, and the Company's shareholders,
officers and directors set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Shares, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any of the Underwriters or by or on
22
<PAGE>
behalf of the Company or the shareholders, officers or directors of the Company
or any controlling person of the Company, (ii) acceptance of the Shares and
payment therefor hereunder or (iii) termination of this Agreement.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of, and shall be binding upon, the Company, the
Underwriters, any indemnified person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The terms "successors and assigns" shall not include a purchaser of
any of the Shares from any of the several Underwriters merely because of such
purchase.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters, including you.
Very truly yours,
LMI AEROSPACE, INC.
a Missouri corporation
By:_____________________________
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
EVEREN SECURITIES, INC.
GEORGE K. BAUM & COMPANY
Acting as Representatives of the several
Underwriters named in Schedule I hereto
By: EVEREN Securities, Inc.
By:________________________________
Name:______________________________
Title:_____________________________
23
<PAGE>
SCHEDULE I
Underwriters
Number of
Firm Shares
Name to be Purchased
---- ---------------
EVEREN Securities, Inc.
George K. Baum & Company
-----------
Total
===========
RESTATED
ARTICLES OF INCORPORATION
OF
LMI AEROSPACE, INC.
The undersigned, the duly authorized President and Assistant Secretary
of LMI Aerospace, Inc. (f/k/a Leonard's Metal, Inc.) (the "Corporation"), do
hereby restate the following Articles of Incorporation of the Corporation, which
restated Articles of Incorporation correctly set forth without change the
corresponding provisions of the Articles of Incorporation of the Corporation as
heretofore amended, which restated Articles of Incorporation were duly adopted
and approved by the Shareholders and Directors of the Corporation on April 22,
1998, and which restated Articles of Incorporation supersede the original
Articles of Incorporation of the Corporation and all amendments thereto:
ARTICLE ONE
The name of the Corporation shall hereinafter be:
LMI AEROSPACE, INC.
ARTICLE TWO
The address of its registered office in the State of Missouri is 101
South Hanley Road, Suite 1600, St. Louis, Missouri 63105. The name of its
registered agent at such address is Sanford S. Neuman.
ARTICLE THREE
(a) The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is Thirty Million (30,000,000), each
having a par value of Two Cents ($0.02) per share. Of such authorized shares,
Twenty-Eight Million (28,000,000) shares are hereby classified and designated as
Common Stock and Two Million (2,000,000) shares are hereby classified and
designated as Preferred Stock.
(b) The voting power of the Corporation shall be vested in the
holders of the Common Stock, who shall be entitled to one vote per share of
Common Stock on all matters to be voted on by the stockholders (including the
election of directors), except to the extent voting rights are established for
holders of Preferred Stock by the Board of Directors in accordance with part (c)
of this Article Three.
(c) The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of this Article Three, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Missouri, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof.
<PAGE>
(d) The authority of the Board of Directors with respect to the
establishment of each series of Preferred Stock shall include, but not be
limited to, determination of the following:
(i) the number of shares constituting that series and the
distinctive designation of that series;
(ii) the dividend rate on the shares of that series, whether
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of
that series;
(iii) whether that series shall have voting rights, in
addition to the voting rights provided by law, and if so, the terms of such
voting rights;
(iv) whether that series shall have conversion privileges and,
if so, the terms and conditions of such conversion privileges, including
provision for adjustment of the conversion rate in such events as the Board
of Directors shall determine;
(v) whether or not the shares of that series shall be
redeemable and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be redeemable,
and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so, the terms and
amount of such sinking fund;
(vii) the rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(viii) any other relative rights, preferences and limitations
of that series.
(e) There shall be no right to cumulative voting in the election of
directors.
(f) Except as otherwise required by the General and Business
Corporation Law of the State of Missouri, whenever the holders of shares of
stock of the Corporation shall be entitled to vote as a class at a meeting at
which a quorum of the class is present with respect to any matter, the
affirmative vote of a majority of the shares of such class voted in person or by
proxy at the meeting shall be required to constitute the act of such class. 2
2
<PAGE>
ARTICLE FOUR
No holder of any share of stock or other security of the Corporation,
either now or hereafter authorized or issued, shall have any preferential or
preemptive right to acquire additional shares of stock or any other security of
the Corporation other than such, if any, as the Board of Directors may in its
discretion from time to time determine pursuant to the authority conferred by
these Articles of Incorporation of the Corporation.
ARTICLE FIVE
The name and place of residence of the each incorporator is as follows:
Sanford S. Neuman
848 South Meramec
St. Louis, Missouri 63105
ARTICLE SIX
(a) The number of directors constituting the entire Board shall be
not less than three (3) nor more than nine (9) persons, as fixed from time to
time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office and, provided further, that the number of directors
constituting the entire Board shall be five (5) until otherwise fixed by a
majority of the entire Board.
(b) In furtherance and not in limitation of the powers granted by
statute, the board of directors is authorized to adopt, alter or repeal the
bylaws of the Corporation.
ARTICLE SEVEN
The duration of the Corporation is perpetual.
ARTICLE EIGHT
The Corporation is formed for the following purposes and shall have the
following powers:
To have and exercise all the powers now or hereafter conferred
by the laws of the State of Missouri upon corporations organized under
the laws of said State, and any and all acts amendatory thereof and
supplemental thereto;
3
<PAGE>
and to do any and all things necessary and proper in carrying out or
accomplishing any and all of the above-mentioned purposes or any part
thereof, not inconsistent with the Constitution and laws of the State
of Missouri or these Articles of Incorporation.
ARTICLE NINE
The Corporation shall have the power, without further action by the
shareholders of the Corporation, to give any further indemnity in addition to
the indemnity authorized or contemplated under the bylaws of this Corporation to
any person who is or was a director, officer, employee or agent, or to any
person who is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise or to enter into agreements with any of such persons
providing such rights of indemnification as the Corporation may deem
appropriate; provided that no such indemnity shall indemnify any person from or
on account of such person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct. Any
agreement entered into by the Corporation with a director may be authorized by
the other directors, and such authorization shall not be invalid on the basis
that different or similar agreements may have been or may thereafter be entered
into with other directors. Nothing in this Article Nine shall be deemed to limit
the power of the Corporation under Section Five of Article VIII of the bylaws of
this Corporation to enact bylaws or enter into agreements without shareholder
adoption of the same.
4
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand as of this _____ day of
April, 1998.
LMI AEROSPACE, INC.
/s/ Ronald S. Saks
By:
Ronald S. Saks, President
ATTEST:
/s/ Sanford S. Neuman
By:
Sanford S. Neuman, Assistant Secretary
STATE OF MISSOURI )
) ss.
COUNTY OF ST. LOUIS )
I, ________________________, a notary public do hereby certify that
on this _____ day of April, 1998, personally appeared before me Ronald S.
Saks, who, being by me first sworn, declared that he is the President of LMI
AEROSPACE, INC., that he signed the foregoing Amended and Restated Articles of
Incorporation as President of the Corporation, and that the statements therein
contained are true and correct to the best of his personal knowledge,
information and belief.
__________________________________
Notary Public
My commission expires:________________
AMENDED AND RESTATED
BY-LAWS
OF
LMI AEROSPACE, INC.
* * * * *
ARTICLE I
OFFICES
Section 1. The registered office of the corporation shall be in the City
of St. Louis, State of Missouri.
Section 2. The corporation may also have offices at such other places,
both within and without the State of Missouri, as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. All meetings of the shareholders for the election of
directors shall be held at such place, either within or without the State of
Missouri, as may be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of shareholders for any other
purpose may be held at such time and place, within or without the State of
Missouri, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of shareholders, commencing with the year
1998, shall be held on the second Tuesday day of if not a legal holiday, and if
a legal holiday, then on the next business day following, at 9:00 a.m., or at
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which the shareholders
shall elect one or more directors and transact such other business as may
properly be brought before the meeting.
At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) brought before the meeting by or at the direction of the Board
of Directors, or (c) otherwise properly brought before the meeting by a
shareholder. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a shareholder's notice must be
received at the principal executive offices of the corporation not less than 120
days nor more than 150 days prior to the date of the notice to shareholders of
the previous year's annual meeting. A shareholder's notice to the secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting: (a) a brief description of the proposal or business desired to
be brought before the annual meeting and the reasons for presenting the proposal
or conducting such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the shareholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by the shareholder, and (d) any material interest of the
shareholder in such proposal or business. Notwithstanding anything in these
<PAGE>
By-Laws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this Section 2. The
chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2, and if he should so
determine and declare to the meeting, any such business not properly brought
before the meeting shall not be transacted.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each shareholder entitled to vote at
such meeting not less than ten (10) nor more than seventy (70) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every meeting
of shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at the registered office of the corporation.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any shareholder who is
present.
Section 5. Special meetings of the shareholders entitled to vote, for
any purpose or purposes, may be called only by the president or the Board of
Directors.
Section 6. Written notice of a special meeting of the shareholders
entitled to vote, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than seventy (70) days before the date of the meeting to
each shareholder entitled to vote at the meeting.
Section 7. Business transacted at a special meeting of the shareholders
entitled to vote shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the issued and outstanding stock
which is entitled to vote, whether present in person or represented by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business. If, however, such a quorum shall not be present or
represented at a meeting, except as otherwise provided in Article VI, Section 5,
the shareholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting in accordance with the original notice thereof. If the adjournment
is for more than ninety (90) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the meeting in
accordance with Section 3 and/or Section 6 of this Article II.
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<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.
Section 12. Any action required or permitted to be taken at any annual
or special meeting of shareholders of the corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by all of the shareholders entitled
to vote with respect to the subject matter thereof. Such consents shall have the
same force and effect as a unanimous vote of the shareholders at a meeting duly
held. The Secretary of the Corporation shall file such consents with the minutes
of the meetings of the shareholders.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors constituting the entire Board
shall be not less than three (3) nor more than nine (9) as fixed from time to
time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office, and provided further, that the number of directors
constituting the entire Board shall be five (5) until otherwise fixed by a
majority of the entire Board.
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<PAGE>
(b) The Board of Directors shall be divided into three classes.
Directors shall be elected and/or appointed to one of the following classes:
CLASS EXPIRATION OF TERM
I Annual meeting date of the shareholders in
1998 and every 3 years thereafter
II Annual meeting date of the shareholders in
1999 and every 3 years thereafter
III Annual meeting date of the shareholders in
2000 and every 3 years thereafter
Directors shall be elected and/or appointed to classes so that the total number
of directors shall be divided as equally as possible between the three classes
of directors. Any vacancies in the Board of Directors for any reason, and any
created directorships resulting from any increase in the directors, may be
filled by the Board of Directors, acting by a majority of the directors then in
office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected and qualified. No
decrease in the number of directors shall shorten the term of any incumbent
director. Notwithstanding the foregoing, and except as otherwise required by
law, whenever the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a class, to elect one or more directors of
the Corporation, the terms of the director or directors elected by such holders
shall expire at the next succeeding annual meeting of shareholders. Subject to
the foregoing, at each annual meeting of shareholders the successors to the
class of directors whose term shall then expire shall be elected to hold office
for a term expiring at the third succeeding annual meeting.
(c) Notwithstanding any other provisions of the Articles of
Incorporation of the Corporation or these By-Laws (and notwithstanding the fact
that some lesser percentage may be specified or permitted by law, the Articles
of Incorporation or the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of eighty percent (80%) or
more of the outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors cast at a meeting of the
shareholders called for that purpose. Notwithstanding the foregoing, and except
as otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect one
or more directors of the Corporation, the provisions of this subsection (c)
shall not apply with respect to the director or directors elected by such
holders of Preferred Stock.
- 4 -
<PAGE>
Section 2. The business of the corporation shall be managed by or under
the direction of its Board of Directors, which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation of the Corporation or by these By-Laws directed
or required to be exercised or done by the shareholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Missouri.
Section 5. The annual meeting of the Board of Directors shall be held
immediately following the annual meeting of shareholders at the place at which
the meeting of the shareholders is held, and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum of the Board of Directors is present.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board of Directors.
Section 7. Special meetings of the Board of Directors may be called by
the president on three (3) days' notice to each director, either personally or
by mail or by facsimile; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two or
more directors unless the Board of Directors consists of only one director.
Section 8. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
Section 9. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, without prior notice and without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 10. Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
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<PAGE>
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in resolutions of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority to amend the Articles of Incorporation of the Corporation (except that
a committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of Directors,
as provided in Section 351.180 of the General Corporation and Business Law of
Missouri, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation, or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), to adopt an agreement of merger or
consolidation, to recommend to the shareholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, to recommend
to the shareholders a dissolution of the corporation or a revocation of a
dissolution, or to amend the By-Laws of the corporation; and, unless the
resolution of the Board of Directors or the Articles of Incorporation of the
Corporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock or to
adopt a certificate of ownership and merger. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 13. The Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors or committee thereof and
may be paid, either in cash or in securities of the corporation, a fixed sum for
attendance at each meeting of the Board of Directors or committee thereof or a
stated salary as director or committee member. No such payment shall preclude
any director from serving the corporation in any other capacity and receiving
compensation therefor.
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<PAGE>
ARTICLE IV
NOTICES
Section 1. Whenever notice is required or permitted to be given to any
director or shareholder, it shall not be construed to require personal notice,
but such notice may be given in writing, by mail, addressed to such director or
shareholder, at his or her address as it appears on the records of the
corporation, with first class postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given personally, by facsimile or
by next business day courier delivery and shall be deemed to be given when
personally given or so sent.
Section 2. Whenever any notice is required to be given, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors at its first meeting after each annual meeting of shareholders and
shall be a president, one or more vice-presidents (who may have further
descriptive designations thereof, such as executive vice-president, senior
vice-president, vice-president, finance, etc.), a secretary and a treasurer. The
Board of Directors may also choose additional vice-presidents, and one or more
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person, unless the Articles of Incorporation or these By-Laws
otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors.
Section 3. The salaries of all executive officers of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation may be filled by the Board of Directors.
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<PAGE>
THE PRESIDENT
Section 5. The president shall be the chief executive officer of the
corporation and shall have general supervision over the policies, affairs and
finances of the corporation. He shall keep the Board of Directors fully informed
and shall freely consult with the Board of Directors concerning the business of
the corporation and shall perform such other duties as are incident to his
office and are properly required of him by the Board of Directors. The president
shall preside at all meetings of the shareholders and the Board of Directors.
Except where by law the signature of the president is required and except as
otherwise provided by the Board of Directors, the president may sign all
certificates, contracts, documents and other instruments on behalf of the
corporation. Unless otherwise provided by resolution of the Board of Directors,
the president also shall be entitled to vote all stock and other interests
having voting rights which are owned by the corporation; in the absence of a
contrary resolution adopted by the Board of Directors, the president shall vote
such stock and other interests in a manner which he deems appropriate.
THE VICE-PRESIDENTS
Section 6. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president (or in the event
there is more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the president, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 7. The secretary shall attend all meetings of the Board of
Directors and all meetings of the shareholders and record all the proceedings of
such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The secretary shall give, or
cause to be given, notice of all meetings of the shareholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be prescribed by the Board of Directors. The secretary shall have custody of the
corporate seal of the corporation and shall have authority to affix the same to
any instrument requiring it and, when so affixed, it may be attested by the
secretary's signature. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
the secretary's signature.
Section 8. The assistant secretary, if any, or if there be more than
one, the assistant secretaries in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the secretary and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
- 8 -
<PAGE>
THE TREASURER AND ASSISTANT TREASURERS
Section 9. The treasurer shall be the chief financial officer of the
corporation and shall have the custody of the corporate funds and securities and
shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 10. The treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and upon request shall render to the Board of Directors, an
account of all transactions as treasurer and of the financial condition of the
corporation.
Section 11. If required by the Board of Directors, the treasurer shall
give the corporation and maintain in effect a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the possession or under the control of the treasurer belonging
to the corporation.
Section 12. The assistant treasurer, if any, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of the
inability or refusal to act of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by one or
more certificates. Certificates shall be signed, in the name of the corporation,
by the president or a vice-president and the treasurer or an assistant treasurer
or the secretary or an assistant secretary of the corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares shall be set forth the total amount of the consideration to
be paid therefor and the amount paid thereon.
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<PAGE>
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized or referenced
on the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, provided that, if summarized or
referenced, there shall also be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each shareholder
thereof who so requests a copy of the powers, designations, preferences and
relative, participating, optional or other special rights of the class of stock
or series and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books,
subject, however to restrictions imposed either by applicable federal or state
securities laws or by agreements by or among the shareholders.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the shareholders
entitled to notice of or to vote at any meeting of shareholders, or to express
consent to corporate action in writing without a meeting, or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than seventy (70)
nor less than ten (10) days before the date of such meeting, nor more than
seventy (70) days prior to any other action. A determination of shareholders of
record entitled to notice of or to vote at a meeting of shareholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
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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.
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.
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<PAGE>
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation and the words "Corporate Seal, Missouri". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 1. (a) The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust,
or other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement, actually and reasonably incurred by such
person in connection with such action, suit, or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation, as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
- 12 -
<PAGE>
(c) To the extent that a director or officer of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) and (b), or in defense of any claim,
issue or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred in connection
therewith.
(d) Any indemnification under subparagraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director or
officer is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subparagraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative action,
suit, or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit, or proceeding upon receipt of an undertaking
by or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized herein.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, other subsections of this section shall not be deemed
exclusive of any other rights to which officers or directors seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office.
(g) The Corporation shall have the power to give any further
indemnity, in addition to the indemnity authorized or contemplated under other
sections of this Article VIII to any person who is or was a director, officer,
employee or agent, or to any person who is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; provided that no such
indemnity shall indemnify any person from or on account of such person's conduct
which was finally adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct. Nothing in this Section (g) shall be deemed to
limit the power of the Corporation to enact bylaws or to enter into agreements
without shareholder adoption of the same.
- 13 -
<PAGE>
(h) The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the provisions of this
section.
(i) For the purposes of this section, references to "the
corporation" include all constituent corporations (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had the power and authority to indemnify its
directors, officers, employees or agents, as well as the resulting or surviving
corporation, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this section with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
(j) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director or officer of the corporation which imposes duties on, or
involves services by, such director or officer with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this section.
(k) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent, including, but not limited to, a person who ceases
to be a director, officer, employee or agent due to the resignation of such
person prior to the initiation of any action, suit or proceeding referred to in
subparagraphs (a) and (b), and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 2. The corporation shall, to the fullest extent permitted by
Section 351.355 of the General and Business Corporation Law of the State of
Missouri, as the same may be amended and supplemented from time to time,
indemnify all officers and directors whom it shall have the power to indemnify
under said section from and against any and all of the expenses, liabilities or
other matters referred to in or covered by said section, or any successor
section thereto.
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<PAGE>
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed or new
By-Laws may be adopted by the shareholders or by the Board of Directors (when
such power is conferred upon the Board of Directors by the Articles of
Incorporation), at any regular meeting of the shareholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
By-Laws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal By-Laws is conferred upon the Board of Directors by the
Articles of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
- 15 -
COMMON STOCK COMMON STOCK
PAR VALUE $.02 PAR VALUE $.02
NUMBER SHARES
C
[LOGO]
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF MISSOURI CUSIP
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
LMI AEROSPACE, INC.
transferable on the books of the Corporation by the holder hereof in person or
by attorney upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation of the
Corporation, as amended from time to time, to all of which each holder of this
Certificate, by acceptance hereof, assents.
This Certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar. WITNESS the facsimile seal of the
Corporation and the facsimile signatures of its duly authorized
officers.
/s/ Ronald S. Saks COUNTERSIGNED AND REGISTERED:
PRESIDENT AND CHIEF AMERICAN STOCK TRANSFER AND
EXECUTIVE OFFICER TRUST COMPANY
[seal] TRANSFER AGENT AND REGISTRAR
/s/ Lawrence E. Dickinson
SECRETARY BY
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the fact
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common UNIF GIFT MIN ACT - _____________ Custodian __________________
(Cust.) (Minor)
under Uniform Gifts to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _________________________ hereby sell, assign and transfer
unto ______________________
Please insert Social Security or Other
Identifying Number of Assignee
- ------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of Assignee)
- ------------------------------------------------------------------
________________________________________________________ Shares of the Common
Stock evidenced by this Certificate, and do hereby irrevocably constitute and
appoint
______________________________________________________ Attorney to transfer said
shares on the books of the within names Corporation with full power of
substitution in the premises.
Dated___________________________
X__________________________________
X__________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By______________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
April 29, 1998
Board of Directors
LMI Aerospace, Inc.
3600 Mueller Road
St. Charles, Missouri 63302
Re: Registration Statement on Form S-1 (File No. 333-__________)
Ladies and Gentlemen:
We have acted as counsel for LMI Aerospace, Inc., a Missouri
corporation (the "Company"), in connection with the various legal matters
relating to the filing of a Registration Statement on Form S-1, File No.
333-__________ (the "Registration Statement") under the Securities Act of 1933,
as amended, relating to 2,645,000 shares of the common stock of the Company,
$0.02 par value per share (the "Common Stock") to be sold by the Company to
EVEREN Securities, Inc. and George K. Baum & Company, as representatives of the
several underwriters, which shares include up to 345,000 shares of Common Stock
to be upon exercise of an option granted to the representatives to cover
over-allotments, if any.
We have examined such corporate records of the Company, such laws and
such other information as we have deemed relevant, including the Company's
Restated Articles of Incorporation, Amende and Restated Bylaws, resolutions
adopted by the Board of Directors of the Company relating to such offering and
certificates received from state officials and from officers of the Company. In
delivering this opinion, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
the originals of all documents submitted to us as certified, photostatic or
conformed copies, and the correctness of all statements submitted to us by
officers of the Company.
Based solely on the foregoing, the undersigned is of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Missouri; and,
2. The Common Stock being offered by the Company, if sold and
issued in the manner described in the Registration Statement,
will be validly issued and outstanding and will be fully paid
and non-assessable.
<PAGE>
LMI Aerospace, Inc.
April 29, 1998
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
We also consent to your filing copies of this opinion as an exhibit to the
Registration Statement with agencies of such states as you deem necessary in the
course of complying with the laws of such states regarding the issuance of the
Common Stock sold.
Very truly yours,
/S/ GALLOP, JOHNSON & NEUMAN, L.C.
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
1. Purpose. This 1989 Employee Incentive Stock Option Plan (the "Plan")
is intended to encourage the ownership of stock of Leonard's Metal, Inc. (the
"Company") by key employees of the Company, to provide additional incentive for
them to promote the success of the business, and to encourage them to remain in
its employ. It is further intended that options issued pursuant to this Plan
(the "Options") shall constitute Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code of 1986, as amended, (the "Code") and
the rules and regulations thereunder.
2. Administration of the Plan. The Plan shall be administered by the
Board of Directors of the Company (the "Board"). The Board shall determine the
key employees who are to be granted Options hereunder (the "Participants") and
the amount of stock to be optioned to each. The interpretation and construction
by the Board of any provisions of the Plan or any Option granted hereunder shall
be final. No member of the Board shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted under it.
3. Participants. The Board, in its sole discretion but subject to the
requirements of Section 422A of the Code, shall select Participants from among
the key employees of the Company, including officers (whether or not they are
Directors). No Director shall participate in the granting of Options to himself
under the Plan.
4. Grant of Options. Prior to the expiration of ten years from the day
on which this Plan is adopted by the Board, the Board in its discretion may
grant to the Participants the right to purchase Common Stock, as defined in
Paragraph 5 hereof, pursuant to the terms and conditions set forth in Paragraph
7 hereof.
5. Stock Subject to the Plan. The stock subject to the Option shall be
shares of the Company's authorized but unissued or reacquired $0.01 par value
common stock (the "Common Stock"). The aggregate number of shares which may be
issued under Options hereunder shall not exceed 5,000 shares of Common Stock.
The limitations established in this Plan by the preceding sentences shall be
subject to adjustment as provided in Paragraph 6 hereunder.
In the event that any outstanding Option under the Plan for any reason
expires, is cancelled or is terminated, the shares of Common Stock allocable to
the unexercised portion of such Option may again be subjected to an Option under
the Plan.
-1-
<PAGE>
6. Changes in Capital Structure. In the event that the shares of
outstanding Common Stock are hereafter increased or decreased (other than such
shares (i) issued to or acquired from a Participant hereunder or (ii) acquired
by the Company from a stockholder of the Company) or changed into or exchanged
for a different number or kind of shares or other securities of the Company or
of another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares or
dividend payable in corporate shares, an appropriate adjustment shall be made in
the number and kind of shares as to which Options may be granted under the Plan,
including the maximum number that may be granted to any one Participant. In
addition, an appropriate adjustment shall be made in the number and kind of
shares as to which outstanding Options, or portions thereof then unexercised,
shall be exercisable to the end that each Participant's proportionate interest
in the total shares subject to an Option shall be maintained as before the
occurrence of such event; such adjustment in the shares subject to an Option
shall be made without changing the total price applicable to the unexercised
portion of any Option and with a corresponding adjustment in the Option price
per share; provided, however, that each such adjustment in the number and kind
of shares subject to outstanding Options, including any adjustment in the Option
price, shall be made in such manner as not to constitute a "modification" as
defined in Section 425 of the Code. Any adjustment made by the Board shall be
conclusive.
7. Terms and Conditions of Options. Options shall be evidenced by Stock
Option Agreements (the "Option Agreements") in such form not inconsistent with
this Plan as the Board shall from time to time determine, provided that the
substance of the following be included therein.
(a) Number of Shares. Each Option Agreement shall state the number
of shares of Common Stock to which it pertains. The aggregate fair market
value of Common Stock (determined as of the date of grant in accordance
with the provisions of subparagraph 7(b) hereof) with respect to which
Options are first exercisable during any one calendar year shall not exceed
$l00,000.
(b) Option Price. Each Option Agreement shall state the Option
price, which shall not be less than 100% of the fair market value of a
share of Common Stock on the date of the granting of the Option. Such fair
market value shall be the maximum price at which such shares may be sold
under any stock restriction agreement ("Shareholders Agreement") to which
such stock is subject as of the date of the grant of such Option. In the
event no such Shareholders Agreement is then in effect, the Board shall
determine the purchase price based on information available to it including
any valuations or appraisals by independent experts. Subject to the
foregoing, the Board shall have full authority and discretion in fixing the
option price and be fully protected in doing so.
-2-
<PAGE>
(c) Exercise of Options. Each Option Agreement shall set forth the
terms and conditions under which the Option thereby granted may be
exercised, as determined by the Board. During the lifetime of the
Participant the Option shall be exercised only by him and shall not be
assignable or transferable by him and no other person shall acquire any
rights therein. To the extent that the right to purchase shares is accrued
thereunder, Options may be exercised from time to time by the delivery by a
Participant of written notice to the Company stating the number of shares
of Common Stock with respect to which the Option is being exercised and the
time and date of purchase thereof, which shall be during the normal
business hours of the Company on a regular business day not less than
fifteen (l5) days nor more than thirty (30) days after the giving of such
notice unless another date shall have been mutually agreed upon. At the
time specified in such notice, the Company shall, without transfer or issue
tax, transfer and set aside for the benefit of the Participant a
certificate or certificates for such shares out of its theretofor
authorized but unissued or reacquired Common Stock, against payment in full
by the Participant of the Option price. If the Participant fails to pay for
any part of the number of shares specified in such notice in accordance
with the terms of the Plan and such notice, the Participant's right to
exercise the Option with respect to such shares may, by subsequent action
of the Board, be terminated.
(d) Option Term.Each Option Agreement shall specify the period for
which the Option thereunder is granted. In no event shall an Option be
exercisable after the expiration of six years from the date the Option is
granted. At the end of such specified period the Option shall expire.
(e) Effect of Termination of Employment. Upon termination of a
Participant's employment with the Company and its subsidiaries for any
reason, any outstanding Option or unexercised portion thereof granted to
the Participant shall terminate. Any transfer of employment from the
Company to any parent or subsidiary thereof, or vice versa, shall not be
deemed a termination of employment.
(f) Investment Purpose. Each Option issued under this Plan may be
issued on the condition that any purchase of stock thereunder shall be for
investment purposes and not with a view to resale or distribution (the
"Restricted Stock"). If requested by the Company, each Participant must
agree, at the time of the purchase of any Restricted Stock, to execute a
Shareholders Agreement and/or an "investment letter" setting forth such
investment intent in the form acceptable to the Company and subjecting the
Restricted Stock to the terms of such Shareholders Agreement. Each
Participant must consent to any stock certificate issued to him thereunder
bearing a restrictive legend setting forth the restrictions applicable to
the further resale, transfer or other conveyance thereof under the
Shareholders Agreement and without registration under the Securities Act of
1933, as amended, and applicable securities or blue sky laws of any other
jurisdiction (together, the "Securities Laws"), and to the placing of
transfer restrictions on the records of the transfer agent for such stock.
No Restricted Stock may thereafter be resold, transferred or otherwise
conveyed unless such transaction is authorized pursuant to the Stock
Restriction Agreement and:
-3-
<PAGE>
(1) an opinion of the Participant's counsel is received, in
form and substance satisfactory to counsel for the Company, that
registration under the applicable Securities Laws is not required; or
(2) such stock is registered under the applicable Securities
Laws; or
(3) "no action" letters are received from the staff of the
Securities and Exchange Commission and from the administrative
agencies administering all other applicable securities or blue sky
laws, based on an opinion of counsel for Participant in form and
substance reasonably satisfactory to counsel for the Company, advising
that registrations under the Securities Laws are not required.
(g) Rights as a Stockholder. Each Participant shall have all rights
attributable to stockholders of the Company with respect to any shares
issued to him or for his benefit pursuant to the terms of his Option but
shall have no stockholder rights prior thereto. Except as provided in
Paragraph 6 hereof, no adjustment shall be made for dividends or other
rights appurtenant to the ownership of shares in the Company for which the
record date is prior to the date of purchase of shares in accordance with
subparagraph 7(c) hereof.
(h) Stock Ownership. In the event an Option shall be granted to
any person who, at the time such Option is granted, owns Common Stock in
excess of the limitations imposed by Section 422A(b)(6) or other
comparable restriction under the Code (i.e., owns more than l0% of the
total combined voting power of all classes of stock of the Company or of
the parent or any subsidiary corporation of the Company), the Option
price (as defined in subparagraph 7(b) hereof) shall be increased to not
less than ll0% of the fair market value of the Common Stock as of the
date of grant and such Option must be exercisable within five years from
the date the Option is granted.
(i) Waiver of Restrictions. The Board, in its discretion or
pursuant to contract, may waive the restrictions imposed by paragraph
7(c) hereof (relating to time of exercise) on any Participant with
respect to Options granted under the Plan; provided, however, no
restriction which is required by Section 422A of the Code may be waived.
-4-
<PAGE>
8. Effective Date; Amendment; and Termination of the Plan. The
effective date of this Plan is _________________, 1989, i.e. the date of
adoption by the Board ("Adoption Date"). Within twelve months after the Adoption
Date, this Plan shall be submitted to the Shareholders of the Company for their
approval in accordance with Section 422A(b)(1) of the Code. The Board may amend
or terminate this Plan at any time. The amendment or termination of this Plan
shall not affect rights and obligations theretofor granted and then in effect.
9. Use of Proceeds. The proceeds from the sale of Common Stock pursuant
to Options granted under the Plan shall constitute general funds of the Company.
10. Construction. When used herein the male, female and neuter gender
shall include the other and the singular shall include the plural as the context
or facts so require.
Adopted by the Board of Directors as of the _____ day of ____________,
1989.
LEONARD'S METAL, INC.
By
Ronald S. Saks, President
-5-
<PAGE>
AMENDMENT NO. 1
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the
"Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the
"Plan") as of December 7, 1989;
WHEREAS, the Board of Directors of the Corporation, through the duly
authorized officers of the Corporation, desires to amend the Plan so as to
increase the aggregate number of shares which may be issued under Options (as
that term is defined in the Plan); and
WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of
the Corporation reserved the right to amend the Plan at any time.
NOW, THEREFORE, in the exercise of the power provided for in Section 8
of the Plan, the Corporation, through its duly authorized officers and Board of
Directors, hereby amends the Plan, effective December 31, 1991, in the following
respects:
1. By deleting in its entirety the second sentence of Section 5 of the
Plan (on page 2 of the Plan) and substituting in lieu thereof the following
which shall henceforth be read as the second sentence of Section 5 of the Plan:
"The aggregate number of shares which may be issued
under Options hereunder shall not exceed 50,000 shares
of Common Stock."
2. Except as expressly set forth in this Amendment No. 1 to the Plan,
all other provisions of the Plan shall remain in full force and effect.
Adopted by the Board of Directors as of the 31st day of December, 1991.
LEONARD'S METAL, INC.
By:_________________________________
Ronald S. Saks, President
<PAGE>
AMENDMENT NO. 2
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the
"Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the
"Plan") as of December 7, 1989;
WHEREAS the Plan was previously amended as of December 31, 1991;
WHEREAS, the Board of Directors of the Corporation, through the duly
authorized officers of the Corporation, desires to again amend the Plan in order
to allow the Corporation to grant incentive stock options to certain employees
of any wholly-owned subsidiary of the Corporation; and
WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of
the Corporation reserved the right to amend the Plan at any time.
NOW, THEREFORE, in the exercise of the power provided for in Section 8
of the Plan, the Corporation, through its duly authorized officers and Board of
Directors, hereby amends the Plan, effective January 1, 1994, in the following
respects:
1. By deleting in its entirety the first sentence of Section 1 of the
Plan (on page 1 of the Plan) and substituting in lieu thereof the following
which shall henceforth be read as the first sentence of Section 1 of the Plan:
"This 1989 Employee Incentive Stock Option Plan (the "Plan") is
intended to encourage the ownership of stock of Leonard's Metal, Inc.
(the "Company") by key employees of the Company or any wholly-owned
subsidiary of the Company, to provide additional incentive for them to
promote the success of the business, and to encourage them to remain in
the employ of the Company or its subsidiary, as the case may be."
<PAGE>
2. By deleting in its entirety the first sentence of Section 3 of the
Plan (on page 1 of the Plan) and substituting in lieu thereof the following
which shall henceforth be read as the first sentence of Section 3 of the Plan:
"The Board, in its sole discretion but subject to the requirements of
Section 422A of the Code, shall select Participants from the key
employees of the Company or any wholly-owned subsidiary of the Company,
including officers (whether or not they are Directors)."
3. Except as expressly set forth in this Amendment No. 2 to the Plan,
all other provisions of the Plan, as amended, shall remain in full force and
effect.
Adopted as of the 1st day of August, 1994.
LEONARD'S METAL, INC.
By:
Ronald S. Saks, President
Attest:
By:
Secretary
<PAGE>
AMENDMENT NO. 3
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the
"Corporation") adopted the 1989 Employee Incentive Stock Option
Plan (the "Plan") as of December 7, 1989;
WHEREAS the Plan was amended as of December 31, 1991 and again
amended as of January 1, 1994;
WHEREAS, the Board of Directors of the Corporation, through the duly
authorized officers of the Corporation, desires to again amend the Plan in order
to increase the aggregate number of shares of Common Stock that may be issued
under Options granted to any one Participant (as those terms are defined in the
Plan); and
WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of
the Corporation reserved the right to amend the Plan at any time.
NOW, THEREFORE, in the exercise of the power provided for in Section 8
of the Plan, the Corporation, through its duly authorized officers and Board of
Directors, hereby amends the Plan, effective October 1, 1995, in the following
respects:
1. By deleting the number "5,000" in the fifth line of Section 5 of the
Plan (on page 2 of the Plan) and substituting in lieu thereof the number
"75,000".
2. By adding the following language to the Plan which shall
henceforth be read as Section 6A of the Plan:
"6A. Notwithstanding the provisions of Section 6 above, upon:
(i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger or consolidation of the Company with one or more
corporations in which the Company is not the surviving corporation,
(iii) a sale of substantially all of the assets of the Company, or (iv)
the transfer of more than 80% of the then outstanding Stock of the
<PAGE>
Company to another entity or person in a single transaction or series
of transactions, the Plan shall terminate, and any outstanding Options
granted under the Plan shall terminate on the day before the
consummation of the transaction; provided that the Board shall9 have
the right, but shall not be obligated, to accelerate the time in which
any Options may be exercised prior to such a termination. However, the
termination of such Options shall not occur if provision is made in
writing in connection with the transaction, in a manner acceptable to
the Board of Directors, for: (i) the continuance of the Plan and
assumption of outstanding Options, or (ii) the substitution for such
Options of new options to purchase the stock of a successor corporation
(or parent or subsidiary thereof), with appropriate adjustments as to
number and kind of shares and option price. The Board of Directors
shall have the authority to amend this paragraph to provide for a
requirement that a successor corporation assume any outstanding
Options.
Adjustments under this Section 6A shall be made by the Board
of Directors whose determination as to what adjustments shall be made,
and the extent thereof, shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan or in
connection with any such adjustment."
3. Except as expressly set forth in this Amendment No. 3 to the Plan,
all other provisions of the Plan, as amended, shall remain in full force and
effect.
Adopted as of the 1st day of October, 1995.
LEONARD'S METAL, INC.
By:
Ronald S. Saks, President
Attest:
By:
Secretary
<PAGE>
AMENDMENT NO. 4
LEONARD'S METAL, INC.
1989 EMPLOYEE INCENTIVE STOCK OPTION PLAN
WHEREAS, the Board of Directors of Leonard's Metal, Inc. (the
"Corporation") adopted the 1989 Employee Incentive Stock Option Plan (the
"Plan") as of December 7, 1989;
WHEREAS, the Plan was amended as of December 31, 1991, amended again as
of January 1, 1994, and amended again as of October 1, 1995;
WHEREAS, the Board of Directors of the Corporation, through the duly
authorized officers of the Corporation, desires to again amend the Plan in order
to increase the aggregate number of shares of Common Stock that may be issued
under Options granted to Plan Participants (as those terms are defined in the
Plan); and
WHEREAS, pursuant to Section 8 of the Plan, the Board of Directors of
the Corporation reserved the right to amend the Plan at any time.
NOW, THEREFORE, in the exercise of the power provided for in Section 8
of the Plan, the Corporation, through its duly authorized officers and Board of
Directors, hereby amends the Plan, effective December 18, 1996, in the following
respects:
1. By deleting the number "75,000" in Section 5 of the Plan, as amended
by Section 1 of Amendment No. 3 to the Plan and substituting in lieu thereof the
number "85,000".
2. Except as expressly set forth in this Amendment No. 4 to the Plan,
all other provisions of the Plan, as amended, shall remain in full force and
effect.
Adopted as of the 18th day of December, 1996.
LEONARD'S METAL, INC.
By:
Ronald S. Saks, President
Attest:
By:
Secretary
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
RONALD S. SAKS ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under
this Agreement shall commence as of January 1, 1997 and shall continue for a six
(6) year period terminating December 31, 2002; provided, however, that this
Agreement shall be automatically extended for additional terms of one year each
unless not later than August 31 of any year beginning in 2002, either party has
given written notice to the other party of its or his intention not to extend
the term of this Agreement; and provided, further, that the term of employment
may be terminated upon the earlier occurrence of any of the following events:
(a) Upon the termination of the business or corporate
existence of the Corporation;
(b) Upon the death of the Employee;
(c) At the Corporation's option if Employee shall suffer a
permanent disability; (For purpose of this Agreement "permanent
disability" shall be defined as Employee's inability, through physical
or mental illness or other cause, to perform the essential functions of
Employee's usual duties, with or without a reasonable accommodation
that would not cause an undue hardship to the Corporation, for a period
of 12 months or more. The Corporation's option in this regard shall be
exercised in writing and mailed or delivered to Employee or Employee's
personal representative, and shall be effective on the date of mailing
or delivery of the option as exercised.) or
(d) At the Corporation's option upon ten (10) days written
notice to Employee in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder, or in the event the Corporation determines that
Employee is not performing the duties required of him hereunder to the
satisfaction of the Corporation.
<PAGE>
Upon termination of employment for any reason, Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued but
unpaid as of the date of termination and shall not be entitled to additional
compensation except as expressly provided in this Agreement.
3. Compensation.
(A) During the term of this Agreement the Corporation shall
compensate Employee for Employee's services rendered hereunder by paying to
Employee an annual salary (the "Base Salary") as follows:
(i) One Hundred Fifty Thousand Dollars
($150,000.00) payable in equal monthly installments during the
calendar year 1997; and
(ii) Two Hundred Forty Thousand Dollars ($240,000.00)
payable in equal monthly installments during the calendar years 1998,
1999, 2000, 2001, and 2002.
(B) With respect to each complete fiscal year of the
Corporation during which (i) the Employee is employed under the terms of this
Agreement as of the last day of such fiscal year, and (ii) the Corporation's
"Annual Net Income" (as that term is hereinafter defined) is more than Five
Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in
addition to the Base Salary, an annual "Performance Bonus". The amount of the
annual Performance Bonus (if any) shall be equal to Three Percent (3%) of the
Corporation's Annual Net Income that is between Five Million Dollars
($5,000,000.00) and Nine Million Dollars ($9,000,000.00), inclusive. In the
event the Corporation's Annual Net Income for any given fiscal year during the
term of this Agreement is Five Million Dollars ($5,000,000.00) or less, the
Employee shall not be entitled to a Performance Bonus with respect to such
fiscal year. Notwithstanding anything contained herein to the contrary, in no
event shall Employee's Performance Bonus for fiscal year 1997 exceed Two Hundred
Forty-Five Thousand Dollars ($245,000.00).
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonuses paid to the Corporation's Chairman
of the Board, President and any Vice-President; (b) federal and state income
tax; and (c) any income or loss attributable to any other corporation or entity
(including the assets of a corporation or entity that constitute an operating
business) acquired by or merged into the Corporation subsequent to the effective
date of this Agreement. If during the term of this Agreement outstanding debt of
the Corporation is repaid through the proceeds of the sale of the Corporation's
stock by the Corporation, the interest that otherwise would have been payable on
such repaid debt shall be deemed to have been paid by the Corporation for
purposes of calculating the Corporation's "Annual Net Income", as if such
repayment of debt had not occurred.
-2-
<PAGE>
The Corporation shall pay to Employee any Performance Bonus due the
Employee hereunder not later than fifteen (15) days after the receipt by the
Corporation of its annual audited financial statements, which the Corporation
expects to receive within ninety (90) days after the end of each fiscal year of
the Corporation.
(C) In addition to the Base salary and Performance Bonus (if
any) Employee shall be entitled to receive such bonus compensation as the Board
of Directors of the Corporation may authorize from time to time.
4. Duties of Employee.
(A) Employee shall be elected as President and Chief Executive
Officer of the Corporation or to such other office (but not below the office of
President) as may be determined by the Board of Directors of the Corporation and
shall perform such duties (comparable to those normally performed by individuals
who serve as officers of comparable companies) on behalf of the Corporation and
its subsidiaries by such means and in such manner as may be specified from time
to time by the officers or Board of Directors of the Corporation.
(B) Employee agrees to abide by and conform to all rules
established by the Corporation applicable to its employees.
(C) Employee shall devote so much of Employee's entire time,
attention and energies to the business of the Corporation as is necessary for
the successful operation of the Corporation and shall endeavor at all times to
improve the business of the Corporation.
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
-3-
<PAGE>
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health,
accident and life insurance program and other benefits which have been or may be
established by the Corporation for other employees of the Corporation performing
duties similar to those of Employee.
(B) Employee shall be entitled to an annual vacation without
loss of compensation for such period as may be determined by the Board of
Directors of the Corporation.
(C) The Corporation shall furnish to the Employee during the
term of his employment an automobile comparable to the automobiles furnished by
the Corporation to other executives performing duties similar to those performed
by Employee, to aid the Employee in the performance of his duties.
7. Covenants of Employee.
(A) During the term of Employee's employment with the
Corporation and for all time thereafter Employee covenants and agrees that
Employee will not in any manner directly or indirectly, except as required in
Employee's duties to the Corporation, disclose or divulge to any person, entity,
firm or company whatsoever, or use for Employee's own benefit or the benefit of
any other person, entity, firm or company, directly or indirectly, any
knowledge, devices, information, techniques, customer lists, business plans or
other data belonging to the Corporation or developed by Employee on behalf of
the Corporation during his employment with the Corporation, without regard to
whether all of the foregoing matters will be deemed confidential, material or
important, the parties hereto stipulating, as between them, that the same are
important, material, confidential and the property of the Corporation, that
disclosure of the same to or use of the same by third parties would greatly
affect the effective and successful conduct of the business of the Corporation
and the goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
(B) During the term of Employee's employment with the
Corporation and for a period of two (2) years (the "Covenant Term") after
cessation for whatever reason of such employment (except as hereinafter provided
in subparagraph (C) of this paragraph 7), Employee covenants and agrees that
Employee will not in any manner directly or indirectly:
-4-
<PAGE>
(i) solicit, divert, take away or interfere with
any of the customers (or their respective affiliates or
successors) of the Corporation;
(ii) engage directly or indirectly, either personally
or as an employee, partner, associate partner, officer, manager, agent,
advisor, consultant or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the
business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part
within any geographic area wherein the Corporation is engaged in
marketing its products, and if it involves the manufacture of component
parts for commercial aircraft or any other business which is in any
manner competitive, as of the date of cessation of Employee's
employment, with any business then being conducted by the Corporation
or as to which the Corporation has then formulated definitive plans to
enter;
(iii) induce any salesman, distributor, supplier,
manufacturer, representative, agent, jobber or other person transacting
business with the Corporation to terminate their relationship with the
Corporation, or to represent, distribute or sell products in
competition with products of the Corporation; or
(iv) induce or cause any employee of the Corporation
to leave the employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in
the preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of the
operating assets or all of the common stock of the Corporation is sold
to any entity or individuals unaffiliated with the Corporation, its
successors or assigns; or
(ii) eliminated if the business currently operated
by the Corporation is terminated and the assets of the
Corporation are liquidated.
(D) All the covenants of Employee contained in this paragraph
7 shall be construed as agreements independent of any other provision of this
Agreement, and the existence of any claim or cause of action against the
Corporation, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Corporation of these covenants.
-5-
<PAGE>
(E) It is the intention of the parties to restrict the
activities of Employee under this paragraph 7 only to the extent necessary for
the protection of legitimate business interests of the Corporation, and the
parties specifically covenant and agree that should any of the provisions set
forth therein, under any set of circumstances not now foreseen by the parties,
be deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms
of this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee by written
notice thereof to Employee and with payment of the Base Salary to Employee only
to the date of such termination. It is further agreed that any breach or evasion
of any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to the Corporation and will authorize recourse to injunction
and/or specific performance as well as to other legal or equitable remedies to
which the Corporation may be entitled. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each and every remedy given hereunder or now or hereafter existing at
law or in equity by statute or otherwise. The election of any one or more
remedies by the Corporation shall not constitute a waiver of the right to pursue
other available remedies. In the event it becomes necessary for the Corporation
to institute a suit at law or in equity for the purpose of enforcing any of the
provisions of this Agreement, the Corporation shall be entitled to recover from
Employee the Corporation's reasonable attorneys' fees plus court costs and
expenses.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
-6-
<PAGE>
11. Waiver or Modification. No waiver or modification of this Agreement
or of any covenant, condition or limitation herein shall be valid unless in
writing and duly executed by the party to be charged therewith, and no evidence
of any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder
are personal in nature and, therefore, Employee shall not assign Employee's
rights or delegate Employee's obligations under this Agreement, and any
attempted or purported assignment or delegation not herein permitted shall be
null and void.
13. Successors. Subject to the provisions of paragraph 12, this
Agreement shall be binding upon and shall inure to the benefit of the
Corporation and Employee and their respective heirs, executors, administrators,
legal administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or mailed by certified or registered mail, return receipt
requested, if to the Corporation, to:
Ronald S. Saks, President
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
with a copy to:
Gallop, Johnson & Neuman, L.C.
101 South Hanley Road
Suite 1600
St. Louis, MO 63105
Attention: Sanford S. Neuman, Esq.
and, if to Employee, to:
Mr. Ronald S. Saks
96 Arundel Place
St. Louis, MO 63105
-7-
<PAGE>
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to
have been made in the State of Missouri and shall be governed by and construed
in accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
16. Venue. The parties hereto agree that any suit filed arising out of
or in connection with this Agreement shall be brought only in the Federal Court
for the Eastern District of Missouri, unless said Court shall lack jurisdiction,
in which case such action shall be brought only in the circuit Court in the
County of St. Louis, Missouri.
The parties have executed this Agreement as of January 1, 1997.
LEONARD'S METAL, INC.
("Corporation")
By: __________________________
Title: ________________________
-------------------------------
Ronald S. Saks
("Employee")
-8-
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
LAWRENCE J. LEGRAND ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under
this Agreement shall commence as of May 1, 1998 and shall continue through
December 31, 2002; provided, however, that this Agreement shall be automatically
extended for additional terms of one year each unless not later than August 31
of any year beginning in 2002, either party has given written notice to the
other party of its or his intention not to extend the term of this Agreement;
and provided, further, that the term of employment may be terminated upon the
earlier occurrence of any of the following events:
(a) Upon the termination of the business or corporate
existence of the Corporation;
(b) Upon the death of the Employee;
(c) At the Corporation's option if Employee shall suffer a
permanent disability; (For purpose of this Agreement "permanent
disability" shall be defined as Employee's inability, through physical
or mental illness or other cause, to perform the essential functions of
Employee's usual duties, with or without a reasonable accommodation
that would not cause an undue hardship to the Corporation, for a period
of 12 months or more. The Corporation's option in this regard shall be
exercised in writing and mailed or delivered to Employee or Employee's
personal representative, and shall be effective on the date of mailing
or delivery of the option as exercised.) or
<PAGE>
(d) At the Corporation's option upon ten (10) days written
notice to Employee in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder, or in the event the Corporation determines that
Employee is not performing the duties required of him hereunder to the
satisfaction of the Corporation.
Upon termination of employment for any reason Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued but
unpaid as of the date of termination and shall not be entitled to additional
compensation except as expressly provided in this Agreement.
3. Compensation.
(A) During the term of this Agreement the Corporation shall
compensate Employee for Employee's services rendered hereunder by paying to
Employee a salary (the "Base Salary") at an annual rate of two Hundred
Twenty-Five Thousand Dollars ($225,000.00) payable in equal monthly installments
of Eighteen Thousand Seven Hundred Fifty dollars ($18,750.00) during the
remainder of 1998 and during each of the calendar years 1999, 2000, 2001 and
2002.
(B) With respect to each complete fiscal year of the
Corporation during which (i) the Employee is employed under the terms of this
Agreement as of the last day of such fiscal year, and (ii) the Corporation's
"Annual Net Income" (as that term is hereinafter defined) is more than Five
Million Dollars ($5,000,000.00), the Corporation shall pay to the Employee, in
addition to the Base Salary, an annual "Performance Bonus". The amount of the
annual Performance Bonus (if any) shall be equal to the following: (i) Three
Percent (3%) of the Corporation's Annual Net Income that is between Five Million
Dollars ($5,000,000.00) and Nine Million Dollars ($9,000,000.00), inclusive;
plus (ii) One Percent (1%) of the Corporation's Annual Net Income that is
between Nine Million Dollars ($9,000,000.00) and Twelve Million Dollars
($12,000,000.00), inclusive. In the event the Corporation's Annual Net Income
for any given fiscal year is Five Million Dollars ($5,000,000.00) or less, the
Employee shall not be entitled to a Performance Bonus with respect to such
fiscal year. With respect to the period beginning May 1, 1998 and ending
December 31, 1998, the Corporation shall pay the Employee an amount equal to
Sixty-Six and 7/10 Percent (66.7%) of the Performance Bonus (if any) to which
the Employee would have been entitled if the Employee had been employed by the
Corporation for the entire fiscal year ending December 31, 1998.
-2-
<PAGE>
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonuses paid to the Corporation's Chairman
of the Board, President and any Vice-President; (b) federal and state income
tax; and (c) any income or loss attributable to any other corporation or entity
(including the assets of a corporation or entity that constitute an operating
business) acquired by or merged into the Corporation subsequent to the effective
date of this Agreement. If during the term of this Agreement outstanding debt of
the Corporation is repaid through the proceeds of the sale of the Corporation's
stock by the Corporation, the interest that otherwise would have been payable on
such repaid debt shall be deemed to have been paid by the Corporation for
purposes of calculating the Corporation's "Annual Net Income", as if such
repayment of debt had not occurred.
The Corporation shall pay to Employee any Performance Bonus due the
Employee hereunder not later than fifteen (15) days after the receipt by the
Corporation of its annual audited financial statements, which the Corporation
expects to receive within ninety (90) days after the end of each fiscal year of
the Corporation.
(C) In addition to the Base salary and Performance Bonus (if
any) Employee shall be entitled to receive such bonus compensation as the Board
of Directors of the Corporation may authorize from time to time.
4. Duties of Employee.
(A) Employee shall serve as Vice President and Chief Operating
Officer of the Corporation or in such other positions as may be determined by
the Board of Directors of the Corporation, and Employee shall perform such
duties on behalf of the Corporation and its subsidiaries by such means and in
such manner as may be specified from time to time by the officers or Board of
Directors of the Corporation.
(B) Employee agrees to abide by and conform to all rules
established by the Corporation applicable to its employees.
(C) Employee acknowledges that he is being employed as a
full-time employee, and Employee agrees to devote so much of Employee's entire
time, attention and energies to the business of the Corporation as is necessary
for the successful operation of the Corporation and shall endeavor at all times
to improve the business of the Corporation.
-3-
<PAGE>
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health,
accident and life insurance program and other benefits which have been or may be
established by the Corporation for other employees of the Corporation performing
duties similar to those of Employee.
(B) Employee shall be entitled to an annual vacation without
loss of compensation for such period as may be determined by the Board of
Directors of the Corporation.
(C) The Corporation shall furnish to the Employee during the
term of his employment an automobile comparable to the automobiles furnished by
the Corporation to other executives performing duties similar to those performed
by Employee, to aid the Employee in the performance of his duties.
7. Covenants of Employee.
(A) During the term of Employee's employment with the
Corporation and for all time thereafter Employee covenants and agrees that
Employee will not in any manner directly or indirectly, except as required in
Employee's duties to the Corporation, disclose or divulge to any person, entity,
firm or company whatsoever, or use for Employee's own benefit or the benefit of
any other person, entity, firm or company, directly or indirectly, any
knowledge, devices, information, techniques, customer lists, business plans or
other data belonging to the Corporation or developed by Employee on behalf of
the Corporation during his employment with the Corporation, without regard to
whether all of the foregoing matters will be deemed confidential, material or
important, the parties hereto stipulating, as between them, that the same are
important, material, confidential and the property of the Corporation, that
disclosure of the same to or use of the same by third parties would greatly
affect the effective and successful conduct of the business of the Corporation
and the goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
-4-
<PAGE>
(B) During the term of Employee's employment with the
Corporation and for a period of two (2) years (the "Covenant Term") after
cessation for whatever reason of such employment (except as hereinafter provided
in subparagraph (C) of this paragraph 7), Employee covenants and agrees that
Employee will not in any manner directly or indirectly:
(i) solicit, divert, take away or interfere with
any of the customers (or their respective affiliates or
successors) of the Corporation;
(ii) engage directly or indirectly, either personally
or as an employee, partner, associate partner, officer, manager, agent,
advisor, consultant or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the
business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part
within any geographic area wherein the Corporation is engaged in
marketing its products, and if it involves the manufacture of component
parts for commercial aircraft or any other business which is in any
manner competitive, as of the date of cessation of Employee's
employment, with any business then being conducted by the Corporation
or as to which the Corporation has then formulated definitive plans to
enter;
(iii) induce any salesman, distributor, supplier,
manufacturer, representative, agent, jobber or other person transacting
business with the Corporation to terminate their relationship with the
Corporation, or to represent, distribute or sell products in
competition with products of the Corporation; or
(iv) induce or cause any employee of the Corporation
to leave the employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in
the preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of the
operating assets or all of the common stock of the Corporation is sold
to any entity or individuals unaffiliated with the Corporation, its
successors or assigns; or
(ii) eliminated if the business currently operated
by the Corporation is terminated and the assets of the
Corporation are liquidated.
(D) All the covenants of Employee contained in this paragraph
7 shall be construed as agreements independent of any other provision of this
Agreement, and the existence of any claim or cause of action against the
Corporation, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Corporation of these covenants.
-5-
<PAGE>
(E) It is the intention of the parties to restrict the
activities of Employee under this paragraph 7 only to the extent necessary for
the protection of legitimate business interests of the Corporation, and the
parties specifically covenant and agree that should any of the provisions set
forth therein, under any set of circumstances not now foreseen by the parties,
be deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms
of this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee by written
notice thereof to Employee and with payment of the Base Salary to Employee only
to the date of such termination. It is further agreed that any breach or evasion
of any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to the Corporation and will authorize recourse to injunction
and/or specific performance as well as to other legal or equitable remedies to
which the Corporation may be entitled. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each and every remedy given hereunder or now or hereafter existing at
law or in equity by statute or otherwise. The election of any one or more
remedies by the Corporation shall not constitute a waiver of the right to pursue
other available remedies. In the event it becomes necessary for the Corporation
to institute a suit at law or in equity for the purpose of enforcing any of the
provisions of this Agreement, the Corporation shall be entitled to recover from
Employee the Corporation's reasonable attorneys' fees plus court costs and
expenses.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
-6-
<PAGE>
11. Waiver or Modification. No waiver or modification of this Agreement
or of any covenant, condition or limitation herein shall be valid unless in
writing and duly executed by the party to be charged therewith, and no evidence
of any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder
are personal in nature and, therefore, Employee shall not assign Employee's
rights or delegate Employee's obligations under this Agreement, and any
attempted or purported assignment or delegation not herein permitted shall be
null and void.
13. Successors. Subject to the provisions of paragraph 12, this
Agreement shall be binding upon and shall inure to the benefit of the
Corporation and Employee and their respective heirs, executors, administrators,
legal administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or mailed by certified or registered mail, return receipt
requested, if to the Corporation, to:
Ronald S. Saks, President
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
and, if to Employee, to:
Mr. Lawrence J. LeGrand
908 Claymark Drive
St. Louis, MO 63131
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to
have been made in the State of Missouri and shall be - governed by and construed
in accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
-7-
<PAGE>
16. Venue. The parties hereto agree that any suit filed arising out of
or in connection with this Agreement shall be brought only in the Federal Court
for the Eastern District of Missouri, unless said Court shall lack jurisdiction,
in which case such action shall be brought only in the circuit Court in the
County of St. Louis, Missouri.
The parties have executed this Agreement as of January 1, 1998.
LEONARD'S METAL, INC.
("Corporation")
By: __________________________
Ronald S. Saks, President
-------------------------------
Lawrence J. LeGrand
("Employee")
-8-
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
PHILLIP A. LAJEUNESSE ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under
this Agreement shall commence as of January 1, 1998 and shall continue for a two
(2) year period terminating December 31, 1999; provided, however, that this
Agreement shall be automatically extended for additional terms of one year each
unless not later than October 31 of any year beginning in 1999, either party has
given written notice to the other party of its or his intention not to extend
the term of this Agreement; and provided, further, that the term of employment
may be terminated upon the earlier occurrence of any of the following events:
(a) Upon the termination of the business or corporate
existence of the Corporation;
(b) Upon the death of the Employee;
(c) At the Corporation's option if Employee shall suffer a
permanent disability; (For purpose of this Agreement "permanent
disability" shall be defined as Employee's inability, through physical
or mental illness or other cause, to perform the essential functions of
Employee's usual duties, with or without a reasonable accommodation
that would not cause an undue hardship to the Corporation, for a period
of 12 months or more. The Corporation's option in this regard shall be
exercised in writing and mailed or delivered to Employee or Employee's
personal representative, and shall be effective on the date of mailing
or delivery of the option as exercised.) or
(d) At the Corporation's option upon ten (10) days written
notice to Employee in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder, or in the event the Corporation determines that
Employee is not performing the duties required of him hereunder to the
satisfaction of the Corporation.
<PAGE>
Upon termination of employment for any reason, Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued but
unpaid as of the date of termination and shall not be entitled to additional
compensation except as expressly provided in this Agreement.
3. Compensation.
(A) During the term of this Agreement the Corporation shall
compensate Employee for Employee's services rendered hereunder by paying to
Employee an annual salary (the "Base Salary") of One Hundred Twenty-Five
Thousand Dollars ($125,000.00) for the fiscal year of the Company ending
December 31, 1998, and the sum of One Hundred Thirty-Five Thousand Dollars
($135,000.00) for the fiscal year ending December 31, 1999. The Base Salary
shall be payable in equal monthly installments.
(B) With respect to each complete fiscal year of the
Corporation during which (i) the Employee is employed under the terms of this
Agreement as of the last day of such fiscal year, and (ii) the Corporation's
"Annual Net Income" (as that term is hereinafter defined) is more than Five
Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in
addition to the Base Salary, an annual "Performance Bonus". The amount of the
annual Performance Bonus (if any) shall be equal to one percent (1%) of the
Corporation's Annual Net Income that is between Five Million Dollars
($5,000,000.00) and Ten Million Dollars ($10,000,000.00), inclusive. In the
event the Corporation's Annual Net Income for any given fiscal year is Five
Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a
Performance Bonus with respect to such fiscal year. Notwithstanding anything
contained herein to the contrary, in the event the sum of the Employee's
Performance Bonus with respect to a fiscal year plus the Employee's benefit
under all performance/production incentive programs of the Corporation in which
the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year
exceeds Fifty Thousand Dollars ($50,000.00), the amount of the Employee's
Performance Bonus for such year shall be reduced so that the sum of the
Performance Bonus and the Incentive Benefit equals Fifty Thousand Dollars
($50,000.00).
-2-
<PAGE>
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonuses paid to the Corporation's Chairman
of the Board, President and any Vice-President; (b) federal and state income
tax; and (c) any income or loss attributable to any other corporation or entity
(including the assets of a corporation or entity that constitute an operating
business) acquired by or merged into the Corporation subsequent to the effective
date of this Agreement. If during the term of this Agreement outstanding debt of
the Corporation is repaid through the proceeds of the sale of the Corporation's
stock by the Corporation, the interest that otherwise would have been payable on
such repaid debt shall be deemed to have been paid by the Corporation for
purposes of calculating the Corporation's "Annual Net Income", as if such
repayment of debt had not occurred.
The Corporation shall pay to Employee any Performance Bonus due the
Employee hereunder not later than fifteen (15) days after the receipt by the
Corporation of its annual audited financial statements, which the Corporation
expects to receive within ninety (90) days after the end of each fiscal year of
the Corporation.
(C) In addition to the Base salary and Performance Bonus (if
any) Employee shall be entitled to receive such bonus compensation as the Board
of Directors of the Corporation may authorize from time to time.
4. Duties of Employee.
(A) Employee shall serve as General Manager of the
Corporation's plant located in Wichita, Kansas or in such other positions as may
be determined by the Board of Directors of the Corporation, and Employee shall
perform such duties on behalf of the Corporation and its subsidiaries by such
means and in such manner as may be specified from time to time by the officers
or Board of Directors of the Corporation.
(B) Employee agrees to abide by and conform to all rules
established by the Corporation applicable to its employees.
(C) Employee acknowledges that he is being employed as a
full-time employee, and Employee agrees to devote so much of Employee's entire
time, attention and energies to the business of the Corporation as is necessary
for the successful operation of the Corporation and shall endeavor at all times
to improve the business of the Corporation.
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
-3-
<PAGE>
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health,
accident and life insurance program and other benefits which have been or may be
established by the Corporation for other employees of the Corporation performing
duties similar to those of Employee.
(B) Employee shall be entitled to an annual vacation without
loss of compensation for such period as may be determined by the Board of
Directors of the Corporation.
(C) The Corporation shall furnish to the Employee during the
term of his employment an automobile comparable to the automobiles furnished by
the Corporation to other executives performing duties similar to those performed
by Employee, to aid the Employee in the performance of his duties.
7. Covenants of Employee.
(A) During the term of Employee's employment with the
Corporation and for all time thereafter Employee covenants and agrees that
Employee will not in any manner directly or indirectly, except as required in
Employee's duties to the Corporation, disclose or divulge to any person, entity,
firm or company whatsoever, or use for Employee's own benefit or the benefit of
any other person, entity, firm or company, directly or indirectly, any
knowledge, devices, information, techniques, customer lists, business plans or
other data belonging to the Corporation or developed by Employee on behalf of
the Corporation during his employment with the Corporation, without regard to
whether all of the foregoing matters will be deemed confidential, material or
important, the parties hereto stipulating, as between them, that the same are
important, material, confidential and the property of the Corporation, that
disclosure of the same to or use of the same by third parties would greatly
affect the effective and successful conduct of the business of the Corporation
and the goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
(B) During the term of Employee's employment with the
Corporation and for a period of two (2) years (the "Covenant Term") after
cessation for whatever reason of such employment (except as hereinafter provided
in subparagraph (C) of this paragraph 7), Employee covenants and agrees that
Employee will not in any manner directly or indirectly:
-4-
<PAGE>
(i) solicit, divert, take away or interfere with
any of the customers (or their respective affiliates or
successors) of the Corporation;
(ii) engage directly or indirectly, either personally
or as an employee, partner, associate partner, officer, manager, agent,
advisor, consultant or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the
business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part
within any geographic area wherein the Corporation is engaged in
marketing its products, and if it involves the manufacture of component
parts for commercial aircraft or any other business which is in any
manner competitive, as of the date of cessation of Employee's
employment, with any business then being conducted by the Corporation
or as to which the Corporation has then formulated definitive plans to
enter;
(iii) induce any salesman, distributor, supplier,
manufacturer, representative, agent, jobber or other person transacting
business with the Corporation to terminate their relationship with the
Corporation, or to represent, distribute or sell products in
competition with products of the Corporation; or
(iv) induce or cause any employee of the Corporation
to leave the employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in
the preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of the
operating assets or all of the common stock of the Corporation is sold
to any entity or individuals unaffiliated with the Corporation, its
successors or assigns; or
(ii) eliminated if the business currently operated
by the Corporation is terminated and the assets of the
Corporation are liquidated.
(D) All the covenants of Employee contained in this paragraph
7 shall be construed as agreements independent of any other provision of this
Agreement, and the existence of any claim or cause of action against the
Corporation, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Corporation of these covenants.
-5-
<PAGE>
(E) It is the intention of the parties to restrict the
activities of Employee under this paragraph 7 only to the extent necessary for
the protection of legitimate business interests of the Corporation, and the
parties specifically covenant and agree that should any of the provisions set
forth therein, under any set of circumstances not now foreseen by the parties,
be deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms
of this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee by written
notice thereof to Employee and with payment of the Base Salary to Employee only
to the date of such termination. It is further agreed that any breach or evasion
of any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to the Corporation and will authorize recourse to injunction
and/or specific performance as well as to other legal or equitable remedies to
which the Corporation may be entitled. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each and every remedy given hereunder or now or hereafter existing at
law or in equity by statute or otherwise. The election of any one or more
remedies by the Corporation shall not constitute a waiver of the right to pursue
other available remedies. In the event it becomes necessary for the Corporation
to institute a suit at law or in equity for the purpose of enforcing any of the
provisions of this Agreement, the Corporation shall be entitled to recover from
Employee the Corporation's reasonable attorneys' fees plus court costs and
expenses.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
-6-
<PAGE>
11. Waiver or Modification. No waiver or modification of this Agreement
or of any covenant, condition or limitation herein shall be valid unless in
writing and duly executed by the party to be charged therewith, and no evidence
of any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder
are personal in nature and, therefore, Employee shall not assign Employee's
rights or delegate Employee's obligations under this Agreement, and any
attempted or purported assignment or delegation not herein permitted shall be
null and void.
13. Successors. Subject to the provisions of paragraph 12, this
Agreement shall be binding upon and shall inure to the benefit of the
Corporation and Employee and their respective heirs, executors, administrators,
legal administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or mailed by certified or registered mail, return receipt
requested, if to the Corporation, to:
Ronald S. Saks, President
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
and, if to Employee, to:
Mr. Phillip A. Lajeunesse
===========================
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to
have been made in the State of Missouri and shall be - governed by and construed
in accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
-7-
<PAGE>
16. Venue. The parties hereto agree that any suit filed arising out of
or in connection with this Agreement shall be brought only in the Federal Court
for the Eastern District of Missouri, unless said Court shall lack jurisdiction,
in which case such action shall be brought only in the circuit Court in the
County of St. Louis, Missouri.
The parties have executed this Agreement as of January 1, 1998.
LEONARD'S METAL, INC.
("Corporation")
By: __________________________
Ronald S. Saks, President
-------------------------------
Phillip A. Lajeunesse
("Employee")
-8-
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
ROBERT T. GRAH ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under
this Agreement shall commence as of January 1, 1998 and shall continue for a two
(2) year period terminating December 31, 1999; provided, however, that this
Agreement shall be automatically extended for additional terms of one year each
unless not later than October 31 of any year beginning in 1999, either party has
given written notice to the other party of its or his intention not to extend
the term of this Agreement; and provided, further, that the term of employment
may be terminated upon the earlier occurrence of any of the following events:
(a) Upon the termination of the business or corporate
existence of the Corporation;
(b) Upon the death of the Employee;
(c) At the Corporation's option if Employee shall suffer a
permanent disability; (For purpose of this Agreement "permanent
disability" shall be defined as Employee's inability, through physical
or mental illness or other cause, to perform the essential functions of
Employee's usual duties, with or without a reasonable accommodation
that would not cause an undue hardship to the Corporation, for a period
of 12 months or more. The Corporation's option in this regard shall be
exercised in writing and mailed or delivered to Employee or Employee's
personal representative, and shall be effective on the date of mailing
or delivery of the option as exercised.) or
(d) At the Corporation's option upon ten (10) days written
notice to Employee in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder, or in the event the Corporation determines that
Employee is not performing the duties required of him hereunder to the
satisfaction of the corporation.
<PAGE>
Upon termination of employment for any reason, Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued but
unpaid as of the date of termination and shall not be entitled to additional
compensation except as expressly provided in this Agreement.
3. Compensation.
(A) During the term of this Agreement the Corporation shall
compensate Employee for Employee's services rendered hereunder by paying to
Employee an annual salary (the "Base Salary") as follows:
(i) One Hundred Five Thousand Dollars ($105,000.00)
payable in equal monthly installments during the calendar year 1998;
and
(ii) One Hundred Fifteen Thousand Dollars
($115,000.00) payable in equal monthly installments during the calendar
year 1999.
(B) With respect to each complete fiscal year of the
Corporation during which (i) the Employee is employed under the terms of this
Agreement as of the last day of such fiscal year, and (ii) the Corporation's
"Annual Net Income" (as that term is hereinafter defined) is more than Five
Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in
addition to the Base Salary, an annual "Performance Bonus". The amount of the
annual Performance Bonus (if any) shall be equal to one percent (1%) of the
Corporation's Annual Net Income that is between Five Million Dollars
($5,000,000.00) and Twelve Million Dollars ($12,000,000.00), inclusive. In the
event the Corporation's Annual Net Income for any given fiscal year is Five
Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a
Performance Bonus with respect to such fiscal year. Notwithstanding anything
contained herein to the contrary, in the event the sum of the Employee's
Performance Bonus with respect to a fiscal year plus the Employee's benefit
under all performance/production incentive programs of the Corporation in which
the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year
exceeds Seventy Thousand Dollars ($70,000.00), the amount of the Employee's
Performance Bonus for such year shall be reduced so that the sum of the
Performance Bonus and the Incentive Benefit equals Seventy Thousand Dollars
($70,000.00).
-2-
<PAGE>
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonuses paid to the Corporation's Chairman
of the Board, President and any Vice-President; (b) federal and state income
tax; and (c) any income or loss attributable to any other corporation or entity
(including the assets of a corporation or entity that constitute an operating
business) acquired by or merged into the Corporation subsequent to the effective
date of this Agreement. If during the term of this Agreement outstanding debt of
the Corporation is repaid through the proceeds of the sale of the Corporation's
stock by the Corporation, the interest that otherwise would have been payable on
such repaid debt shall be deemed to have been paid by the Corporation for
purposes of calculating the Corporation's "Annual Net Income", as if such
repayment of debt had not occurred.
The Corporation shall pay to Employee any Performance Bonus due the
Employee hereunder not later than fifteen (15) days after the receipt by the
Corporation of its annual audited financial statements, which the Corporation
expects to receive within ninety (90) days after the end of each fiscal year of
the Corporation.
(C) In addition to the Base salary and Performance Bonus (if
any) Employee shall be entitled to receive such bonus compensation as the Board
of Directors of the Corporation may authorize from time to time.
4. Duties of Employee.
(A) Employee shall serve as General Manager of the LMI
Finishing, Inc. plant located in Tulsa, Oklahoma (a subsidiary of the
Corporation) or in such other positions as may be determined by the Board of
Directors of the Corporation, and Employee shall perform such duties on behalf
of the Corporation and its subsidiaries by such means and in such manner as may
be specified from time to time by the officers or Board of Directors of the
Corporation.
(B) Employee agrees to abide by and conform to all rules
established by the Corporation applicable to its employees.
(C) Employee acknowledges that he is being employed as a
full-time employee, and Employee agrees to devote so much of Employee's entire
time, attention and energies to the business of the Corporation as is necessary
for the successful operation of the Corporation and shall endeavor at all times
to improve the business of the Corporation.
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
-3-
<PAGE>
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health,
accident and life insurance program and other benefits which have been or may be
established by the Corporation for other employees of the Corporation performing
duties similar to those of Employee.
(B) Employee shall be entitled to an annual vacation without
loss of compensation for such period as may be determined by the Board of
Directors of the Corporation.
(C) The Corporation shall furnish to the Employee during the
term of his employment an automobile comparable to the automobiles furnished by
the Corporation to other executives performing duties similar to those performed
by Employee, to aid the Employee in the performance of his duties.
7. Covenants of Employee.
(A) During the term of Employee's employment with the
Corporation and for all time thereafter Employee covenants and agrees that
Employee will not in any manner directly or indirectly, except as required in
Employee's duties to the Corporation, disclose or divulge to any person, entity,
firm or company whatsoever, or use for Employee's own benefit or the benefit of
any other person, entity, firm or company, directly or indirectly, any
knowledge, devices, information, techniques, customer lists, business plans or
other data belonging to the Corporation or developed by Employee on behalf of
the Corporation during his employment with the Corporation, without regard to
whether all of the foregoing matters will be deemed confidential, material or
important, the parties hereto stipulating, as between them, that the same are
important, material, confidential and the property of the Corporation, that
disclosure of the same to or use of the same by third parties would greatly
affect the effective and successful conduct of the business of the Corporation
and the goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
-4-
<PAGE>
(B) During the term of Employee's employment with the
Corporation and for a period of two (2) years (the "Covenant Term") after
cessation for whatever reason of such employment (except as hereinafter provided
in subparagraph (C) of this paragraph 7), Employee covenants and agrees that
Employee will not in any manner directly or indirectly:
(i) solicit, divert, take away or interfere with
any of the customers (or their respective affiliates or
successors) of the Corporation;
(ii) engage directly or indirectly, either personally
or as an employee, partner, associate partner, officer, manager, agent,
advisor, consultant or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the
business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part
within any geographic area wherein the Corporation is engaged in
marketing its products, and if it involves the manufacture of component
parts for commercial aircraft or any other business which is in any
manner competitive, as of the date of cessation of Employee's
employment, with any business then being conducted by the Corporation
or as to which the Corporation has then formulated definitive plans to
enter;
(iii) induce any salesman, distributor, supplier,
manufacturer, representative, agent, jobber or other person transacting
business with the Corporation to terminate their relationship with the
Corporation, or to represent, distribute or sell products in
competition with products of the Corporation; or
(iv) induce or cause any employee of the Corporation
to leave the employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in
the preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of
the operating assets or all of the common stock of the Corporation is
sold to any entity or individuals unaffiliated with the Corporation,
its successors or assigns; or
(ii) eliminated if the business currently operated
by the Corporation is terminated and the assets of the Corporation are
liquidated.
(D) All the covenants of Employee contained in this paragraph
7 shall be construed as agreements independent of any other provision of this
Agreement, and the existence of any claim or cause of action against the
Corporation, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Corporation of these covenants.
-5-
<PAGE>
(E) It is the intention of the parties to restrict the
activities of Employee under this paragraph 7 only to the extent necessary for
the protection of legitimate business interests of the Corporation, and the
parties specifically covenant and agree that should any of the provisions set
forth therein, under any set of circumstances not now foreseen by the parties,
be deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms
of this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee by written
notice thereof to Employee and with payment of the Base Salary to Employee only
to the date of such termination. It is further agreed that any breach or evasion
of any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to the Corporation and will authorize recourse to injunction
and/or specific performance as well as to other legal or equitable remedies to
which the Corporation may be entitled. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each and every remedy given hereunder or now or hereafter existing at
law or in equity by statute or otherwise. The election of any one or more
remedies by the Corporation shall not constitute a waiver of the right to pursue
other available remedies. In the event it becomes necessary for the Corporation
to institute a suit at law or in equity for the purpose of enforcing any of the
provisions of this Agreement, the Corporation shall be entitled to recover from
Employee the Corporation's reasonable attorneys' fees plus court costs and
expenses.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
-6-
<PAGE>
11. Waiver or Modification. No waiver or modification of this Agreement
or of any covenant, condition or limitation herein shall be valid unless in
writing and duly executed by the party to be charged therewith, and no evidence
of any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder
are personal in nature and, therefore, Employee shall not assign Employee's
rights or delegate Employee's obligations under this Agreement, and any
attempted or purported assignment or delegation not herein permitted shall be
null and void.
13. Successors. Subject to the provisions of paragraph 12, this
Agreement shall be binding upon and shall inure to the benefit of the
Corporation and Employee and their respective heirs, executors, administrators,
legal administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or mailed by certified or registered mail, return receipt
requested, if to the Corporation, to:
Ronald S. Saks, President
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
and, if to Employee, to:
Mr. Robert T. Grah
___________________________
___________________________
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to
have been made in the State of Missouri and shall be governed by and construed
in accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
-7-
<PAGE>
16. Venue. The parties hereto agree that any suit filed arising out of
or in connection with this Agreement shall be brought only in the Federal Court
for the Eastern District of Missouri, unless said Court shall lack jurisdiction,
in which case such action shall be brought only in the circuit Court in the
County of St. Louis, Missouri.
The parties have executed this Agreement as of January 1, 1998.
LEONARD'S METAL, INC.
("Corporation")
By: __________________________
Ronald S. Saks, President
--------------------------------
Robert T. Grah
("Employee")
-8-
EMPLOYMENT AGREEMENT
LEONARD'S METAL, INC., a Missouri corporation (the "Corporation"), and
BRADLEY L. NELSON ("Employee") hereby agree as follows:
1. Employment. The Corporation hereby employs Employee, and Employee
accepts employment from the Corporation, upon the terms and conditions
hereinafter set forth. Any and all employment agreements heretofore entered into
between the Corporation and Employee are hereby terminated and cancelled, and
each of the parties hereto mutually releases and discharges the other from any
and all obligations and liabilities heretofore or now existing under or by
virtue of any such employment agreements, it being the intention of the parties
hereto that this Agreement, effective immediately, shall supersede and be in
lieu of any and all prior employment agreements between them.
2. Term of Employment. The initial term of Employee's employment under
this Agreement shall commence as of January 1, 1998 and shall continue for a two
(2) year period terminating December 31, 1999; provided, however, that this
Agreement shall be automatically extended for additional terms of one year each
unless not later than October 31 of any year beginning in 1999, either party has
given written notice to the other party of its or his intention not to extend
the term of this Agreement; and provided, further, that the term of employment
may be terminated upon the earlier occurrence of any of the following events:
(a) Upon the termination of the business or corporate
existence of the Corporation;
(b) Upon the death of the Employee;
(c) At the Corporation's option if Employee shall suffer a
permanent disability; (For purpose of this Agreement "permanent
disability" shall be defined as Employee's inability, through physical
or mental illness or other cause, to perform the essential functions of
Employee's usual duties, with or without a reasonable accommodation
that would not cause an undue hardship to the Corporation, for a period
of 12 months or more. The Corporation's option in this regard shall be
exercised in writing and mailed or delivered to Employee or Employee's
personal representative, and shall be effective on the date of mailing
or delivery of the option as exercised.) or
(d) At the Corporation's option upon ten (10) days written
notice to Employee in the event of any breach or default by Employee of
any of the terms of this Agreement or of any of Employee's duties or
obligations hereunder, or in the event the Corporation determines that
Employee is not performing the duties required of him hereunder to the
satisfaction of the Corporation.
<PAGE>
Upon termination of employment for any reason, Employee shall be entitled to
receive only the Base Salary (as that term is hereinafter defined) accrued but
unpaid as of the date of termination and shall not be entitled to additional
compensation except as expressly provided in this Agreement.
3. Compensation.
(A) During the term of this Agreement the Corporation shall
compensate Employee for Employee's services rendered hereunder by paying to
Employee an annual salary (the "Base Salary") as follows:
(i) One Hundred Five Thousand Dollars ($105,000.00)
payable in equal monthly installments during the calendar year 1998;
and
(ii) One Hundred Fifteen Thousand Dollars
($115,000.00) payable in equal monthly installments during the calendar
year 1999.
(B) With respect to each complete fiscal year of the
Corporation during which (i) the Employee is employed under the terms of this
Agreement as of the last day of such fiscal year, and (ii) the Corporation's
"Annual Net Income" (as that term is hereinafter defined) is more than Five
Million Dollars ($5,000,000.00), the Corporation shall pay to Employee, in
addition to the Base Salary, an annual "Performance Bonus". The amount of the
annual Performance Bonus (if any) shall be equal to one percent (1%) of the
Corporation's Annual Net Income that is between Five Million Dollars
($5,000,000.00) and Twelve Million Dollars ($12,000,000.00), inclusive. In the
event the Corporation's Annual Net Income for any given fiscal year is Five
Million Dollars ($5,000,000.00) or less, the Employee shall not be entitled to a
Performance Bonus with respect to such fiscal year. Notwithstanding anything
contained herein to the contrary, in the event the sum of the Employee's
Performance Bonus with respect to a fiscal year plus the Employee's benefit
under all performance/production incentive programs of the Corporation in which
the Employee is entitled to a bonus ("Incentive Benefit") for such fiscal year
exceeds Seventy Thousand Dollars ($70,000.00), the amount of the Employee's
Performance Bonus for such year shall be reduced so that the sum of the
Performance Bonus and the Incentive Benefit equals Seventy Thousand Dollars
($70,000.00).
For purposes of the calculation of the Performance Bonus, the Corporation's
"Annual Net Income" means the consolidated net profit of the Corporation and its
subsidiaries, for a given fiscal year, as determined by the firm of independent
certified public accountants providing auditing services to the Corporation,
using generally accepted accounting principles consistently applied, and
calculated without regard to (a) any bonuses paid to the Corporation's Chairman
of the Board, President and any Vice-President; (b) federal and state income
tax; and (c) any income or loss attributable to any other corporation or entity
(including the assets of a corporation or entity that constitute an operating
business) acquired by or merged into the Corporation subsequent to the effective
date of this Agreement. If during the term of this Agreement outstanding debt of
the Corporation is repaid through the proceeds of the sale of the Corporation's
stock by the Corporation, the interest that otherwise would have been payable on
such repaid debt shall be deemed to have been paid by the Corporation for
purposes of calculating the Corporation's "Annual Net Income", as if such
repayment of debt had not occurred.
-2-
<PAGE>
The Corporation shall pay to Employee any Performance Bonus due the
Employee hereunder not later than fifteen (15) days after the receipt by the
Corporation of its annual audited financial statements, which the Corporation
expects to receive within ninety (90) days after the end of each fiscal year of
the Corporation.
(C) In addition to the Base salary and Performance Bonus (if
any) Employee shall be entitled to receive such bonus compensation as the Board
of Directors of the Corporation may authorize from time to time.
4. Duties of Employee.
(A) Employee shall serve as General Manager of the
Corporation's plant located in Auburn, Washington or in such other positions as
may be determined by the Board of Directors of the Corporation, and Employee
shall perform such duties on behalf of the Corporation and its subsidiaries by
such means and in such manner as may be specified from time to time by the
officers or Board of Directors of the Corporation.
(B) Employee agrees to abide by and conform to all rules
established by the Corporation applicable to its employees.
(C) Employee acknowledges that he is being employed as a
full-time employee, and Employee agrees to devote so much of Employee's entire
time, attention and energies to the business of the Corporation as is necessary
for the successful operation of the Corporation and shall endeavor at all times
to improve the business of the Corporation.
5. Expenses. During the period of Employee's employment, except as
otherwise specifically provided in this Agreement, the Corporation will pay
directly, or reimburse Employee for, all items of reasonable and necessary
business expenses approved in advance by the Corporation if such expenses are
incurred by Employee in the interest of the business of the Corporation. The
Corporation shall also reimburse Employee for automobile expenses incurred by
Employee in the performance of Employee's duties hereunder. The amount of such
reimbursement shall be in accordance with the automobile expense reimbursement
policy adopted (and as it may be modified from time to time) by the
Corporation's Board of Directors. All such expenses paid by Employee will be
reimbursed by the Corporation upon presentation by Employee, from time to time
(but not less than quarterly), of an itemized account of such expenditures in
accordance with the Corporation's policy for verifying such expenditures.
-3-
<PAGE>
6. Fringe Benefits.
(A) Employee shall be entitled to participate in any health,
accident and life insurance program and other benefits which have been or may be
established by the Corporation for other employees of the Corporation performing
duties similar to those of Employee.
(B) Employee shall be entitled to an annual vacation without
loss of compensation for such period as may be determined by the Board of
Directors of the Corporation.
(C) The Corporation shall furnish to the Employee during the
term of his employment an automobile comparable to the automobiles furnished by
the Corporation to other executives performing duties similar to those performed
by Employee, to aid the Employee in the performance of his duties.
7. Covenants of Employee.
(A) During the term of Employee's employment with the
Corporation and for all time thereafter Employee covenants and agrees that
Employee will not in any manner directly or indirectly, except as required in
Employee's duties to the Corporation, disclose or divulge to any person, entity,
firm or company whatsoever, or use for Employee's own benefit or the benefit of
any other person, entity, firm or company, directly or indirectly, any
knowledge, devices, information, techniques, customer lists, business plans or
other data belonging to the Corporation or developed by Employee on behalf of
the Corporation during his employment with the Corporation, without regard to
whether all of the foregoing matters will be deemed confidential, material or
important, the parties hereto stipulating, as between them, that the same are
important, material, confidential and the property of the Corporation, that
disclosure of the same to or use of the same by third parties would greatly
affect the effective and successful conduct of the business of the Corporation
and the goodwill of the Corporation, and that any breach of the terms of this
subparagraph (A) shall be a material breach of this Agreement.
-4-
<PAGE>
(B) During the term of Employee's employment with the
Corporation and for a period of two (2) years (the "Covenant Term") after
cessation for whatever reason of such employment (except as hereinafter provided
in subparagraph (C) of this paragraph 7), Employee covenants and agrees that
Employee will not in any manner directly or indirectly:
(i) solicit, divert, take away or interfere with any
of the customers (or their respective affiliates or successors) of the
Corporation;
(ii) engage directly or indirectly, either personally
or as an employee, partner, associate partner, officer, manager, agent,
advisor, consultant or otherwise, or by means of any corporate or other
entity or device, in any business which is competitive with the
business of the Corporation. For purposes of this covenant a business
will be deemed competitive if it is conducted in whole or in part
within any geographic area wherein the Corporation is engaged in
marketing its products, and if it involves the manufacture of component
parts for commercial aircraft or any other business which is in any
manner competitive, as of the date of cessation of Employee's
employment, with any business then being conducted by the Corporation
or as to which the Corporation has then formulated definitive plans to
enter;
(iii) induce any salesman, distributor, supplier,
manufacturer, representative, agent, jobber or other person transacting
business with the Corporation to terminate their relationship with the
Corporation, or to represent, distribute or sell products in
competition with products of the Corporation; or
(iv) induce or cause any employee of the Corporation
to leave the employ of the Corporation.
(C) The parties agree that the Covenant Term provided for in
the preceding subparagraph (B) shall be:
(i) reduced to six (6) months in the event all of the
operating assets or all of the common stock of the Corporation is sold
to any entity or individuals unaffiliated with the Corporation, its
successors or assigns; or
(ii) eliminated if the business currently operated
by the Corporation is terminated and the assets of the Corporation are
liquidated.
(D) All the covenants of Employee contained in this paragraph
7 shall be construed as agreements independent of any other provision of this
Agreement, and the existence of any claim or cause of action against the
Corporation, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Corporation of these covenants.
-5-
<PAGE>
(E) It is the intention of the parties to restrict the
activities of Employee under this paragraph 7 only to the extent necessary for
the protection of legitimate business interests of the Corporation, and the
parties specifically covenant and agree that should any of the provisions set
forth therein, under any set of circumstances not now foreseen by the parties,
be deemed too broad for such purpose, said provisions will nevertheless be valid
and enforceable to the extent necessary for such protection.
8. Documents. Upon cessation of Employee's employment with the
Corporation, for whatever reason, all documents, records (including without
limitation, customer records), notebooks, invoices, statements or
correspondence, including copies thereof, relating to the business of the
Corporation then in Employee's possession, whether prepared by Employee or
others, will be delivered to and left with the Corporation, and Employee agrees
not to retain copies of the foregoing documents without the written consent of
the Corporation.
9. Remedies. In the event of the breach by Employee of any of the terms
of this Agreement, notwithstanding anything to the contrary contained in this
Agreement, the Corporation may terminate the employment of Employee by written
notice thereof to Employee and with payment of the Base Salary to Employee only
to the date of such termination. It is further agreed that any breach or evasion
of any of the terms of this Agreement by Employee will result in immediate and
irreparable injury to the Corporation and will authorize recourse to injunction
and/or specific performance as well as to other legal or equitable remedies to
which the Corporation may be entitled. No remedy conferred by any of the
specific provisions of this Agreement is intended to be exclusive of any other
remedy and each and every remedy given hereunder or now or hereafter existing at
law or in equity by statute or otherwise. The election of any one or more
remedies by the Corporation shall not constitute a waiver of the right to pursue
other available remedies. In the event it becomes necessary for the Corporation
to institute a suit at law or in equity for the purpose of enforcing any of the
provisions of this Agreement, the Corporation shall be entitled to recover from
Employee the Corporation's reasonable attorneys' fees plus court costs and
expenses.
10. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any court
of competent jurisdiction, this Agreement, subject to subparagraph 7(E) hereof,
shall continue in full force and effect and shall be interpreted as if such
invalid agreements or covenants were not contained herein.
-6-
<PAGE>
11. Waiver or Modification. No waiver or modification of this Agreement
or of any covenant, condition or limitation herein shall be valid unless in
writing and duly executed by the party to be charged therewith, and no evidence
of any waiver or modification shall be offered or received in evidence in any
proceeding, arbitration or litigation between the parties hereto arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid, and the parties further agree that the provisions of this Paragraph
may not be waived except as herein set forth. Failure of the Corporation to
exercise or otherwise act with respect to any of its rights hereunder in the
event of a breach of any of the terms or conditions hereof by Employee shall not
be construed as a waiver of such breach nor prevent the Corporation from
thereafter enforcing strict compliance with any and all of the terms and
conditions hereof.
12. Assignability. The services to be performed by Employee hereunder
are personal in nature and, therefore, Employee shall not assign Employee's
rights or delegate Employee's obligations under this Agreement, and any
attempted or purported assignment or delegation not herein permitted shall be
null and void.
13. Successors. Subject to the provisions of paragraph 12, this
Agreement shall be binding upon and shall inure to the benefit of the
Corporation and Employee and their respective heirs, executors, administrators,
legal administrators, successors and assigns.
14. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered personally or mailed by certified or registered mail, return receipt
requested, if to the Corporation, to:
Ronald S. Saks, President
Leonard's Metal, Inc.
P.O. Box 678
St. Charles, MO 63302-0678
and, if to Employee, to:
Mr. Bradley L. Nelson
12358 105th Place, NE
Kirkland, WA 98034
or to such other address as may be specified by either of the parties in the
manner provided under this paragraph 14.
15. Construction. This Agreement shall be deemed for all purposes to
have been made in the State of Missouri and shall be - governed by and construed
in accordance with the laws of the State of Missouri, notwithstanding either the
place of execution hereof, nor the performance of any acts in connection
herewith or hereunder in any other jurisdiction.
-7-
<PAGE>
16. Venue. The parties hereto agree that any suit filed arising out of
or in connection with this Agreement shall be brought only in the Federal Court
for the Eastern District of Missouri, unless said Court shall lack jurisdiction,
in which case such action shall be brought only in the circuit Court in the
County of St. Louis, Missouri.
The parties have executed this Agreement as of January 1, 1998.
LEONARD'S METAL, INC.
("Corporation")
By: __________________________
Ronald S. Saks, President
-------------------------------
Bradley L. Nelson
("Employee")
-8-
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>
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
IX LOANS
9.1 Availability of Loans......................... 27
9.2 Amount of Loan................................ 27
9.3 Length and Amortization of Loan............... 27
9.4 Frequency of Loans............................ 27
9.5 Repayment..................................... 28
9.6 Note, Interest Rate and Security.............. 28
9.7 Spousal Consent............................... 28
9.8 Administrative Expenses....................... 29
9.9 No Prohibited Transactions.................... 29
9.10 Default on Loan............................... 29
9.11 No Loans to Shareholder-Employee
or Owner-Employee.......................... 29
X PAYMENT OF BENEFITS
(OTHER THAN DEATH BENEFITS)............................... 30
10.1 Payment of Benefits - Fully Vested
Participant................................. 30
10.2 Payment of Benefits - Partially Vested
Participant................................. 30
10.3 Time of Payment............................... 30
10.4 Latest Time of Payment........................ 31
10.5 Normal Form of Payment........................ 33
10.6 Accounts of Former Employees.................. 33
10.7 Postdistribution Credits...................... 33
10.8 Hardship Distributions........................ 33
10.9 Direct Transfer of Eligible
Rollover Distributions..................... 35
XI DEATH BENEFITS............................................ 36
11.1 Death Benefits................................ 36
11.2 Beneficiary Designation....................... 36
11.3 Failure to Designate a Beneficiary............ 36
11.4 Renunciation of Death Benefit................. 36
11.5 Payment of Benefit............................ 37
11.6 Time of Payment............................... 37
11.7 Latest Time for Payment....................... 37
XII CLAIMS AND REVIEW PROCEDURE............................... 39
12.1 Claims for Benefits........................... 39
12.2 Written Denials of Claims..................... 39
12.3 Appeal of Denial.............................. 39
XIII ALLOCATION OF AUTHORITY AND DUTIES AMONG
NAMED FIDUCIARIES......................................... 41
13.1 Authority and Duties of the Company........... 41
13.2 Authority and Duties of the Plan
Administrator............................... 41
13.3 Authority and Duties of the Trustee........... 41
13.4 Authority and Duties of an Investment Manager. 41
13.5 Limitation on Obligations of Named Fiduciaries 41
13.6 General Fiduciary Standard of Conduct.......... 42
13.7 Service in Multiple Capacities................. 42
13.8 Compensation of Named Fiduciaries.............. 42
13.9 Expenses of Administration..................... 42
XIV THE PLAN ADMINISTRATOR..................................... 43
14.1 Appointment and Tenure ........................ 43
14.2 Meetings; Majority Rule........................ 43
14.3 Delegation..................................... 43
14.4 Authority and Duty of the Plan
Administrator................................ 43
14.5 Construction of the Plan....................... 44
14.6 Engagement of Assistants and Advisors.......... 44
14.7 Indemnification of the Plan
Administrator............................... 45
XV PROVISIONS RELATING TO THE TRUSTEE......................... 46
15.1 Control of Trust Assets........................ 46
15.2 Accounting..................................... 47
15.3 Income and Expenses............................ 47
15.4 Indemnification of the Trustee................. 47
15.5 Advice of Employer or Counsel.................. 47
15.6 Distributions from the Plan.................... 47
15.7 Appointment of Trustees........................ 48
15.8 Resignation; Removal; Successors............... 48
15.9 Powers of Trustee.............................. 48
15.10 Investment Manager............................. 49
15.11 Powers of Corporate Trustee.................... 50
15.12 Bond........................................... 51
XVI AMENDMENT, TERMINATION, MERGERS AND CONSOLIDATION
OF THE PLAN ............................................... 51
16.1 Amendment............................................ 52
16.2 Termination.................................... 52
16.3 Mergers and Consolidations of Plans............ 52
XVII MISCELLANEOUS PROVISIONS................................... 53
17.1 Anti-Assignation............................... 53
17.2 No Contract of Employment...................... 53
17.3 Actions by a Corporation....................... 53
17.4 Severability of Provisions..................... 53
17.5 Heirs, Assigns and Personal
Representatives.............................. 54
17.6 Headings and Captions.......................... 54
17.7 Gender and Number.............................. 54
17.8 Rules of Construction.......................... 54
17.9 Title to Assets................................ 54
17.10 Payments to Legal Incompetents................. 54
17.11 Address for Notification....................... 54
17.12 Reliance on Data............................... 54
17.13 Lost Payees.................................... 55
17.14 Adoption of Plan by an Affiliate............... 55
XVIII TOP HEAVY PROVISIONS....................................... 56
18.1 Applicability.................................. 56
18.2 Definitions.................................... 56
18.3 Contributions.................................. 59
18.4 Adjustments to Section 415 Limits.............. 60
18.5 Vesting........................................ 60
18.6 Subsequent Amendment of Provisions............. 60
<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
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made and entered into this
15th day of August, 1996, by and between LEONARD'S METAL, INC., a Missouri
corporation ("Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national
banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Borrower has applied for a term loan from Bank in the original
principal amount of Two Million Six Hundred Thousand Dollars ($2,600,000.00);
and
WHEREAS, Borrower has requested Bank to purchase a one hundred percent
(100%) participation in that certain Letter of Credit (hereinafter defined);
WHEREAS, Bank is willing to make said term loan and purchase the
participation upon, and subject to, the terms, provisions and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby mutually agree and promise as follows:
SECTION 1. TERM.
The "Term" of this Agreement shall commence on the date hereof and
shall end on such date as Borrower's Obligations shall have been paid in full
and Bank has no further obligation to loan or advance monies to or for the
account of Borrower.
SECTION 2. DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement or in any
Exhibit or Schedule hereto, when used in this Agreement, the following terms
shall have the following meanings (such meanings shall be equally applicable to
the singular and plural forms of the terms used, as the context requires):
Attorneys' Fees shall mean the reasonable out-of-pocket fees (and
costs, charges and expenses related thereto) of attorneys retained by Bank from
time to time (i) in connection with the negotiation, preparation, execution,
delivery, administration and enforcement of this Agreement and/or any of the
other Transaction Documents, (ii) to represent Bank in any litigation, contest,
dispute, suit or proceeding, or to commence, defend or intervene in any
litigation, contest, dispute, suit or proceeding, or to file any petition,
complaint, answer, motion or other pleading or to take any other action in or
with respect to any litigation, contest, dispute, suit or proceeding (whether
instituted by Bank, Borrower or any other Person and whether in bankruptcy or
otherwise) in any way or respect relating to the Collateral, any Third Party
Collateral, this Agreement or any of the other Transaction Documents, Borrower,
any Subsidiary of Borrower or any other Obligor, (iii) to protect, collect,
lease, sell, take possession of or liquidate any of the Collateral or any Third
Party Collateral, (iv) to attempt to enforce any security interest in or other
Lien upon any of the Collateral or any Third Party Collateral or to give any
advice with respect to such enforcement and (v) to enforce any of Bank's rights
to collect any of Borrower's Obligations.
Bond Documents shall have the meaning given thereto in the
Reimbursement Agreement.
Borrower's Obligations shall mean any and all indebtedness (principal,
interest, fees and other amounts), liabilities and obligations of Borrower to
Bank under the Note, this Agreement, the Security Agreement, any of the other
Transaction Documents, the Reimbursement Agreement or any other agreement,
document or instrument heretofore, now or hereafter executed and delivered by
Borrower to or for the benefit of Bank, in each case whether now existing or
hereafter arising, absolute or contingent, joint and/or several, secured or
unsecured, direct or indirect, expressed or implied in law, contractual or
tortious, liquidated or unliquidated, at law or in equity, or otherwise, and
whether created directly or acquired by Bank by assignment or otherwise, and any
and all costs of collection and/or Attorneys' Fees incurred or to be incurred in
connection therewith.
Business Day shall mean any day except a Saturday, Sunday or legal
holiday observed by Bank.
Capital Expenditure shall mean any expenditure which, in accordance
with generally accepted accounting principles consistently applied, is or should
be capitalized on the balance sheet of the Person making the same.
Capitalized Lease shall mean any lease which, in accordance with
generally accepted accounting principles consistently applied, is or should be
capitalized on the balance sheet of the lessee.
Code shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
Collateral shall mean any Property or assets of Borrower which now or
at any time hereafter secure the payment or performance of any of Borrower's
Obligations.
Consolidated Net Worth shall mean, at any date, the consolidated
stockholders' equity of Borrower and its Consolidated Subsidiaries.
Consolidated Subsidiary shall mean with respect to any Person at any
date, any Subsidiary or other entity the assets and liabilities of which are or
should be consolidated with those of such Person in its consolidated financial
statements as of such date in accordance with generally accepted accounting
principles consistently applied.
Consolidated Tangible Net Worth shall mean, at any date, the
consolidated stockholders' equity of Borrower and its Consolidated Subsidiaries
(which shall be deemed to exclude subordinated indebtedness) less their
Intangible Assets as of such date. For purposes of this definition, "Intangible
Assets" shall mean the amount (to the extent reflected in determining such
stockholders' equity) of (i) all write-ups in the book value of any asset owned
by Borrower or a Consolidated Subsidiary of Borrower resulting from a
revaluation thereof subsequent to the date of this Agreement and (ii) goodwill,
unamortized debt discount and expense, unamortized deferred charges, patents,
trademarks, service marks, trade names, copyrights, organizational and
developmental expenses and other similar intangible items and assets.
Current Assets shall mean all assets which, in accordance with
generally accepted accounting principles consistently applied, should be
classified as current assets on a balance sheet.
Current Liabilities shall mean all liabilities which, in accordance
with generally accepted accounting principles consistently applied, should be
classified as current liabilities on a balance sheet.
Default shall mean an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default as defined in Section 9 hereof.
Distribution in respect of any corporation shall mean:
(a) dividends or other distributions on capital stock of the
corporation; and
(b) the redemption, repurchase or other acquisition of such stock
or of warrants, rights or other options to purchase such stock (except when
solely in exchange for such stock).
Environmental Laws shall mean the Resource Conservation and Recovery
Act of 1987, the Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law, the Toxic
Substances Control Act and any other Federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Materials or
any other hazardous, toxic or dangerous waste, substance or constituent or other
substance, whether solid, liquid or gas, as now or at any time hereafter in
effect.
Environmental Lien shall have the meaning ascribed thereto in Section
8.01(k)(vii).
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
ERISA Affiliate shall mean any corporation, trade or business that is,
along with Borrower, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in Sections 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
Event of Default shall have the meaning ascribed thereto in Section 9.
Harris shall mean Harris Trust and Savings Bank, an Illinois banking
corporation.
Hazardous Materials shall mean any hazardous substance or pollutant or
contaminant defined as such in (or for the purposes of) any Environmental Law
and shall include, without limitation, petroleum, including crude oil or any
fraction thereof which is liquid at standard conditions of temperature or
pressure (60 degrees fahrenheit and 14.7 pounds per square inch absolute), any
radioactive material, including, without limitation, any source, special nuclear
or by-product material as defined in 42 U.S.C. Section 2011 et seq., as amended
or hereafter amended, and asbestos in any form or condition.
Indebtedness of any Person shall mean and include, without duplication,
any and all indebtedness, liabilities and obligations of such Person which in
accordance with generally accepted accounting principles consistently applied
are or should be classified upon a balance sheet of such Person as liabilities
of such Person, and in any event shall include all (i) obligations of such
Person for borrowed money or which have been incurred in connection with the
acquisition of Property, (ii) obligations secured by any Lien or other charge
upon any Property owned by such Person, provided that if such Person has not
assumed or become liable for the payment of such obligations, such obligations
shall still be included in Indebtedness but the determination of the amount of
Indebtedness evidenced by such obligations shall be limited to the book value of
such Property, (iii) obligations created or arising under any conditional sale
or other title retention agreement with respect to any Property acquired by such
Person, provided that if the rights and remedies of the seller, lender or lessor
in the event of default under such agreement are limited to repossession or sale
of such Property such obligations shall still be included in Indebtedness but
the determination of the amount of Indebtedness evidenced by such obligations
shall be limited to the book value of such Property, (iv) all Guarantees and
other contingent indebtedness, liabilities and obligations of such Person
whether or not reflected on the balance sheet of such Person and (v) all
obligations of such Person as lessee under any Capitalized Lease.
For the purpose of computing the "Indebtedness" of any Person, there
shall be excluded any particular Indebtedness to the extent that, upon or prior
to the maturity thereof, there shall have been deposited with the proper
depository in trust the necessary funds (or evidences of such Indebtedness) for
the payment, redemption or satisfaction of such Indebtedness; and thereafter
such funds and evidences of Indebtedness so deposited shall not be included in
any computation of the assets of such Person.
Kansas Mortgage shall have the meaning ascribed thereto in Section 6.
Letter of Credit shall mean that certain irrevocable transferable
direct pay letter of credit, as amended, in the form of Appendix I to the
Reimbursement Agreement, issued by Harris for the account of Borrower in favor
of the Trustee, for the benefit of the owners from time to time of the
$5,000,000 aggregate principal amount of the Variable Rate Demand Industrial
Development Revenue Bonds, Series 1990 (Leonard's Metal, Inc. Project) issued by
The Industrial Development Authority of St. Charles County, Missouri.
Lien shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract, including, without
limitation, any security interest, mortgage, deed of trust, pledge,
hypothecation, judgment lien or other lien or encumbrance of any kind or nature
whatsoever, any conditional sale or trust receipt and any lease, consignment or
bailment for security purposes. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property.
Loan shall mean the Term Loan.
Missouri Deed of Trust shall have the meaning ascribed thereto in
Section 6.
Multiemployer Plan shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of Borrower, any
ERISA Affiliate or any Subsidiary of Borrower.
Note or Term Loan Note shall mean the Promissory Note evidencing the
Term Loan.
Obligor shall mean Borrower and each other Person who is or shall
become primarily or secondarily liable on any of Borrower's Obligations or who
grants Bank a Lien upon any of the Property or assets of such Person as security
for any of Borrower's Obligations.
Occupational Safety and Health Laws shall mean the Occupational Safety
and Health Act of 1970, as amended, and any other Federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning employee
health and/or safety, as now or at any time hereafter in effect.
Participation Agreement shall mean that certain Participation Agreement
dated as of August 15, 1996, by and between Harris and Bank.
PBGC shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
Pension Plan shall mean a "pension plan," as such term is defined in
Section 3(2) of ERISA, which is subject to the provisions of Title IV of ERISA
and which is established or maintained by Borrower, any ERISA Affiliate or any
Subsidiary of Borrower, other than a Multiemployer Plan.
Person shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, entity or government (whether national, Federal, state, county,
city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
Prime Rate shall mean, as of any date, the highest Prime Rate reported
in the Money Rates column of The Wall Street Journal, currently defined as being
the base rate on corporate loans posted by at least 75% of the nation's 30
largest banks (regardless of whether such rate has actually been charged by any
such bank). In the event The Wall Street Journal ceases publication of the Prime
Rate, then "Prime Rate" shall mean the "prime rate" or "base rate" announced by
Bank or any other bank designated by Bank, from time to time, (regardless of
whether such rate has actually been charged by such bank). In the event The Wall
Street Journal (a) publishes more than one Prime Rate, the highest of such rates
shall be the "Prime Rate", or (b) publishes a retraction or correction of any
such rate, the rate reported in such retraction or correction shall be the
"Prime Rate".
Property shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible. Properties shall
mean the plural of Property. For purposes of this Agreement, Borrower and each
Subsidiary of Borrower shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, financing lease
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes.
Reimbursement Agreement shall mean that certain Reimbursement Agreement
dated as of September 1, 1990, between Borrower and Harris, as from time to time
supplemented and amended, under the terms of which Harris has issued and
delivered the Letter of Credit.
Related Party shall mean any Person (other than a wholly-owned
Subsidiary) (i) which directly or indirectly through one or more intermediaries
controls, or is controlled by or is under common control with, Borrower or any
Subsidiary of Borrower, (ii) which beneficially owns or holds ten percent (10%)
or more of the equity interest of Borrower or (iii) ten percent (10%) or more of
the equity interest of which is beneficially owned or held by Borrower or a
Subsidiary of Borrower. The term "control" shall mean the possession, directly
or indirectly, of the power to vote ten percent (10%) or more of the capital
stock of any Person or the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Reportable Event shall have the meaning given to such term in ERISA.
Security Agreement shall mean the Security Agreement (Equipment) to be
executed by Borrower and delivered to Bank pursuant to Section 6, as the same
may from time to time be amended.
Subsidiary shall mean, with respect to any Person, any corporation of
which fifty percent (50%) or more of the issued and outstanding capital stock
entitled to vote for the election of directors (other than by reason of default
in the payment of dividends) is at the time owned directly or indirectly by such
Person.
Term shall have the meaning ascribed thereto in Section 1.
Term Loan shall have the meaning ascribed thereto in Section 4.01.
Third Party Collateral shall mean any Property or assets of any Obligor
other than Borrower which now or at any time hereafter secure the payment or
performance of any of Borrower's Obligations.
Transaction Documents shall mean this Agreement, the Note, the Security
Agreement, the Kansas Mortgage, the Missouri Deed of Trust and all other
agreements, documents and instruments heretofore, now or hereafter delivered to
Bank with respect to or in connection with or pursuant to this Agreement, any
Loans made hereunder or any other of Borrower's Obligations, and executed by or
on behalf of Borrower, all as the same may from time to time be amended,
modified, extended or renewed.
Trustee shall mean Mark Twain Bank or any successor trustee serving as
such under that certain Indenture of Trust dated September 1, 1990, by and
between The Industrial Development Authority of St. Charles County, Missouri and
Mark Twain Bank.
SECTION 3. THE LETTER OF CREDIT.
3.01 Purchase of Participation. Bank agrees to purchase a 100%
participation in the Letter of Credit, all drawings made thereunder and
Borrower's reimbursement and payment obligations to Harris pursuant to the terms
of the Reimbursement Agreement and in the collateral and other documents
executed in favor of Harris in connection therewith. Such participation shall be
evidenced by the Participation Agreement. Borrower acknowledges and agrees that
Bank shall be entitled to the benefits of the Reimbursement Agreement and any
and all collateral and other documents executed in favor of Harris in connection
therewith as if it were a direct party thereto.
3.02 Direct Recourse Against Borrower. Borrower acknowledges that
pursuant to the terms of the Participation Agreement, Bank shall be required to
fund the full amount of all drawings under the Letter of Credit. Any funds so
advanced by Bank shall bear interest and be repaid by Borrower in accordance
with the terms of the Reimbursement Agreement. All such payments shall be paid
by Borrower to Harris for the benefit of Bank and shall be remitted by Harris to
Bank in accordance with the terms of the Participation Agreement; provided,
however, that at its election, Bank shall be entitled to enforce repayment of
all such sums in its own name directly against Borrower and to otherwise invoke
and enforce in its own name any and all rights and remedies provided for in the
Reimbursement Agreement and any collateral or other documents executed in
connection therewith. Any statement of account delivered by Bank to Borrower
relating to amounts advanced by Bank pursuant to the Participation Agreement or
the Reimbursement Agreement shall be rebuttably presumed correct and accurate
and shall constitute an account stated between Borrower and Bank absent manifest
error.
3.03 Obligations Absolute. The obligations of Borrower to Bank with
respect to the Letter of Credit shall be absolute and unconditional and shall
not be impaired or affected by:
(a) any lack of validity or enforceability of the Reimbursement
Agreement, the Letter of Credit, the Bond Documents and any other agreement
or instrument relating thereto;
(b) any amendment or waiver of or any consent to departure from all
or any of the Reimbursement Agreement, the Letter of Credit, the Bond
Documents and any other agreement or instrument relating thereto without
the express written consent of Bank; or
(c) the existence of any claim, set-off, defense or other rights
which Borrower may have at any time against any beneficiary of the Letter
of Credit or Harris, it being understood that any breach by Harris of its
obligations to Bank under the Participation Agreement shall not relieve
Borrower of its obligations to Bank.
3.04 Liability of the Bank. As between Borrower and Bank, Borrower
assumes all risks of the acts or omissions of Harris with respect to the Letter
of Credit, including, but not limited to, its honoring or refusing to honor
drawings thereunder.
SECTION 4. THE TERM LOAN.
4.01 Commitment of Bank. Bank agrees to make Borrower a term loan in
the original principal amount of Two Million Six Hundred Thousand Dollars
($2,600,000.00) (the "Term Loan"), which Term Loan is being funded on the date
hereof. The Term Loan shall be evidenced by a Promissory Note of Borrower dated
the date hereof and payable to the order of Bank in the original principal
amount of $2,600,000.00 (as the same may from time to time be amended, modified,
extended or renewed, the "Term Loan Note"), an unexecuted copy of which is
attached hereto as Exhibit A. The Term Loan Note shall mature on July 15, 1999
(on which date all unpaid principal and all accrued and unpaid interest shall
become due and payable). Principal on the Term Loan Note shall be payable in
thirty-five (35) consecutive monthly installments as follows: two (2) equal
consecutive monthly installments in the amount of Fifty Thousand Dollars
($50,000.00) each, due and payable on September 15, 1996 and October 15, 1996;
two (2) equal consecutive monthly installments in the amount of One Hundred
Twenty-Five Thousand Dollars ($125,000.00) each, due and payable on November 15,
1996 and December 15, 1996; one (1) monthly installment in the amount of Seven
Hundred Fifty Thousand Dollars ($750,000.00) due and payable on January 15,
1997; twenty-nine (29) equal consecutive monthly installments in the amount of
Fifty Thousand Dollars ($50,000.00) each, due and payable commencing February
15, 1997 through June 15, 1999; and a final installment in the amount of the
then outstanding and unpaid principal balance of the Term Loan Note due and
payable on July 15, 1999. Interest on the outstanding principal balance of the
Term Loan Note shall be payable monthly, on the date each installment of
principal is due thereunder and at the maturity of the Term Loan Note, whether
by reason of acceleration or otherwise. Interest on the Term Loan Note shall be
calculated as provided for under Section 4.02.
4.02 Interest Rates. So long as no Event of Default has been declared
by Bank and is continuing, the Term Loan Note shall bear interest at a rate per
annum equal to Nine and Three-Fourths Percent (9.75%) per annum. From and after
the declaration of an Event of Default by Bank, so long as such Event of Default
has not been cured or waived in writing by Bank, and from and after the maturity
of the Term Loan Note, whether by reason of acceleration or otherwise, the
unpaid principal balance of the Term Loan Note shall bear interest until paid at
a rate per annum equal to Eleven and Three-Fourths Percent (11.75%). Interest
shall be computed with respect to the Term Loan Note on an actual day, 360-day
year basis.
4.03 Prepayment. Borrower shall be privileged to prepay all at any time
or any portion from time to time of the unpaid principal under the Term Loan
Note prior to maturity, without penalty or premium, provided that: (i) partial
prepayments shall be applied to installments of principal under the Term Loan
Note in the inverse order of their stated maturities; (ii) on each prepayment
date, Borrower shall pay to Bank all accrued and unpaid interest on the
principal portion of the Note being prepaid to and including the date of such
prepayment; and (iii) no Default or Event of Default under this Agreement shall
have occurred and be continuing.
4.04 Payments not on a Business Day. In case any installment of
principal or interest under the Term Loan Note shall become due on a day which
is not a Business Day, such principal and interest shall be payable on the next
succeeding Business Day.
SECTION 5. PRECONDITIONS TO LOAN AND PARTICIPATION.
Notwithstanding any provision contained herein to the contrary, Bank
shall have no obligation to make the Term Loan hereunder or to purchase the
participation in the Letter of Credit unless Bank shall have first received:
1. this Agreement and the Term Loan Note, each executed by a duly
authorized officer of Borrower;
2. the duly executed Security Agreement, financing statements and
such other documents as Bank may reasonably require under Section 6;
3. the Kansas Mortgage and the Missouri Deed of Trust, duly
executed by Borrower;
4. an amendment to the Reimbursement Agreement in form and
substance acceptable to Bank, duly executed by Borrower and Harris;
5. a Participation Agreement in form and substance acceptable to
Bank duly executed by Harris and Bank;
6. a copy of resolutions of the Board of Directors of Borrower,
duly adopted, which authorize the execution, delivery and performance of
this Agreement, the Term Loan Note, the Security Agreement and the other
Transaction Documents, certified by the President and Secretary of
Borrower;
7. a copy of the Certificate or Articles of Incorporation of
Borrower, including any amendments thereto, certified by the Secretary of
State of the State of Missouri;
8. a copy of the By-Laws of Borrower, including any amendments
thereto, certified by the Secretary of Borrower;
9. an incumbency certificate, executed by the Secretary of
Borrower, which shall identify by name and title and bear the signatures of
all of the officers of Borrower executing any of the Transaction Documents;
10. a certificate of corporate good standing of Borrower issued by
the Secretary of State of the State of Missouri, the State of Kansas and
the State of Washington;
11. an opinion of counsel of Gallop, Johnson & Neuman, L.C.,
independent counsel to Borrower, in form and substance acceptable to Bank;
12. a Security Agreement (Equipment) duly executed by LMI
Finishing, Inc. (the "LMI Security Agreement"); and
13. such other agreements, documents, instruments and certificates
as Bank may reasonably request.
SECTION 6. SECURITY AGREEMENTS
In order to secure the payment when due of Borrower's Obligations,
Borrower shall convey to Bank a security interest in all of Borrower's
machinery, equipment and fixtures and all proceeds and products thereof, which
security interest shall be a first and prior interest in all such items except
for those Uniform Commercial Code security interests securing Borrower's
obligations to Harris under the Reimbursement Agreement. Said security interest
shall be evidenced by a Security Agreement (Equipment) dated the date hereof and
executed by Borrower in favor of Bank in the form attached hereto as Exhibit B
and incorporated herein by reference (as the same may from time to time be
amended, the "Security Agreement (Equipment)"). Borrower further covenants and
agrees to execute and delivery to Bank any and all financing statements,
continuation statements and such other documentation as may be requested by Bank
in order to create, perfect and continue said security interest. Borrower's
Obligations shall further be secured by the Mortgage dated the date hereof
executed by Borrower in favor of Bank in the form attached hereto as Exhibit C
and incorporated herein by reference (as the same may from time to time be
amended, the "Kansas Mortgage") and by the Deed of Trust dated the date hereof
executed by Borrower in favor of Bank in the form attached hereto as Exhibit D
and incorporated herein by reference (as the same may from time to time be
amended, the "Missouri Deed of Trust"). Upon demand, Borrower shall pay all
legal and filing fees and expenses incurred by Bank in the preparation of the
foregoing documents and perfection of the security interests and liens
contemplated thereby. Bank shall have no obligation to make the Term Loan
hereunder or to purchase the participation in the Letter of Credit unless and
until Borrower has fully satisfied these requirements.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank that:
7.01 Corporate Existence and Power. Borrower and each Subsidiary of
Borrower: (a) is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; (b) has all requisite
corporate powers and all governmental and regulatory licenses, authorizations,
consents and approvals required to carry on its business as now conducted; and
(c) is duly qualified to do business in all jurisdictions in which the nature of
the business conducted by it makes such qualification necessary and where
failure to so qualify would have a material adverse effect on its business,
financial condition or operations.
7.02 Corporate Authorization. The execution, delivery and performance
by Borrower of this Agreement, the Term Loan Note, the Security Agreements and
the other Transaction Documents are within the corporate powers of Borrower and
have been duly authorized by all necessary corporate action.
7.03 Binding Effect. This Agreement, the Term Loan Note, the Security
Agreements and the other Transaction Documents have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency or other similar laws
affecting creditors' rights in general.
7.04 Financial Statements. Borrower has furnished Bank with the
following financial statements, identified by the principal financial officer of
Borrower: (1) consolidated balance sheets and profit and loss statements of
Borrower and its Consolidated Subsidiaries as of December 31, 1995, all
certified by Borrower's independent certified public accountants, which
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied; and (2) unaudited consolidated
balance sheets and profit and loss statements of Borrower and its Consolidated
Subsidiaries as of May 31, 1996, certified by the principal financial officer of
Borrower as being true and correct to the best of his knowledge and as being
prepared in accordance with Borrower's normal accounting procedures. Borrower
further represents that: (1) said balance sheets and their accompanying notes
fairly present the condition of Borrower and its Consolidated Subsidiaries as of
the dates thereof; (2) there has been no material adverse change in the
condition or operation, financial or otherwise, of Borrower or any of its
Consolidated Subsidiaries since May 31, 1996; and (3) neither Borrower nor any
of its Consolidated Subsidiaries has any direct or contingent liabilities which
are not disclosed on said financial statements.
7.05 Litigation. Except as disclosed in Schedule 7.05 attached hereto,
there is no action or proceeding pending or, to the knowledge of Borrower,
threatened against or affecting Borrower or any Subsidiary of Borrower before
any court, arbitrator or any governmental, regulatory or administrative body,
agency or official which could result in any material adverse change in the
condition or operation, financial or otherwise, of Borrower or any Subsidiary of
Borrower, and neither Borrower nor any Subsidiary of Borrower is in default with
respect to any order, writ, injunction, decision or decree of any court,
arbitrator or any governmental, regulatory or administrative body, agency or
official, a default under which would have a material adverse effect on Borrower
or any Subsidiary of Borrower.
7.06 Pension and Welfare Plans. Each Pension Plan complies with all
applicable statutes and governmental rules and regulations; no Reportable Event
has occurred and is continuing with respect to any Pension Plan; neither
Borrower nor any ERISA Affiliate nor any Subsidiary of Borrower has withdrawn
from any Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal"
as defined in Sections 4203 or 4205 of ERISA, respectively; no steps have been
instituted by Borrower, any ERISA Affiliate or any Subsidiary of Borrower to
terminate any Pension Plan; no condition exists or event or transaction has
occurred in connection with any Pension Plan or Multiemployer Plan which could
result in the incurrence by Borrower, any ERISA Affiliate or any Subsidiary of
Borrower of any material liability, fine or penalty; and neither Borrower nor
any ERISA Affiliate nor any Subsidiary of Borrower is a "contributing sponsor"
as defined in Section 4001(a)(13) of ERISA of a "single-employer plan" as
defined in Section 4001(a)(15) of ERISA which has two or more contributing
sponsors at least two of whom are not under common control. Neither Borrower nor
any Subsidiary of Borrower has any contingent liability with respect to any
"employee welfare benefit plan", as such term is defined in Section 3(a) of
ERISA, which covers retired employees and their beneficiaries.
7.07 Tax Returns and Payment. Borrower and each Subsidiary of Borrower
has filed all Federal, state and local income tax returns and all other tax
returns which are required to be filed and has paid all taxes due pursuant to
such returns or pursuant to any assessment received by Borrower or any
Subsidiary of Borrower, except for the filing of such returns, if any, in
respect of which an extension of time for filing is in effect and except for
such taxes, if any, as are being contested in good faith by appropriate
proceedings being diligently conducted and as to which adequate reserves in
accordance with generally accepted accounting principles consistently applied
have been provided. The charges, accruals and reserves on the books of Borrower
and each Subsidiary of Borrower in respect of any taxes or other governmental
charges are, in the opinion of Borrower, adequate.
7.08 Subsidiaries. Borrower has the following Subsidiaries: LMI
Finishing, Inc. and AERO Assembly, Inc.
7.09 Compliance With Other Instruments; None Burdensome. Neither
Borrower nor any Subsidiary of Borrower is a party to any contract or agreement
or subject to any charter or other corporate restriction which materially and
adversely affects its business, Property or financial condition and which is not
disclosed on Borrower's financial statements heretofore submitted to Bank; none
of the execution and delivery by Borrower of the Transaction Documents, the
consummation of the transactions therein contemplated or the compliance with the
provisions thereof will violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Borrower, or any of the
provisions of Borrower's Certificate or Articles of Incorporation or By-Laws or
any of the provisions of any indenture, agreement, document, instrument or
undertaking to which Borrower is a party or subject, or by which it or its
Property is bound, or conflict with or constitute a default thereunder or result
in the creation or imposition of any Lien pursuant to the terms of any such
indenture, agreement, document, instrument or undertaking. No order, consent,
approval, license, authorization or validation of, or filing, recording or
registration with, or exemption by, any governmental, regulatory, administrative
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, the execution, delivery or
performance of, or the legality, validity, binding effect or enforceability of,
any of the Transaction Documents.
7.10 Other Loans and Guarantees. Except as disclosed on Schedule 7.10
attached hereto, neither Borrower nor any Subsidiary of Borrower is a party to
any loan transaction or Guarantee.
7.11 Labor Matters. Except as disclosed on Schedule 7.11 attached
hereto, (a) no labor contract to which Borrower or any Subsidiary of Borrower is
subject is scheduled to expire during the Term of this Agreement and (b) on the
date of this Agreement, (i) neither Borrower nor any Subsidiary of Borrower is a
party to any labor dispute and (ii) there are no strikes or walkouts relating to
any labor contract to which Borrower or any Subsidiary of Borrower is subject.
7.12 Title to Property. Borrower and each Subsidiary of Borrower is the
sole and absolute owner of, or has the legal right to use and occupy, all
Property it claims to own or which is necessary for Borrower or such Subsidiary
of Borrower to conduct its business. Neither Borrower nor any Subsidiary of
Borrower has signed any financing statements, security agreements or chattel
mortgages with respect to any of its Property, has granted or permitted any
Liens with respect to any of its Property or has any knowledge of any Liens with
respect to any of its Property, except as disclosed on Schedule 7.12 attached
hereto.
7.13 Regulation U. Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U of The
Board of Governors of the Federal Reserve System, as amended) and no part of the
proceeds of any Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately (i) to purchase or carry margin stock or
to extend credit to others for the purpose of purchasing or carrying margin
stock, or to refund or repay indebtedness originally incurred for such purpose
or (ii) for any purpose which entails a violation of, or which is inconsistent
with, the provisions of any of the Regulations of The Board of Governors of the
Federal Reserve System, including, without limitation, Regulations G, U, T or X
thereof, as amended. If requested by Bank, Borrower shall furnish to Bank a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in Regulation U.
7.14 Multi-Employer Pension Plan Amendments Act of 1980. Borrower and
each Subsidiary of Borrower is in compliance with the Multi-Employer Pension
Plan Amendments Act of 1980, as amended ("MEPP"), and has no liability for
pension contributions pursuant to MEPP.
7.15 Investment Company Act of 1940; Public Utility Holding Company Act
of 1935. Borrower is not an "investment company" as that term is defined in, and
is not otherwise subject to regulation under, the Investment Company Act of
1940, as amended. Borrower is not a "holding company" as that term is defined
in, and is not otherwise subject to regulation under, the Public Utility Holding
Company Act of 1935, as amended.
7.16 Patents, Licenses, Trademarks, Etc. Borrower and each Subsidiary
of Borrower possesses all necessary patents, licenses, trademarks, trademark
rights, trade names, trade name rights and copyrights to conduct its business
without conflict with any patent, license, trademark, trade name or copyright of
any other Person.
7.17 Environmental and Health and Safety Matters. Except as disclosed
on Schedule 7.17 attached hereto or in reports listed on Schedule 7.17 and
delivered to Bank: (i) the operations of Borrower and each Subsidiary of
Borrower comply with (A) all applicable Environmental Laws and (B) all
applicable Occupational Safety and Health Laws; (ii) none of the operations of
Borrower or any Subsidiary of Borrower are subject to any judicial,
governmental, regulatory or administrative proceeding alleging the violation of
any Environmental Law or Occupational Safety and Health Law; (iii) none of the
operations of Borrower or any Subsidiary of Borrower is the subject of any
Federal or state investigation evaluating whether any remedial action is needed
to respond to (A) any spillage, disposal or release into the environment of any
Hazardous Material or any other hazardous, toxic or dangerous waste, substance
or constituent or other substance, or (B) any unsafe or unhealthful condition at
any premises of Borrower or such Subsidiary of Borrower; (iv) neither Borrower
nor any Subsidiary of Borrower has filed any notice under any Environmental Law
or Occupational Safety and Health Law indicating or reporting (A) any past or
present spillage, disposal or release into the environment of, or treatment,
storage or disposal of, any Hazardous Material or any other hazardous, toxic or
dangerous waste, substance or constituent or other substance or (B) any unsafe
or unhealthful condition at any premises of Borrower or such Subsidiary of
Borrower; and (v) neither Borrower nor any Subsidiary of Borrower has any known
contingent liability in connection with (A) any spillage, disposal or release
into the environment of, or otherwise with respect to, any Hazardous Material or
any other hazardous, toxic or dangerous waste, substance or constituent or other
substance or (B) any unsafe or unhealthful condition at any premises of Borrower
or such Subsidiary of Borrower.
SECTION 8. COVENANTS.
8.01 Affirmative Covenants of Borrower. Borrower covenants and agrees
that, so long as Bank has any obligation to make any Loan hereunder or any of
Borrower's Obligations remain unpaid:
(a) Information. Borrower will deliver to Bank:
(i) As soon as available and in any event within one hundred
twenty (120) days after the end of each fiscal year of Borrower,
consolidated balance sheets of Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, retained earnings and cash flow for
such fiscal year, setting forth in each case, in comparative form, the
figures for the previous fiscal year, all such financial statements to
be prepared in accordance with generally accepted accounting
principles consistently applied and reported on by and accompanied by
the unqualified opinion of independent certified public accountants of
nationally recognized standing selected by Borrower and reasonably
acceptable to Bank together with (i) if requested by Bank, a
certificate from such accountants to the effect that, in making the
examination necessary for the signing of such annual audit report,
such accountants have not become aware of any Default or Event of
Default that has occurred and is continuing, or, if such accountants
have become aware of any such event, describing it and the steps, if
any, being taken to cure it and (ii) the computations of such
accountants evidencing Borrower's compliance with the financial
covenants contained in this Agreement;
(ii) As soon as available and in any event within forty-five
(45) days after the end of each month, consolidated and consolidating
balance sheets of Borrower and its Consolidated Subsidiaries as of the
end of such month and the related consolidated and consolidating
statements of income, retained earnings and cash flow for such month
and for the portion of Borrower's fiscal year ended at the end of such
month, setting forth in each case in comparative form, the figures for
the corresponding month and the corresponding portion of Borrower's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the principal financial
officer of Borrower;
(iii) Simultaneously with the delivery of each set of
financial statements referred to in clauses (i) and (ii) above, a
certificate of the principal financial officer of Borrower, in the
form attached hereto as Exhibit E and incorporated herein by
reference, accompanied by supporting financial work sheets where
appropriate;
(iv) Promptly upon receipt thereof, any reports submitted to
Borrower or any Consolidated Subsidiary of Borrower (other than
reports previously delivered pursuant to Sections 8.01(a)(i) and (ii)
above) by independent accountants in connection with any annual,
interim or special audit made by them of the books of Borrower or any
Consolidated Subsidiary of Borrower; and
(v) With reasonable promptness, such further information
regarding the business, affairs and financial position of Borrower or
any Subsidiary of Borrower as Bank may from time to time reasonably
request.
Bank is hereby authorized to deliver a copy of any financial statement
or other information made available by Borrower to any regulatory authority
having jurisdiction over Bank, pursuant to any request therefor.
(b) Payment of Indebtedness. Borrower and each Subsidiary of
Borrower will (i) pay any and all Indebtedness payable or Guaranteed by
Borrower or such Subsidiary of Borrower, as the case may be, and any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) or prior to the
expiration of any applicable cure periods, in accordance with the agreement
or instrument relating to such Indebtedness or Guarantee and (ii)
faithfully perform, observe and discharge all covenants, conditions and
obligations which are imposed upon Borrower or such Subsidiary of Borrower,
as the case may be, by any and all agreements, documents, instruments and
indentures evidencing, securing or otherwise relating to such Indebtedness
or Guarantee.
(c) Consultations and Inspections. Borrower will permit, and will
cause each Subsidiary of Borrower to permit, Bank (and any Person appointed
by Bank to whom Borrower does not reasonably object) to discuss the
affairs, finances and accounts of Borrower and each Subsidiary of Borrower
with the officers of Borrower and each Subsidiary of Borrower, all at such
reasonable times and as often as Bank may reasonably request. Borrower will
also permit, and will cause each Subsidiary of Borrower to permit,
inspection of its Properties, books and records by Bank during normal
business hours or at other reasonable times.
(d) Payment of Taxes; Corporate Existence; Maintenance of
Properties; Insurance. Borrower and each Subsidiary of Borrower will:
(i) Duly file all Federal, state and local income tax returns
and all other tax returns and reports of Borrower and each Subsidiary
of Borrower which are required to be filed and duly pay and discharge
promptly all taxes, assessments and other governmental charges imposed
upon it or any of its Property; provided, however, that neither
Borrower nor any Subsidiary of Borrower shall be required to pay any
such tax, assessment or other governmental charge the payment of which
is being contested in good faith and by appropriate proceedings
diligently conducted and for which adequate reserves in form and
amount satisfactory to Bank have been provided, except that Borrower
and each Subsidiary of Borrower shall pay or cause to be paid all such
taxes, assessments and governmental charges forthwith upon the
commencement of proceedings to foreclose any Lien which is attached as
security therefor, unless such foreclosure is stayed by the filing of
an appropriate bond;
(ii) Do all things necessary to preserve and keep in full
force and effect its corporate existence, rights and franchise and to
be duly qualified to do business in all jurisdictions where the nature
of its business requires such qualification;
(iii) Maintain and keep its Properties as a whole in good
repair, working order and condition; provided, however, that nothing
in this subsection (iii) shall prevent any abandonment of any Property
which is not disadvantageous in any material respect to Bank and
which, in the opinion of the management of Borrower, is in the best
interests of Borrower or such Subsidiary of Borrower, as the case may
be; and
(iv) Insure with financially sound and reputable insurers
acceptable to Bank, all Property of Borrower and each Subsidiary of
Borrower of the character usually insured by corporations engaged in
the same or similar businesses similarly situated, against loss or
damage of the kind customarily insured against by such corporations,
unless higher limits or coverage are reasonably required in writing by
Bank, and carry adequate liability insurance and other insurance of a
kind and in an amount generally carried by corporations engaged in the
same or similar businesses similarly situated, unless higher limits or
coverage are reasonably required in writing by Bank. All such
insurance may be subject to reasonable deductible amounts. Promptly
upon Bank's request therefor, Borrower shall provide Bank with
evidence that Borrower maintains, and that each Subsidiary of Borrower
maintains, the insurance required under this Section 8.01(d)(iv), and
evidence of the payment of all premiums therefor.
(e) Accountant. Borrower shall give Bank prompt notice of any
change of Borrower's independent certified public accountants and a
statement of the reasons for such change. Borrower shall at all times
utilize independent certified public accountants reasonably acceptable to
Bank.
(f) ERISA Compliance. If Borrower or any Subsidiary of Borrower
shall have any Pension Plan, Borrower and such Subsidiary or Subsidiaries
of Borrower shall comply with all requirements of ERISA relating to such
plan. Without limiting the generality of the foregoing, neither Borrower
nor any Subsidiary of Borrower will:
(i) permit any Pension Plan maintained by it to engage in any
nonexempt "prohibited transaction," as such term is defined in Section
4975 of the Internal Revenue Code of 1986, as amended;
(ii) permit any Pension Plan maintained by it to incur any
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, 29 U.S.C. ss. 1082, whether or not waived;
(iii) terminate any such Pension Plan in a manner which could
result in the imposition of a Lien on any Property of Borrower or any
Subsidiary of Borrower pursuant to Section 4068 of ERISA, 29 U.S.C.
ss.1368; or
(iv) take any action which would constitute a complete or
partial withdrawal from a Multiemployer Plan within the meaning of
Sections 4203 and 4205 of Title IV of ERISA.
Notwithstanding any provision contained in this Section 8.01(f) to the
contrary, an act by Borrower or any Subsidiary of Borrower shall not be deemed
to constitute a violation of subparagraphs (i) through (iv) hereof unless Bank
determines in good faith that said action, individually or cumulatively with
other acts of Borrower and the Subsidiaries of Borrower, does have or is likely
to cause a significant adverse financial effect upon Borrower or any Subsidiary
of Borrower.
Borrower shall have the affirmative obligation hereunder to report to
Bank any of those acts identified in subparagraphs (i) through (iv) hereof,
regardless of whether said act does or is likely to cause a significant adverse
financial effect upon Borrower or any Subsidiary of Borrower, and failure by
Borrower to report such act promptly upon Borrower's becoming aware of the
existence thereof shall constitute an Event of Default hereunder.
(g) Maintenance of Books and Records. Borrower and each Subsidiary
of Borrower will maintain its books and records in accordance with
generally accepted accounting principles consistently applied and in which
true, correct and complete entries will be made of all of its dealings and
transactions.
(h) Further Assurances. Borrower will execute any and all further
agreements, documents and instruments, and take any and all further actions
which may be required under applicable law, or which Bank may from time to
time reasonably request, in order to effectuate the transactions
contemplated by this Agreement, the Note, the Security Agreements and the
other Transaction Documents.
(i) Financial Covenants. Borrower will:
(i) Maintain a ratio of Indebtedness (determined on a
consolidated basis for Borrower and all of its Consolidated
Subsidiaries and in accordance with generally accepted accounting
principles consistently applied) to Consolidated Net Worth of not more
than 2.1 to 1.0 as of September 30, 1996, 1.9 to 1.0 as of December
31, 1996, 1.7 to 1.0 as of March 31, 1997, and 1.6 to 1.0 as of the
end of each subsequent calendar quarter.
(ii) Maintain at all times a ratio of Current Assets to
Current Liabilities, both determined on a consolidated basis for
Borrower and all of its Consolidated Subsidiaries and in accordance
with generally accepted accounting principles consistently applied, of
at least 2.0 to 1.0;
(iii) Maintain a Consolidated Tangible Net Worth of at least
the following amounts as of the dates indicated:
September 30, 1996 $10,000,000.00
December 31, 1996 $10,250,000.00
March 31, 1997 $10,500,000.00
June 30, 1997 $11,050,000.00
September 30, 1997 $11,750,000.00
December 31, 1997 $12,500,000.00
As of the end of each subsequent fiscal quarter, Borrower shall have a
Consolidated Tangible Net Worth of at least the sum of $12,500,000.00 plus the
greater of (A) $125,000.00 or (B) Seventy Percent (70%) of the after-tax net
income shown on Borrower's consolidated financial statements for such fiscal
quarter, such required increases to be cumulative for each fiscal quarter.
(iv) Deliver a certificate of the principal financial officer
of Borrower containing the financial ratio calculations required in
clauses (i) through (iii) above simultaneously with the financial
statements referred to in Sections 8.01(a)(i) and (ii).
(j) Compliance with Law. Borrower will, and will cause each
Subsidiary of Borrower to, comply in all material respects with any and all
laws, ordinances and governmental and regulatory rules and regulations to
which it is subject and obtain any and all licenses, permits, franchises
and other governmental and regulatory authorizations necessary to the
ownership of its Properties or to the conduct of its business, which
violation or failure to obtain might materially adversely affect the
condition or operation, financial or otherwise, of Borrower or any
Subsidiary of Borrower.
(k) Notices. Borrower will notify Bank in writing of any of the
following promptly, but in no event more than five (5) days after an
executive officer of Borrower learns of the occurrence thereof, describing
the same and, if applicable, the steps being taken by the Person(s)
affected with respect thereto:
(i) Default. The occurrence of any Default or Event of Default
under this Agreement or any default or event of default by Borrower,
any other Obligor or any Subsidiary of Borrower under the
Reimbursement Agreement, any note, indenture, loan agreement,
mortgage, deed of trust, security agreement, lease or other similar
agreement, document or instrument to which Borrower, any other Obligor
or any Subsidiary of Borrower, as the case may be, is a party or by
which it is bound or to which it is subject;
(ii) Litigation. The institution of any litigation,
arbitration proceeding or governmental or regulatory proceeding
affecting Borrower, any other Obligor, any Subsidiary of Borrower, any
Collateral or any Third Party Collateral, whether or not considered to
be covered by insurance;
(iii) Judgment. The entry of any judgment or decree against
Borrower, any other Obligor or any Subsidiary of Borrower;
(iv) Pension Plans. The occurrence of a Reportable Event with
respect to any Pension Plan; the filing of a notice of intent to
terminate a Pension Plan by Borrower, any ERISA Affiliate or any
Subsidiary of Borrower; the institution of proceedings to terminate a
Pension Plan by the PBGC or any other Person; the withdrawal in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections
4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate
or any Subsidiary of Borrower from any Multiemployer Plan; or the
incurrence of any material increase in the contingent liability of
Borrower or any Subsidiary of Borrower with respect to any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which covers
retired employees and their beneficiaries;
(v) Change of Name. Any change in the name of Borrower, any
other Obligor or any Subsidiary of Borrower;
(vi) Change in Place(s) of Business. Any proposed opening,
closing or other change of any place of business of Borrower or any
Subsidiary of Borrower;
(vii) Environmental Matters. Receipt of any notice that the
operations of Borrower, any other Obligor or any Subsidiary of
Borrower are not in full compliance with any of the requirements of
any applicable Environmental Law or Occupational Safety and Health
Law; receipt of notice that Borrower, any other Obligor or any
Subsidiary of Borrower is subject to any Federal, state or local
investigation evaluating whether any remedial action is needed to
respond to the release of any Hazardous Materials or any other
hazardous or toxic waste, substance or constituent or other substance
into the environment; or receipt of notice that any of the Properties
or assets of Borrower, any other Obligor or any Subsidiary of Borrower
are subject to an "Environmental Lien." For purposes of this Section
8.01(k)(vii), "Environmental Lien" shall mean a Lien in favor of any
governmental or regulatory agency, entity, authority or official for
(1) any liability under Environmental Laws or (2) damages arising from
or costs incurred by any such governmental or regulatory agency,
entity, authority or official in response to a release of any
Hazardous Materials or any other hazardous or toxic waste, substance
or constituent or other substance into the environment;
(viii) Material Adverse Change. The occurrence of any material
adverse change in the business, operations or condition, financial or
otherwise, of Borrower, any other Obligor or any Subsidiary of
Borrower;
(ix) Change in Management or Line(s) of Business. Any material
change in the senior management of Borrower or any Subsidiary of
Borrower or any change in Borrower's or any Subsidiary of Borrower's
line(s) of business; and
(x) Other Notices. Any notices required to be provided
pursuant to other provisions of this Agreement and notice of the
occurrence of such other events as Bank may from time to time
reasonably specify.
(l) Compliance with Reimbursement Agreement. Borrower will comply
with the terms and provisions of the Reimbursement Agreement, will not
agree or consent to any amendment or modification thereof without the
express prior written consent of Bank, and will deliver a copy of any
notices or other communications required thereunder to Bank as and when the
same are furnished to Harris.
8.02 Negative Covenants of Borrower. Borrower covenants and agrees
that, so long as Bank has any obligation to make any Loan hereunder or any of
Borrower's Obligations remain unpaid, unless the prior written consent of Bank
is obtained:
(a) Limitation on Indebtedness. Neither Borrower nor any Subsidiary
of Borrower will incur or be obligated on any Indebtedness, either directly
or indirectly, by way of Guarantee, suretyship or otherwise, other than:
(i) Indebtedness evidenced by the Note;
(ii) Indebtedness evidenced by the Bond Documents and the
Reimbursement Agreement;
(iii) Indebtedness to Norwest Business Credit, Inc. in the
principal amount not to exceed $8,500,000.00 at any given time;
(iv) Indebtedness incurred to repurchase Borrower's
outstanding capital stock pursuant to shareholder agreements in effect
with employees from time to time in a principal amount not to exceed
$200,000.00 outstanding at any given time;
(v) Indebtedness in a principal amount not to exceed
$1,000,000.00 outstanding at any given time which is subordinated in a
manner acceptable to Bank, in its sole and absolute discretion, to
Borrower's Obligations; provided, however, that Borrower may repay its
subordinated indebtedness on or after the date occurring eighteen (18)
months from the date hereof if (A) no Default has occurred, and (B)
Bank shall have determined that, immediately after such repayment,
Borrower shall have had average availability of no less than $500,000
during the ninety (90) day period preceding and including such
repayment date under Borrower's credit facility with Norwest Business
Credit, Inc.;
(vi) Indebtedness incurred to finance the purchase of capital
assets provided that (A) the principal amount of the indebtedness
incurred in each instance does not exceed the purchase price of the
asset(s) being acquired; and (B) the principal amount of such
indebtedness incurred in each of the following periods shall not
exceed the amount indicted on a non-cumulative basis, to wit: amounts
not incurred in any given period may not be carried forward to
subsequent periods:
$200,000 8/15/96 to 12/31/96
$600,000 1/1/97 to 12/31/97
$200,000 1/1/98 to 12/31/98
$100,000 1/1/99 to 7/15/99
(vii) Indebtedness reflected on the most recent financial
statements of Borrower furnished to Bank, exclusive of Indebtedness
owing to Harris;
(viii) Unsecured trade accounts payable incurred in the
ordinary course of business; and
(ix) Indebtedness representing loans against life insurance
policies of Borrower or any Subsidiary of Borrower in an amount not to
exceed the aggregate cash surrender value of such life insurance
policies.
(b) Limitations on Liens. Borrower will not create, incur, assume
or suffer to exist, and will not cause or permit any Subsidiary of Borrower
to create, incur, assume or suffer to exist, any Lien on any of its
Property, assets or revenues other than:
(i) Liens presently in existence which are described on
Schedule 7.12 attached hereto;
(ii) Purchase money liens or security interests covering the
property acquired with the proceeds of Indebtedness permitted to be
incurred under Section 8.02(a)(vi) above;
(iii) Pledges or deposits in connection with or to secure
workmen's compensation, unemployment insurance, pension or other
employee benefits;
(iv) Any Lien renewing, extending or refunding any Lien
permitted hereunder, provided that the principal amount of
Indebtedness secured by such Lien is not increased and such Lien is
not extended to cover any other Property or assets of Borrower or any
Subsidiary of Borrower; and
(v) Subject to Section 8.01(d)(i), Liens for taxes,
assessments or governmental charges or levies on Property of Borrower
or any Subsidiary of Borrower if the same are being contested in good
faith and by appropriate proceedings diligently conducted and for
which adequate reserves in form and amount satisfactory to Bank are
provided.
(c) Sale of Property. Neither Borrower nor any Subsidiary of
Borrower will sell, lease, transfer or otherwise dispose of any Property or
assets of Borrower or such Subsidiary of Borrower, as the case may be,
except in the ordinary course of business; provided, however, that the
foregoing shall not preclude Borrower or any Subsidiary of Borrower from
selling, leasing, transferring or otherwise disposing of less than
substantially all of its Property or assets so long as (i) the aggregate
book value of all such Property or assets sold, leased, transferred or
otherwise disposed of in any given fiscal year does not exceed $100,000.00;
and (ii) the purchase price for said Property or assets shall be equal to
or greater than the depreciated book value of said Property or assets.
(d) Mergers and Consolidations. Neither Borrower nor any Subsidiary
of Borrower will merge or consolidate with any other Person or sell,
transfer or convey all or a substantial part of its Property or assets to
any Person, except that Subsidiaries of Borrower may merge with each other
or into Borrower.
(e) Acquisitions. Neither Borrower nor any Subsidiary of Borrower
will acquire all or substantially all of the stock or assets of any Person.
(f) Fiscal Year. Neither Borrower nor any Subsidiary of Borrower
will change their respective fiscal years.
(g) Stock Redemptions and Distributions. Borrower will not make or
declare or incur any liability to make any Distribution in respect of the
capital stock of Borrower.
(h) Transactions with Related Parties. Neither Borrower nor any
Subsidiary of Borrower will, directly or indirectly, engage in any material
transaction, in the ordinary course of business or otherwise, with any
Related Party unless such transaction is upon fair market terms, is not
disadvantageous in any material respect to Bank and has been approved by a
majority of the disinterested directors of Borrower or such Subsidiary of
Borrower, as the case may be (or, if none of such directors are
disinterested, by a majority of the directors), as being in the best
interests of Borrower or such Subsidiary of Borrower, as the case may be.
In addition, neither Borrower nor any Subsidiary of Borrower shall (i)
transfer any Property or assets to any Related Party or (ii) purchase or
sign any agreement to purchase any stock or other securities of any Related
Party (whether debt, equity or otherwise), underwrite or Guarantee the
same, or otherwise become obligated with respect thereto.
(i) Capital Expenditures. Neither Borrower nor any Subsidiary of
Borrower will make any capital expenditures or enter into any Capitalized
Leases which in the aggregate (for Borrower and all Subsidiaries of
Borrower) exceed the amount indicted during each of the following periods:
$350,000 8/15/96 to 12/31/96
$1,200,000 1/1/97 to 12/31/97
$1,000,000 1/1/98 to 12/31/98
$500,000 1/1/99 to 7/15/99
(j) Loans and Investments. Neither Borrower nor any Subsidiary of
Borrower will make any loans or advances or extensions of credit to (other
than extensions of credit in the ordinary course of business), purchase any
stocks, bonds, notes, debentures or other securities of, make any
expenditures on behalf of, or in any manner assume liability (direct,
contingent or otherwise) for the Indebtedness of any Person, except that
Borrower and the Subsidiaries of Borrower may:
(i) Make or permit to remain outstanding loans or advances to
any Subsidiary of Borrower;
(ii) Acquire and own stock, obligations or securities received
in settlement of debts (created in the ordinary course of business)
owing to Borrower or any Subsidiary of Borrower;
(iii) Own, purchase or acquire (A) prime commercial paper and
certificates of deposit in United States commercial banks (having
capital resources in excess of $100,000,000.00), in each case due
within one (1) year from the date of purchase and payable in the
United States in United States dollars, (B) obligations of the United
States government or any agency thereof, (C) obligations guaranteed
directly by the United States government or (D) repurchase agreements
of United States commercial banks (having capital resources in excess
of $100,000,000.00) for terms of less than one (1) year; and
(iv) Make or permit to remain outstanding travel and other
like advances to officers and employees of Borrower or any Subsidiary
of Borrower in the ordinary course of business; and
(v) Redeem or repurchase outstanding capital stock of Borrower
in connection with Borrower's 401(k) plan or pursuant to shareholder
agreements in effect with employees from time to time provided that
the aggregate amounts expended with respect to such transactions in
any given year shall not exceed $200,000 with respect to repurchases
relating to Borrower's 401(k) plan and $200,000 with respect to all
other repurchases.
(k) Dissolution or Liquidation. Neither Borrower nor any Subsidiary
of Borrower will seek or permit the dissolution or liquidation of Borrower
in whole or in part.
(l) Leases. Neither Borrower nor any Subsidiary of Borrower will
enter into or permit to remain in effect any agreements to rent or lease
(as lessee) any real or personal property for initial terms (including
options to renew or extend any term, whether or not exercised) of more than
one (1) year which in the aggregate (for Borrower and all Subsidiaries of
Borrower) provide for payments in excess of $375,000 during any consecutive
twelve-month (12-month) period.
(m) Change in Nature or Ownership of Business. Neither Borrower nor
any Subsidiary of Borrower will make or permit any material change in the
nature or ownership of its business.
(n) Pension Plans. Neither Borrower nor any Subsidiary of Borrower
shall (a) permit any condition to exist in connection with any Pension Plan
which might constitute grounds for the PBGC to institute proceedings to
have such Pension Plan terminated or a trustee appointed to administer such
Pension Plan or (b) engage in, or permit to exist or occur, any other
condition, event or transaction with respect to any Pension Plan which
could result in the incurrence by Borrower or any Subsidiary of Borrower of
any material liability, fine or penalty. Neither Borrower nor any
Subsidiary of Borrower shall become obligated to contribute to any Pension
Plan or Multiemployer Plan other than any such plan or plans in existence
on the date hereof.
8.03 Use of Proceeds. Borrower agrees that (i) the proceeds of the Term
Loan will be used solely for repayment of existing Indebtedness of Borrower to
Harris and for general working capital; (ii) none of such proceeds will be used
in violation of any applicable law or regulation; and (iii) Borrower will not
engage principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying "margin stock" within
the meaning of Regulation U of The Board of Governors of the Federal Reserve
System, as amended.
SECTION 9. EVENTS OF DEFAULT.
If any of the following (each of the following herein sometimes called
an "Event of Default") shall occur and be continuing:
9.01 Borrower shall fail to pay any of Borrower's Obligations as and
when the same shall become due and payable, whether by reason of demand,
acceleration or otherwise;, and such failure remains unremedied for ten (10)
days after written notice thereof shall have been given to Borrower by Bank.
9.02 Any representation or warranty of Borrower made in this Agreement,
in any other Transaction Document to which Borrower is a party or in any
certificate, agreement, instrument or statement furnished or made or delivered
pursuant hereto or thereto or in connection herewith or therewith, shall prove
to have been untrue or incorrect in any material respect when made or effected;
9.03 Borrower shall fail to perform or observe any term, covenant or
provision contained in Section 8.01(i), Section 8.02 or Section 8.03;
9.04 Borrower shall fail to perform or observe any other term, covenant
or provision contained in this Agreement and any such failure remains unremedied
for ten (10) days after written notice thereof shall have been given to Borrower
by Bank;
9.05 This Agreement or any of the other Transaction Documents shall at
any time for any reason cease to be in full force and effect or shall be
declared to be null and void by a court of competent jurisdiction, or if the
validity or enforceability thereof shall be contested or denied by Borrower, or
if the transactions completed hereunder or thereunder shall be contested by
Borrower or if Borrower shall deny that it has any or further liability or
obligation hereunder or thereunder;
9.06 Borrower, any Subsidiary of Borrower or any other Obligor shall
(i) voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, receivership, liquidation or similar law, (ii) consent
to the institution of, or fail to contravene in a timely and appropriate manner,
any such proceeding or the filing of any such petition, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator or
similar official of itself, himself or herself or of a substantial part of its,
his or her Property or assets, (iv) file an answer admitting the material
allegations of a petition filed against itself, himself or herself in any such
proceeding, (v) make a general assignment for the benefit of creditors, (vi)
become unable, admit in writing its, his or her inability or fail generally to
pay its, his or her debts as they become due or (vii) take any corporate or
other action for the purpose of effecting any of the foregoing;
9.07 An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of Borrower, any Subsidiary of Borrower or any other Obligor, or of a
substantial part of the Property or assets of Borrower, any Subsidiary of
Borrower or any other Obligor, under Title 11 of the United States Code or any
other Federal, state or foreign bankruptcy, insolvency, receivership,
liquidation or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator or similar official of Borrower, any Subsidiary of
Borrower or any other Obligor or of a substantial part of the Property or assets
of Borrower, any Subsidiary of Borrower or any other Obligor or (iii) the
winding-up or liquidation of Borrower, any Subsidiary of Borrower or any other
Obligor, and such proceeding or petition shall continue undismissed for
forty-five (45) consecutive days or an order or decree approving or ordering any
of the foregoing shall continue unstayed and in effect for forty-five (45)
consecutive days;
9.08 An "Event of Default" (as defined therein) shall occur under or
within the meaning of the Security Agreement (Equipment);
9.09 An "Event of Default" (as defined therein) shall occur under or
within the meaning of the Kansas Mortgage;
9.10 An "Event of Default" (as defined therein) shall occur under or
within the meaning of the Missouri Deed of Trust;
9.11 An "Event of Default" (as defined therein) shall occur under or
within the meaning of the Reimbursement Agreement;
9.12 An "Event of Default" (as defined therein) shall occur under or
within the meaning of the LMI Security Agreement;
9.13 Borrower, any Subsidiary of Borrower, or any other Obligor shall
be declared by Bank to be in default on, or pursuant to the terms of, (1) any
other present or future obligation to Bank, including, without limitation, any
other loan, line of credit, revolving credit, guaranty or letter of credit
reimbursement obligation, or (2) any other present or future agreement
purporting to convey to Bank a Lien upon any Property or assets of Borrower,
such Subsidiary of Borrower or such other Obligor, as the case may be;
9.14 Borrower, any Subsidiary of Borrower or any other Obligor shall
fail (and such failure shall not have been cured or waived) to perform or
observe any term, provision or condition of, or any other default or event of
default shall occur under, any agreement, document or instrument evidencing,
securing or otherwise relating to any outstanding Indebtedness of Borrower, such
Subsidiary of Borrower or such other Obligor, as the case may be, for borrowed
money (other than Borrower's Obligations), if the effect of such failure or
default (after taking into account all applicable cure periods and waivers) is
to cause or permit such Indebtedness to be declared to be due and payable or
otherwise accelerated, or to be required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
9.15 Borrower, any Subsidiary of Borrower or any other Obligor shall
have a judgment in excess of $50,000.00 entered against it, him or her by a
court having jurisdiction in the premises and such judgment shall not be
appealed in good faith or satisfied by Borrower, such Subsidiary of Borrower or
such other Obligor, as the case may be, within thirty (30) days after the entry
of such judgment;
9.16 The occurrence of a Reportable Event with respect to any Pension
Plan; the filing of a notice of intent to terminate a Pension Plan by Borrower,
any ERISA Affiliate or any Subsidiary of Borrower; the institution of
proceedings to terminate a Pension Plan by the PBGC or any other Person; the
withdrawal in a "complete withdrawal" or a "partial withdrawal" as defined in
Sections 4203 and 4205, respectively, of ERISA by Borrower, any ERISA Affiliate
or any Subsidiary of Borrower from any Multiemployer Plan; or the incurrence of
any material increase in the contingent liability of Borrower or any Subsidiary
of Borrower with respect to any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA which covers retired employees and their beneficiaries;
9.17 The institution by Borrower, any ERISA Affiliate or any Subsidiary
of Borrower of steps to terminate any Pension Plan if, in order to effectuate
such termination, Borrower, such ERISA Affiliate or such Subsidiary of Borrower,
as the case may be, would be required to make a contribution to such Pension
Plan, or would incur a liability or obligation to such Pension Plan, in excess
of $50,000.00; or the institution by the PBGC of steps to terminate any Pension
Plan; or
9.18 Harris at any time refuses or fails to extend the Stated
Termination Date of the Letter of Credit pursuant to Section 2.15 of the
Reimbursement Agreement;
THEN, and in each such event (other than an event described in Sections
9.06 or 9.07), Bank may declare that its obligation to lend funds under this
Agreement has terminated, whereupon such obligation of Bank shall be immediately
and forthwith terminated, Bank may, by written notice to Borrower, require that
Borrower immediately prepay to Bank in immediately available funds an amount
equal to the Available Amount of the Letter of Credit, and Bank may further
declare the entire outstanding principal balance of and all accrued and unpaid
interest on the Note issued under this Agreement and all other amounts payable
by Borrower hereunder to be forthwith due and payable, whereupon all of the
unpaid principal balance, accrued and unpaid interest and all such other amounts
shall become and be immediately due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrower, and Bank may exercise any and all other rights and remedies which
it may have under any of the other Transaction Documents or under applicable
law; provided, however, that upon the occurrence of any event described in
Sections 9.06 or 9.07, Bank's obligation to lend funds under this Agreement
shall automatically terminate and the entire outstanding principal balance of
and all accrued and unpaid interest on the Note issued under this Agreement and
all other amounts payable by Borrower hereunder shall automatically become
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by Borrower, and
Bank may exercise any and all other rights and remedies which it may have under
any of the other Transaction Documents or under applicable law.
SECTION 10. GENERAL.
10.01 No Waiver. No failure or delay by Bank in exercising any right,
remedy, power or privilege hereunder or under any other Transaction Document
shall operate as a waiver thereof; nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The remedies provided herein and in the
other Transaction Documents are cumulative and not exclusive of any remedies
provided by law. Nothing herein contained shall in any way affect the right of
Bank to exercise any statutory or common law right of banker's lien or set-off.
10.02 Right of Set-Off. Upon the occurrence and during the continuance
of any Event of Default, Bank is hereby authorized at any time and from time to
time, without notice to Borrower (any such notice being expressly waived by
Borrower) and to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by Bank and any and all other indebtedness at any time owing by
Bank to or for the credit or account of Borrower against any and all of
Borrower's Obligations irrespective of whether or not Bank shall have made any
demand hereunder or under any of the other Transaction Documents and although
such obligations may be contingent or unmatured. Bank agrees to promptly notify
Borrower after any such set-off and application made by Bank, provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of Bank under this Section 10.02 are in
addition to any other rights and remedies (including, without limitation, other
rights of set-off) which Bank may have. Nothing contained in this Agreement or
any other Transaction Document shall impair the right of Bank to exercise any
right of set-off or counterclaim it may have against Borrower and to apply the
amount subject to such exercise to the payment of indebtedness of Borrower
unrelated to this Agreement or the other Transaction Documents.
10.03 Cost and Expenses. Borrower agrees, whether or not any Loan is
made hereunder, to pay Bank upon demand (i) all out-of-pocket costs and expenses
and all Attorneys' Fees of Bank in connection with the preparation, negotiation,
execution and administration of this Agreement, the Note and the other
Transaction Documents, (ii) all recording, filing, title insurance, surveying
and appraisal fees incurred in connection with this Agreement and the other
Transaction Documents, (iii) all out-of-pocket costs and expenses and all
Attorneys' Fees of Bank in connection with the preparation of any waiver or
consent hereunder or any amendment hereof or any Event of Default or alleged
Event of Default hereunder, (iv) if an Event of Default occurs, all
out-of-pocket costs and expenses and all Attorneys' Fees incurred by Bank in
connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom and (v) all other Attorneys' Fees incurred by
Bank relating to or arising out of or in connection with this Agreement or any
of the other Transaction Documents. Borrower further agrees to pay or reimburse
Bank for any stamp or other taxes which may be payable with respect to the
execution, delivery, recording and/or filing of this Agreement, the Note, the
Security Agreements or any of the other Transaction Documents. All of the
obligations of Borrower under this Section 10.03 shall survive the satisfaction
and payment of Borrower's Obligations and the termination of this Agreement.
10.04 Environmental Indemnity. Borrower hereby agrees to indemnify Bank
and hold Bank harmless from and against any and all losses, liabilities,
damages, injuries, costs, expenses and claims of any and every kind whatsoever
(including, without limitation, court costs and Attorneys' Fees) which at any
time or from time to time may be paid, incurred or suffered by, or asserted
against, Bank for, with respect to or as a direct or indirect result of the
violation by Borrower or any Subsidiary of Borrower of any Environmental Laws;
or with respect to, or as a direct or indirect result of the presence on or
under, or the escape, seepage, leakage, spillage, discharge, emission or release
from, properties utilized by Borrower and/or any Subsidiary of Borrower in the
conduct of their respective businesses into or upon any land, the atmosphere or
any watercourse, body of water or wetland, of any Hazardous Materials or any
other hazardous or toxic waste, substance or constituent or other substance
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under the Environmental Laws); and
the provisions of and undertakings and indemnification set out in this Section
10.04 shall survive the satisfaction and payment of Borrower's Obligations and
the termination of this Agreement. Notwithstanding the foregoing, Borrower shall
have no obligation to the Bank under this Section 10.04 with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of Bank as determined by a court of competent jurisdiction.
10.05 General Indemnity. In addition to the payment of expenses
pursuant to Section 10.03, whether or not the transactions contemplated hereby
shall be consummated, Borrower hereby agrees to indemnify, pay and hold Bank and
any holder(s) of the Note, and the officers, directors, employees, agents and
affiliates of Bank and such holder(s) (collectively, the "Indemnitees") harmless
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel for such Indemnities in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnities shall be designated a party thereto), that may
be imposed on, incurred by or asserted against the Indemnities, in any manner
relating to or arising out of this Agreement, any of the other Transaction
Documents or any other agreement, document or instrument executed and delivered
by Borrower or any other Obligor in connection herewith or therewith, the
statements contained in any commitment letters delivered by Bank, Bank's
agreement to make the Loans hereunder or the use or intended use of the proceeds
of any Loan hereunder (collectively, the "indemnified liabilities"); provided
that Borrower shall have no obligation to an Indemnitee hereunder with respect
to indemnified liabilities arising from the gross negligence or willful
misconduct of that Indemnitee as determined by a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all indemnified liabilities incurred by the
Indemnities or any of them. The provisions of the undertakings and
indemnification set out in this Section 10.05 shall survive satisfaction and
payment of Borrower's Obligations and the termination of this Agreement.
10.06 Authority to Act. Bank shall be entitled to act on any notices
and instructions (telephonic or written) believed by Bank to have been delivered
by any person authorized to act on behalf of Borrower pursuant hereto,
regardless of whether such notice or instruction was in fact delivered by a
person authorized to act on behalf of Borrower, and Borrower hereby agrees to
indemnify Bank and hold Bank harmless from and against any and all losses and
expenses, if any, ensuing from any such action.
10.07 Notices. Any notice, request, demand, consent, confirmation or
other communication hereunder shall be in writing and delivered in person or
sent by telegram, telex, telecopy or registered or certified mail, return
receipt requested and postage prepaid, if to Borrower at P.O. Box 678, St.
Charles, Missouri 63302, Attention: Ronald S. Saks, or if to Bank at 1401 S.
Brentwood Blvd., St. Louis, Missouri 63144, Attention: Patricia A. O'Herin, or
at such other address as either party may designate as its address for
communications hereunder by notice so given. Such notices shall be deemed
effective on the day on which delivered or sent if delivered in person or sent
by telegram, telex or telecopy, or on the third (3rd) Business Day after the day
on which mailed, if sent by registered or certified mail.
10.08 Consent to Jurisdiction. BORROWER IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY MISSOURI STATE COURT OR ANY UNITED STATES OF
AMERICA COURT SITTING IN THE EASTERN DISTRICT OF MISSOURI, AS BANK MAY ELECT, IN
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER TRANSACTION DOCUMENT. BORROWER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT TO SUCH SUIT, ACTION OR PROCEEDING MAY BE HELD AND DETERMINED
IN ANY OF SUCH COURTS. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH BORROWER MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT, AND BORROWER FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. BORROWER HEREBY EXPRESSLY WAIVES ALL RIGHTS OF ANY OTHER JURISDICTION
WHICH BORROWER MAY NOW OR HEREAFTER HAVE BY REASON OF ITS PRESENT OR SUBSEQUENT
DOMICILES. BORROWER AUTHORIZES THE SERVICE OF PROCESS UPON BORROWER BY
REGISTERED MAIL SENT TO BORROWER AT ITS ADDRESS SET FORTH IN SECTION 10.07.
10.09 Bank's Books and Records. Bank's books and records showing the
account between Borrower and Bank shall be admissible in evidence in any action
or proceeding and shall constitute prima facie proof thereof.
10.10 Governing Law; Amendments. This Agreement, the Note, the Security
Agreements and all of the other Transaction Documents shall be governed by and
construed in accordance with the internal laws of the State of Missouri, and
this Agreement and the other Transaction Documents may not be changed, nor may
any term, condition or Event of Default be waived, modified, or discharged
orally but only by an agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought. To the
extent of any inconsistencies between the terms and provisions of this Agreement
and the other Transaction Documents, the terms and provisions of this Agreement
shall govern and control.
10.11 References; Headings for Convenience. Unless otherwise specified
herein, all references herein to Section numbers refer to Section numbers of
this Agreement, and all references herein to Exhibits "A", "B", "C", "D" and "E"
refer to annexed Exhibits "A", "B", "C", "D" and "E" which are hereby
incorporated herein by reference. The Section headings are furnished for the
convenience of the parties and are not to be considered in the construction or
interpretation of this Agreement.
10.12 Subsidiary Reference. Any reference herein to a Subsidiary or
Consolidated Subsidiary of Borrower, and any financial definition, ratio,
restriction or other provision of this Agreement which is stated to be
applicable to Borrower and its Subsidiaries or Consolidated Subsidiaries or
which is to be determined on a "consolidated" or "consolidating" basis, shall
apply only to the extent Borrower has any Subsidiaries or Consolidated
Subsidiaries and, where applicable, to the extent any such Subsidiaries are
consolidated with Borrower for financial reporting purposes.
10.13 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of Borrower and its successors and Bank and its successors and
assigns. Borrower may not assign or delegate any of its rights or obligations
under this Agreement.
10.14 No Oral Agreements; Entire Agreement. Oral agreements or
commitments to loan money, extend credit or to forbear from enforcing repayment
of a debt, including promises to extend or renew such debt, are not enforceable.
To protect Borrower and Bank from misunderstanding or disappointment, any
agreements reached by Borrower and Bank covering such matters are contained in
this Agreement and the other Transaction Documents, which Agreement and other
Transaction Documents are a complete and exclusive statement of the agreements
between Borrower and Bank, except as Borrower and Bank may later agree in
writing to modify them. This Agreement embodies the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings (oral or written) relating to the subject matter hereof.
10.15 Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
10.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.17 Resurrection of Borrower's Obligations. To the extent that Bank
receives any payment on account of any of Borrower's Obligations, and any such
payment(s) or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other Person under any bankruptcy act, state or
Federal law, common law or equitable cause, then, to the extent of such
payment(s) received, Borrower's Obligations or part thereof intended to be
satisfied and any and all Liens upon or pertaining to any Property or assets of
Borrower and theretofore created and/or existing in favor of Bank as security
for the payment of such Borrower's Obligations shall be revived and continue in
full force and effect, as if such payment(s) had not been received by Bank and
applied on account of Borrower's Obligations.
ORAL AGREEMENTS OR COMMITMENTS TO LEND MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THIS AGREEMENT, WHICH AGREEMENT IS
THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND
LENDER, EXCEPT AS BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Loan Agreement this
15th day of August, 1996.
LEONARD'S METAL, INC.
By
Title:
MAGNA BANK, NATIONAL ASSOCIATION
By
Title:
<PAGE>
SCHEDULE 7.05
Litigation
Leonard's Metal, Inc. v. W.L. Hutchins and Luella Hutchins,
Cause No. CV193-0407-CC, Circuit Court of St. Charles County, Missouri.
On or about January 3, 1992, Borrower entered into an
agreement with William and Luella Hutchins (the "Hutchins")
for the purchase of certain real estate located in St. Charles
County, Missouri. The agreement contained a representation and
warranty of the Hutchins that the property did not suffer from
environmental contamination and did not contain underground
storage tanks. Subsequent to the consummation of the purchase,
in the course of excavation for construction of improvements
on the property two underground tanks were located, and it was
subsequently determined that the tanks contained environmental
contaminants. Borrower notified Hutchins that they had
breached the representation and warranty and subsequently
filed suit to rescind the agreement based, inter alia, on the
Hutchins' breach of the representation and warranty. The
Hutchins have responded and are defending the suit. If
Borrower is unsuccessful in obtaining a judicial determination
that it is entitled to rescind the agreement, Borrower could
face liability for cleanup costs associated with the
environmental contamination. At this time Borrower is unable
to predict the extent of those cleanup costs or what portion
of the costs might be allocated to Borrower. Costs for
testing, investigation, and remediation of the site, to the
extent incurred, will be spread over a number of years. The
case is set for trial in the winter of 1997.
<PAGE>
SCHEDULE 7.10
Other Loans and Guaranties
Borrower is indebted to Norwest Business Credit, Inc. pursuant to a loan
agreement between the parties, and the maximum principal amount which may be
outstanding under such agreement at any time is $8,500,000.00.
Borrower has guarantied the indebtedness of its wholly-owned subsidiary, LMI
Finishing, Inc., to the Oklahoma Industrial Authority, which indebtedness is
secured by a lien on certain real property located in Tulsa, Oklahoma owned by
LMI Finishing, Inc.
<PAGE>
SCHEDULE 7.11
Labor Matters
None.
<PAGE>
SCHEDULE 7.12
Permitted Liens
All UCC-1 Financing Statements filed by Harris Trust and
Savings Bank with the Kansas Secretary of State, the Recorder
in Sedgwick County, Kansas, the Missouri Secretary of State,
the Recorder in St. Charles County, Missouri, the Washington
Secretary of State and the Clerk of King County, Washington,
covering only Borrower's equipment and the products and
proceeds thereof.
All UCC-1 Financing Statements filed by Norwest Business
Credit, Inc. with the Kansas Secretary of State, the Recorder
in Sedgwick County, Kansas, the Missouri Secretary of State,
the Recorder in St. Charles County, Missouri, the Washington
Secretary of State and the Clerk of King County, Washington,
covering only Borrower's accounts receivable, inventory and
general intangibles and the products and proceeds thereof.
UCC-1 Financing Statement filed by IBM Credit Corporation with
the Missouri Secretary of State on January 12, 1996, file no.
2621317, covering only certain computer equipment leased to
Borrower.
UCC-1 Financing Statement filed by The CIT Group/Equipment
Financing, Inc. with the Missouri Secretary of State on April
16, 1996, file no. 2653886, covering only a certain vertical
machining center and related attached equipment and the
proceeds thereof.
UCC-1 Financing Statement filed by IBM Credit Corporation with
the St. Charles County, Missouri Recorder on January 16, 1996,
file no. 00215, covering only certain computer equipment
leased to Borrower.
UCC-1 Financing Statement filed by The CIT Group/Equipment
Financing, Inc. with the St. Charles County, Missouri Recorder
on April 16, 1996, file no. 01402, Book 1831, Page 1083,
covering only a certain vertical machining center and related
attached equipment and the proceeds thereof.
Items 4-11 on Schedule B, Section 2 of the Title Commitment
issued to Bank by Commonwealth Land Title Insurance Company,
File No. J180871, relating to the real property owned by
Borrower located in St. Charles County, Missouri.
Items 4-10 on Schedule B of the Title Commitment issued to
Bank by Commonwealth Land Title Insurance Company, File No.
96F06210, relating to the real property owned by Borrower
located in Sedgwick County, Kansas.
<PAGE>
SCHEDULE 7.17
Environmental and Health and Safety Matters
See Schedule 7.05 regarding Litigation and those certain
environmental reports provided by Borrower to Bank dated
October, 1995, prepared by [ATEC Environmental] regarding the
real properties located in Sedgwick County, Kansas and St.
Charles County, Missouri.
<PAGE>
EXHIBIT A
TERM LOAN NOTE
<PAGE>
EXHIBIT B
SECURITY AGREEMENT
(Equipment)
<PAGE>
EXHIBIT C
KANSAS MORTGAGE
<PAGE>
EXHIBIT D
MISSOURI DEED OF TRUST
<PAGE>
EXHIBIT E
, 19
Magna Bank, National Association
One Magna Place
1401 South Brentwood Blvd.
St. Louis, Missouri 63144
Attention: Patricia A. O'Herin
Gentlemen:
Reference is hereby made to that certain Revolving Credit and Term Loan
Agreement dated August 15, 1996, by and between you and the undersigned (as from
time to time amended, the "Agreement"). All capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed to them in
the Agreement.
The undersigned hereby certifies to you that as of the date hereof:
(a) all of the representations and warranties set forth in Section
7 of the Agreement are true and correct;
(b) no violation or breach of any of the affirmative covenants set
forth in Section 8.01 of the Agreement has occurred and is continuing;
(c) no violation or breach of any of the negative covenants set
forth in Section 8.02 of the Agreement has occurred and is continuing;
(d) no Default or Event of Default under or within the meaning of
the Agreement has occurred and is continuing;
(e) the financial statements of Borrower and its Consolidated
Subsidiaries delivered to you with this letter are true, correct and
complete and have been prepared in accordance with generally accepted
accounting principles consistently applied; and
(f) the financial covenant information set forth in Schedule 1 to
this letter is true and correct.
Very truly yours,
LEONARD'S METAL, INC.
By
Title:
<PAGE>
SCHEDULE 1
Financial Covenant Information
as of , 19
Financial Covenant Actual Required
<PAGE>
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into effective as of the 15th day of January, 1997, by and between
LEONARD'S METAL, INC., a Missouri corporation ("Borrower"), and MAGNA BANK,
NATIONAL ASSOCIATION, a national banking association ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have heretofore entered into that
certain Loan Agreement dated August 15, 1996 (the "Loan Agreement"; all
capitalized terms used and not otherwise defined in this Amendment shall have
the respective meanings ascribed to them in the Loan Agreement as amended by
this Amendment) pursuant to which Lender, among other things, made a Term Loan
to Borrower in the original principal amount of $2,600,000.00; and
WHEREAS, the unpaid principal balance of the Term Loan is
$2,250,000.00; and
WHEREAS, Borrower and Lender desire to amend the Loan Agreement to
modify the repayment schedule of the remaining principal balance of the Term
Loan;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
A. The fourth sentence of Section 4.01 of the Loan Agreement is hereby
amended to provide as follows:
<PAGE>
Principal on the Term Loan Note shall be payable in
thirty-five (35) consecutive monthly installments as follows:
Two (2) equal consecutive monthly installments in the amount
of Fifty Thousand Dollars ($50,00.00) each, due and payable on
September 15, 1996 and October 15, 1996; two (2) equal
consecutive monthly installments in the amount of One Hundred
Twenty-Five Thousand Dollars ($125,000.00) each, due and
payable on November 15, 1996 and December 15, 1996; three (3)
equal consecutive monthly installments in the amount of Fifty
Thousand Dollars ($50,00.00) each, due and payable on January
15, 1997, February 15, 1997 and March 15, 1997; seven (7)
equal consecutive monthly installments in the amount of One
Hundred Fifty Thousand Dollars ($150,000.00) each, due and
payable commencing April 15, 1997 through October 15, 1997;
twenty (20) equal consecutive monthly installments in the
amount of Fifty Thousand Dollars ($50,000.00) each, due and
payable commencing November 15, 1997 through June 15, 1999;
and a final installment in the amount of the then outstanding
and unpaid principal balance of the Term Loan Note due and
payable on July 15, 1999.
2. Borrower shall execute and deliver to Lender an Amended and Restated
Term Loan Note in the form of Exhibit A attached hereto (the "Amended and
Restated Term Loan Note").
3. Borrower hereby agrees to reimburse Lender upon demand for all
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Lender in the preparation,
negotiation and execution of this Amendment and all other agreements, documents,
instruments and certificates relating to the amendment of Borrower's existing
credit facilities with Lender (collectively, the "Loan Documents").
4. All references in the Loan Agreement and the other Transaction
Documents to "the Agreement" and any other references of similar import shall
henceforth mean the Loan Agreement as amended by this Amendment. All references
in the Loan Agreement and the other Transaction Documents to the "Term Loan
Note" and any other references of similar import shall henceforth mean the Term
Loan Note as amended and restated by the Amended and Restated Term Loan Note.
5. Except to the extent specifically amended by this Amendment, all of
the terms, provisions, conditions, covenants, representations and warranties
contained in the Loan Agreement shall be and remain in full force and effect and
the same are hereby ratified and confirmed.
6. This Amendment shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns, except that
Borrower may not assign, transfer or delegate any of its rights or obligations
hereunder.
7. Borrower hereby represents and warrants to Lender that:
(a) the execution, delivery and performance by Borrower of
this Amendment are within the corporate powers of Borrower, have been
duly authorized by all necessary corporate action and require no action
by or in respect of, or filing with, any governmental or regulatory
body, agency or official;
(b) this Amendment has been duly executed and delivered by
Borrower and constitutes the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms,
except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law); and
(c) as of the date of this Amendment, all of the
representations and warranties of Borrower set forth in the Loan
Agreement and the other Transaction Documents are true and correct in
all material respects and no Default or Event of Default under or
within the meaning of the Loan Agreement has occurred and is
continuing.
8. In the event of any inconsistency or conflict between this Amendment
and the Loan Agreement, the terms, provisions and conditions contained in this
Amendment shall govern and control.
9. This Amendment shall be governed by and construed in accordance with
the substantive laws of the State of Missouri (without reference to conflict of
law principles).
10. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY
THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS
AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS
BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM.
IN WITNESS WHEREOF, Borrower and Lender have executed this First
Amendment to Loan Agreement effective as of January 15, 1997.
LEONARD'S METAL, INC.
By
Title:
MAGNA BANK, NATIONAL ASSOCIATION
By
Title:
<PAGE>
CONSENT OF SUBORDINATE CREDITOR
The undersigned hereby consents to the terms, provisions and conditions
contained in the foregoing First Amendment to Loan Agreement dated January 15,
1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL
ASSOCIATION ("Lender") (the "First Amendment to Loan Agreement"). The
undersigned acknowledges and agrees that (i) the execution and delivery of the
First Amendment to Loan Agreement by Borrower to Lender will not adversely
affect or impair any of the subordination or other provisions contained in that
certain Subordination Agreement dated August 15, 1996 and executed by the
undersigned in favor of Lender with respect to the indebtedness of Borrower to
the undersigned (the "Subordination Agreement"), (ii) all of the "Borrower's
Obligations" (as defined in that certain Loan Agreement dated August 15, 1996,
by and between Borrower and Lender, as amended by the First Amendment to Loan
Agreement and as the same may from time to time be further amended, modified,
extended or renewed) constitute "Lender Indebtedness" as defined in and within
the meaning of the Subordination Agreement and (iii) the Subordination Agreement
is in full force and effect on the date hereof and the same is hereby ratified
and confirmed.
Executed as of the 15th day of January, 1997.
Lawrence J. LeGrand, Trustee of the
Dennis M. McDaniel Trust dated 12/22/88
<PAGE>
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into effective as of the 1st day of November, 1997, by and between
LEONARD'S METAL, INC., a Missouri corporation ("Borrower"), and MAGNA BANK,
NATIONAL ASSOCIATION, a national banking association ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have heretofore entered into that certain
Loan Agreement dated August 15, 1996, as amended by that certain First Amendment
to Loan Agreement dated January 15, 1997 (the "Loan Agreement"; all capitalized
terms used and not otherwise defined in this Amendment shall have the respective
meanings ascribed to them in the Loan Agreement as amended by this Amendment)
pursuant to which Lender, among other things, made a Term Loan to Borrower in
the original principal amount of $2,600,000.00; and
WHEREAS, the unpaid principal balance of the Term Loan is
$1,000,000.00; and Borrower has requested that Lender loan Borrower the
additional amount of $2,500,000.00, which Lender has agreed to do; and
WHEREAS, Borrower and Lender desire to amend the Loan Agreement to
provide for the increase in the Term Loan and to modify the repayment schedule
applicable thereto;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. Section 4.01 of the Loan Agreement is hereby amended to provide in
its entirety as follows:
4.01 Commitment of Bank. Bank has heretofore made
Borrower a term loan in the original principal amount
of $2,600,000.00 (the "Original Term Loan"). As of
November 1, 1997, the outstanding principal balance
of the Original Term Loan is $1,000,000.00. Bank
agrees to make Borrower an additional term loan in
the principal amount of $2,500,000.00, which loan
shall be consolidated with the Original Term Loan
and, as consolidated, shall be referred to as the
"Term Loan". The Term Loan shall be evidenced by the
Second Amended and Restated Promissory Note of
Borrower dated November 1, 1997 and payable to the
order of Bank in the principal amount of
$3,500,000.00 (as the same may from time to time be
amended, modified, extended or renewed, the "Term
Loan Note"). Interest on the Term Loan Note shall be
calculated as provided in Section 4.02. Principal and
interest on the Term Loan Note shall be payable in
thirty-six (36) consecutive monthly installments as
follows: thirty-five (35) equal consecutive monthly
installments of principal and interest in the amount
of $44,585.52 each, due and payable on the first day
of each month commencing December 1, 1997 through
October 1, 2000; and a thirty-sixth (36th) and final
installment in the amount of the then outstanding and
unpaid principal balance of the Term Loan Note plus
accrued and unpaid interest thereon due and payable
on November 1, 2000.
2. Section 4.02 of the Loan Agreement is hereby amended to provide in
its entirety as follows:
4.02 Interest Rates. So long as no Event of Default
has been declared by Bank and is continuing, the Term
Loan Note shall bear interest at a rate per annum
equal to Nine Percent (9.00%) per annum. From and
after the declaration of an Event of Default by Bank,
so long as such Event of Default has not been cured
or waived in writing by Bank, and from and after
maturity of the Term Loan Note, whether by reason of
acceleration or otherwise, the unpaid principal
balance of the Term Loan Note shall bear interest
until paid at a rate per annum equal to Eleven
Percent (11.00%). Interest shall be computed with
respect to the Term Loan Note on an actual day,
360-day year basis.
3. Notwithstanding any provision contained herein to the contrary, this
Amendment shall not be deemed to be effective and Lender shall have no
obligation hereunder unless and until Borrower shall have effected payment to
Lender of an amount sufficient to reduce the outstanding principal balance of
the Original Term Loan to $1,000,000.00 and shall have effected payment to
Lender of all accrued and unpaid interest on the Original Term Loan through
October 31, 1997.
4. Borrower shall execute and deliver to Lender the Second Amended and
Restated Term Loan Note in the form of Exhibit A attached hereto.
5. Borrower hereby agrees to reimburse Lender upon demand for all
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Lender in the preparation,
negotiation and execution of this Amendment and all other agreements, documents,
instruments and certificates relating to the amendment of Borrower's existing
credit facilities with Lender (collectively, the "Loan Documents").
6. All references in the Loan Agreement and the other Transaction
Documents to "the Agreement" and any other references of similar import shall
henceforth mean the Loan Agreement as amended by this Amendment. All references
in the Loan Agreement and the other Transaction Documents to the "Term Loan
Note" and any other references of similar import shall henceforth mean the Term
Loan Note as amended and restated by the Second Amended and Restated Term Loan
Note.
7. Except to the extent specifically amended by this Amendment, all of
the terms, provisions, conditions, covenants, representations and warranties
contained in the Loan Agreement shall be and remain in full force and effect and
the same are hereby ratified and confirmed.
8. This Amendment shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns, except that
Borrower may not assign, transfer or delegate any of its rights or obligations
hereunder.
9. Borrower hereby represents and warrants to Lender that:
(a) the execution, delivery and performance by
Borrower of this Amendment are within the corporate powers of
Borrower, have been duly authorized by all necessary corporate
action and require no action by or in respect of, or filing
with, any governmental or regulatory body, agency or official;
(b) this Amendment has been duly executed and
delivered by Borrower and constitutes the legal, valid and
binding obligation of Borrower enforceable against Borrower in
accordance with its terms, except as such enforceability may
be limited by (a) applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally
and (b) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or
at law); and
(c) as of the date of this Amendment, all of the
representations and warranties of Borrower set forth in the
Loan Agreement and the other Transaction Documents are true
and correct in all material respects and no Default or Event
of Default under or within the meaning of the Loan Agreement
has occurred and is continuing.
10. In the event of any inconsistency or conflict between this
Amendment and the Loan Agreement, the terms, provisions and conditions contained
in this Amendment shall govern and control.
11. This Amendment shall be governed by and construed in accordance
with the substantive laws of the State of Missouri (without reference to
conflict of law principles).
12. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY
THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS
AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS
BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM.
IN WITNESS WHEREOF, Borrower and Lender have executed this First
Amendment to Loan Agreement effective as of November 1, 1997.
LEONARD'S METAL, INC.
By
Title:
MAGNA BANK, NATIONAL ASSOCIATION
By
Title:
<PAGE>
CONSENT OF SUBORDINATE CREDITOR
The undersigned hereby consents to the terms, provisions and conditions
contained in the foregoing Second Amendment to Loan Agreement dated November 1,
1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL
ASSOCIATION ("Lender") (the "Second Amendment to Loan Agreement"). The
undersigned acknowledges and agrees that (i) the execution and delivery of the
First Amendment to Loan Agreement by Borrower to Lender will not adversely
affect or impair any of the subordination or other provisions contained in that
certain Subordination Agreement dated August 15, 1996 and executed by the
undersigned in favor of Lender with respect to the indebtedness of Borrower to
the undersigned (the "Subordination Agreement"), (ii) all of the "Borrower's
Obligations" (as defined in that certain Loan Agreement dated August 15, 1996,
by and between Borrower and Lender, as amended by the Second Amendment to Loan
Agreement and as the same may from time to time be further amended, modified,
extended or renewed) constitute "Lender Indebtedness" as defined in and within
the meaning of the Subordination Agreement and (iii) the Subordination Agreement
is in full force and effect on the date hereof and the same is hereby ratified
and confirmed.
Executed as of the 1st day of November, 1997.
Lawrence J. LeGrand, Trustee of the
Dennis M. McDaniel Trust dated 12/22/88
<PAGE>
CONSENT OF LMI FINISHING, INC.
The undersigned hereby consents to the terms, provisions and conditions
contained in the foregoing Second Amendment to Loan Agreement dated November 1,
1997, by and between LEONARD'S METAL, INC. ("Borrower") and MAGNA BANK, NATIONAL
ASSOCIATION ("Lender") (the "Second Amendment to Loan Agreement"). The
undersigned acknowledges and agrees that (i) the execution and delivery of the
Second Amendment to Loan Agreement by Borrower to Lender will not adversely
affect or impair any of the provisions or obligations contained in that certain
Security Agreement (Equipment) dated August 15, 1996 and executed by the
undersigned in favor of Lender with respect to the indebtedness of Borrower to
Lender (the "Security Agreement"), (ii) all of the "Borrower's Obligations" (as
defined in that certain Loan Agreement dated August 15, 1996, by and between
Borrower and Lender, as amended by the Second Amendment to Loan Agreement and as
the same may from time to time be further amended, modified, extended or
renewed) constitute "Obligations" as defined in and within the meaning of the
Security Agreement and (iii) the Security Agreement is in full force and effect
on the date hereof and the same is hereby ratified and confirmed.
Executed as of the 1st day of November, 1997.
LMI FINISHING, INC.
By_____________________________________
Title:_________________________________
<PAGE>
EXHIBIT A
SECOND
AMENDED AND RESTATED
PROMISSORY NOTE
Borrower: LEONARD'S METAL, INC., Lender: Magna Bank, N.A.
a Missouri Corporation Brentwood Banking Center
(TIN: 43-1309065) One Magna Place
3030 Highway 94 1401 South Brentwood Blvd
St. Louis, MO 63302 St. Louis, MO 63144
Principal Amount: $3,500,000.00 Date of Original Note: August 15, 1996
Date of this Second Amended and Restated Note: November 1, 1997
RECITALS: LEONARD'S METAL, INC., a Missouri corporation ("Borrower") has
previously executed and delivered to Magna Bank, N.A. ("Lender"), its Promissory
Note dated August 15, 1996 in the original principal amount of $2,600,000.00, as
amended by that certain Amended and Restated Promissory Note dated January 15,
1997 (the "Original Note").
The current balance of the Original Note is $1,000,000.00 and Borrower has
requested, and Lender has extended, an additional loan to Borrower in the
principal amount of $2,500,000.00.
This Second Amended and Restated Promissory Note constitutes an amendment and
restatement of the Original Note.
PROMISE TO PAY: Borrower promises to pay to Lender, or order, in lawful money of
the United States of America, the principal amount of Three Million Five Hundred
Thousand and 00/100 Dollars ($3,500,000.00), together with interest on the
unpaid principal balance from November 1, 1997, until paid in full, at an
interest rate of 9.000 per annum.
PAYMENT: Borrower will pay this loan in accordance with the following payment
schedule:
Thirty-five (35) consecutive monthly payments of principal and interest
of $44,585.52 each, due on the first day of each month beginning
December 1, 1997 through October 1, 2000 and a thirty-sixth (36th) and
final payment due on November 1, 2000 in the amount of the unpaid
principal balance plus accrued and unpaid interest.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
PREPAYMENT: Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
under the payment schedule. Rather, they will reduce the principal amount due
and may result in Borrower making fewer payments.
LATE CHARGE: If a payment (other than the final balloon payment) is sixteen (16)
days or more late, Borrower will be charged 5.000% of the regularly scheduled
payment.
DEFAULT. To the extent any provision of this section is inconsistent with the
provisions of the Loan Agreement dated August 15, 1996, between Borrower and
Lender, as the same may be amended from time to time, the provisions of the Loan
Agreement shall govern. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due; (b) Borrower breaks
any promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant or condition contained in
this Note or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender; (c) any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or misleading
in any material respect either now or at the time made or furnished; (d)
Borrower becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws; (e) any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest (this includes a
garnishment of any of Borrower's accounts with Lender); (f) a material adverse
change occurs in Borrower's financial condition.
LENDER'S RIGHTS: Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the interest rate on this Note 2.000 percentage points.
The interest rate will not exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if Borrower does
not pay. Borrower will also pay Lender that amount. This includes, subject to
any limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law, Borrower also will pay
any court costs, in addition to all other sums provided by law. This Note has
been delivered to Lender and accepted by Lender in the State of Missouri. If
there is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of St. Louis County, the State of Missouri. This Note
shall be governed by and construed in accordance with the laws of the State of
Missouri.
RIGHT OF SETOFF: Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation, all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however, all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
COLLATERAL: This Note is secured by a Deed of Trust executed on August 15, 1996,
to a trustee in favor of Lender on real property located at 3600 Mueller Road
and 3030 Highway 94 North in St. Charles County, State of Missouri, and a
Mortgage to Lender executed on August 15, 1996, on real property located at 2629
Esthner Court in Sedgwick County, State of Kansas, all the terms and conditions
of which are hereby incorporated and made a part of this Note. The Deed of Trust
and Mortgage each secures future advances up to a maximum principal amount of
$3,500,000.00. The Deed of Trust is governed by R.S.Mo. Section 443.055.
GENERAL PROVISIONS: Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs or endorses this Note, to the extent allowed by law, waive presentment,
demand for payment, protest and notice of dishonor. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party who
signs this Note, whether as maker, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or extend
(repeatedly and for any length of time) this loan, or release any party or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY EXTEND CREDIT OR TO FOREBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
BORROWER:
LEONARD'S METAL, INC., a Missouri Corporation
By:
Ronald S. Saks, President
<PAGE>
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into effective as of the 30th day of March, 1998, by LMI AEROSPACE,
INC., formerly known as Leonard's Metal, Inc., a Missouri corporation, LMI
FINISHING, INC., a Missouri corporation, LMI ACQUISITION, INC., a Missouri
corporation, as co-obligors and co-borrowers and not as sureties or
accommodation parties (said corporations being jointly and severally referred to
herein as "Borrower"), and MAGNA BANK, NATIONAL ASSOCIATION, a national banking
association ("Lender").
W I T N E S S E T H:
WHEREAS, LMI Aerospace, Inc. and Lender have heretofore entered into
that certain Loan Agreement dated August 15, 1996, as amended by that certain
First Amendment to Loan Agreement dated January 15, 1997 and that certain Second
Amendment to Loan Agreement dated November 1, 1997 (the "Loan Agreement"; all
capitalized terms used and not otherwise defined in this Amendment shall have
the respective meanings ascribed to them in the Loan Agreement as amended by
this Amendment); and
WHEREAS, Borrower has requested that Lender loan Borrower up to the
additional amount of $15,000,000.00 in the form of a revolving credit facility
which Lender has agreed to do; and
WHEREAS, Borrower and Lender desire to amend the Loan Agreement to
provide for such facility, to add LMI Finishing, Inc. and LMI Acquisition, Inc.
as co-obligors with respect to the Reimbursement Agreement and the Term Loan,
and to modify certain other provisions of the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. All references in the Loan Agreement and the other Transaction
Documents to the "Borrower" and any other references of similar import shall
henceforth mean collectively LMI Aerospace, Inc., LMI Finishing, Inc. and LMI
Acquisition, Inc., whose liability with respect to all of Borrower's Obligations
shall be joint and several.
2. Section 2 of the Loan Agreement is hereby amended by adding the
following new definitions:
Applicable Percentage shall mean the applicable percentage amount
indicated below based upon the Cash Flow Leverage Ratio of Borrower as
of the end of any given fiscal quarter, with any change in the
Applicable Percentage to be effective as of the first day of the next
succeeding fiscal quarter:
Applicable Applicable
Cash Flow Percentage Percentage
Leverage Ratio (Prime) (LIBOR)
Less than 2.0:1.0 (0.50%) 1.40%
Equal to or greater than
2.0:1.0 but less than or equal
to 2.75:1.0 (0.25%) 1.65%
Greater than 2.75:1.0 but
less than or equal to
3.25:1.0 -0- 2.15%
Greater than 3.25:1.0 0.25% 2.40%
Cash Flow Leverage Ratio shall mean the ratio of Senior Funded Debt as
of the last day of any fiscal quarter to Consolidated EBITDA for the
period of four consecutive fiscal quarters then ended.
Consolidated EBITDA shall mean for the period in question the sum of
(a) the after-tax net income (or loss) of Borrower and its Consolidated
Subsidiaries for the period in question (exclusive of extraordinary
gains and/or losses and gains and/or losses from the sale or other
disposition of assets other than in the ordinary course of business),
plus (b) to the extent deducted in determining net income, the sum of
(i) all gross interest expense of Borrower and its Consolidated
Subsidiaries during each period, plus (ii) all provisions for any
Federal, state, local and/or foreign income taxes made by Borrower and
its Consolidated Subsidiaries during such period (whether paid or
deferred), plus (iii) all depreciation and amortization expenses of
Borrower and its Consolidated Subsidiaries during such period, all
determined on a consolidated basis.
Eligible Accounts shall mean all trade accounts receivable of Borrower
which have been invoiced by Borrower or which constitute "unbilled
shippers" except for those which remain unpaid for more than ninety
(90) days after their invoice dates.
Eligible Inventory shall mean all inventory of Borrower, valued at the
lower of cost or market value.
LIBOR shall mean, as of any date, the highest London Interbank Offered
Rate reported for one (1) month in the Money Rates column or any
successor column of The Wall Street Journal based on the British
Banker's Association average of interbank offered rates for dollar
deposits in the London market based on quotations at 16 major banks.
Revolving Credit Period shall mean the period commencing on March 30,
1998 and ending March 30, 2000.
Senior Funded Debt shall mean the aggregate outstanding principal
balance of all indebtedness for borrowed money of Borrower and its
Consolidated Subsidiaries.
Triggering Event shall be deemed to have occurred as of the last day of
any fiscal quarter of Borrower for which the Cash Flow Leverage Ratio
equals or exceeds 3.0:1.0.
3. The Loan Agreement is hereby amended by adding the following new
Section 4A:
SECTION 4A. THE REVOLVING CREDIT LOANS.
4.01A. Revolving Credit Loans.
(a) Subject to the terms and conditions of this Agreement, during
the Revolving Credit Period of this Agreement, and so long as no Default or
Event of Default under this Agreement has occurred and is continuing,
Lender hereby agrees to make such loans (individually, a "Revolving Credit
Loan" and collectively, the "Revolving Credit Loans") to Borrower as
Borrower may from time to time request pursuant to Section 4.02A. Until
such time as a Triggering Event occurs, the aggregate principal amount of
Revolving Credit Loans which Lender shall be required to have outstanding
under this Agreement at any one time shall not exceed $15,000,000.00. From
and after the occurrence of a Triggering Event, the aggregate principal
amount of Revolving Credit Loans which Lender shall be required to have
outstanding under this Agreement at any one time shall not exceed the
lesser of (A) $15,000,000.00 or (B) the Borrowing Base. Subject to the
terms and conditions of this Agreement, Borrower may borrow, repay and
reborrow such sums from Lender, provided, however, that in no event may the
aggregate outstanding principal amount of Revolving Credit Loans on any
given day exceed the applicable amount specified in the preceding sentence.
All Revolving Credit Loans not paid prior to the last day of the Revolving
Credit Period, together with all accrued and unpaid interest thereon, shall
be due and payable on the last day of the Revolving Credit Period.
(b) For purposes of this Agreement, the "Borrowing Base" shall mean
the sum of:
(i) Eighty-Five Percent (85%) of the face amount of all then
existing Eligible Accounts; plus
(ii) the sum of (A) Fifty Percent (50%) of the Eligible
Inventory of Borrower consisting of finished goods, (B) Thirty Percent
(30%) of the Eligible Inventory of Borrower consisting of work in
process, and (C) Sixty-Five Percent (65%) of the Eligible Inventory of
Borrower consisting of raw materials.
(c) Borrower shall deliver to Lender monthly by the fifteenth (15th)
day of each month (calculated as of the close of business of the prior
month) a collateral report in the form of Exhibit F attached hereto and
incorporated herein by reference (or in such other form as Lender shall
require from time to time) (a "Collateral Report") setting forth:
(i) the Borrowing Base and its components as of the end of the
immediately preceding month;
(ii) the aggregate principal amount of all Revolving Credit
Loans outstanding as of the end of the immediately preceding month;
and
(iii) the difference, if any, between the Borrowing Base and
the aggregate principal amount of all Revolving Credit Loans
outstanding as of the end of the immediately preceding month.
The Borrowing Base shown in such Collateral Report shall be and
remain the Borrowing Base hereunder until the next Collateral Report is
delivered to Lender, at which time the Borrowing Base shall be the amount
shown in such subsequent Collateral Report. Each Collateral Report shall be
certified as to truth and accuracy by the president or the chief financial
officer of Borrower.
(d) If at any time after the occurrence of a Triggering Event, the
aggregate outstanding principal amount of the Revolving Credit Loans is
greater than the Borrowing Base as shown on the most recent Collateral
Report, Borrower shall be automatically required (without demand or notice
of any kind by Lender, all of which are hereby expressly waived by
Borrower) to immediately repay the Revolving Credit Loans in an amount
sufficient to reduce the aggregate outstanding principal amount of the
Revolving Credit Loans to the amount of the Borrowing Base.
4.02A. Procedure for Borrowing. (a) Borrower shall give oral or written
notice (a "Borrowing Notice") to Lender by 2:00 p.m. (St. Louis time) on the
Business Day of each Revolving Credit Loan, specifying:
(i) the date of such Revolving Credit Loan, which shall be a
Business Day,
(ii) the aggregate principal amount of such Revolving Credit
Loan,
(iii) that on the date of, and after giving effect to, such
Revolving Credit Loan, no Default or Event of Default under this
Agreement has occurred and is continuing, and
(iv) that on the date of, and after giving effect to, such
Revolving Credit Loan, all of the representations and warranties of
Borrower contained in this Agreement and in the other Transaction
Documents are true and correct in all material respects on and as of
such date of such Revolving Credit Loan as if made on and as of the
date of such Revolving Credit Loan.
(b) Lender shall make the proceeds of the applicable Revolving
Credit Loan available to Borrower by transferring the amount of such
Revolving Credit Loan to such account maintained with Lender as Borrower
shall specify in the Borrowing Notice, not later than 2:30 p.m. (St. Louis
time) on the Business Day specified in said Borrowing Notice.
(c) Borrower hereby irrevocably authorizes Lender to rely on
telephonic, telegraphic, telecopy, telex or written instructions of Ronald
S. Saks or Lawrence E. Dickinson (or any other individual from time to time
authorized to act on behalf of Borrower pursuant to a resolution adopted by
the Board of Directors of Borrower and certified by the Secretary of
Borrower and delivered to Lender) with respect to any request to make a
Revolving Credit Loan or a repayment hereunder, and on any signature which
Lender believes to be genuine, and Borrower shall be bound thereby in the
same manner as if such person were actually authorized or such signature
were genuine. Borrower also hereby agrees to indemnify Lender and hold
Lender harmless from and against any and all claims, demands, damages,
liabilities, losses, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) relating to or arising out of or
in connection with the acceptance of instructions for making Revolving
Credit Loans or repayments hereunder, except for such of the foregoing as
result directly from Lender's gross negligence or willful misconduct.
4.03A. Revolving Credit Note. (a) The Revolving Credit Loans of Lender
to Borrower shall be evidenced by a Promissory Note of Borrower dated the date
hereof and payable to the order of Lender in the principal amount of
$15,000,000.00, which Promissory Note shall be in substantially the form of
Exhibit G attached hereto and incorporated herein by reference (as the same may
from time to time be amended, modified extended or renewed, the "Revolving
Credit Note").
(b) Lender shall record the date, amount, type and maturity of each
Revolving Credit Loan made by it and the date and amount of each payment of
principal made by Borrower with respect thereto in Lender's books and
records. The books and records of Lender showing the account between Lender
and Borrower shall be admissible in evidence in any action or proceeding
and shall constitute prima facie proof of the items therein set forth.
4.04A. Interest Rates. (a) So long as no Event of Default under this
Agreement has been declared by Lender and is continuing, all Revolving Credit
Loans shall bear interest prior to maturity at a rate per annum equal to the
Applicable Percentage over and above the Prime Rate or LIBOR, as elected by
Borrower from time to time (fluctuating as and when the Prime Rate or LIBOR, as
applicable, shall change). So long as any Event of Default under this Agreement
has been declared by Lender and is continuing, each Revolving Credit Loan shall
bear interest prior to maturity at a rate per annum equal to Two Percent (2.0%)
over and above the rate applicable immediately preceding such Event of Default.
Interest on Revolving Credit Loans shall be payable monthly in accordance with
the terms of the Revolving Credit Note, and at the maturity of the Revolving
Credit Note, whether by reason of acceleration or otherwise. From and after the
maturity of the Revolving Credit Note, whether by reason of acceleration or
otherwise, each Revolving Credit Loan shall bear interest payable on demand
until paid at a rate per annum equal to Two Percent (2.0%) over and above the
rate applicable immediately preceding maturity.
(b) Lender shall calculate the interest accrued with respect to
each Revolving Credit Loan hereunder and its determination thereof shall be
conclusive in the absence of manifest error.
4.05A. Collateral for Revolving Credit Loans. Until such time as a
Triggering Event occurs, the Revolving Credit Loans shall be unsecured. From and
after the occurrence of a Triggering Event, the Revolving Credit Loans shall be
secured by the Collateral, which shall include, but not be limited to, the
accounts receivable and inventory of the Borrower, and the proceeds and products
thereof, as more particularly described in the form of Security Agreement
attached hereto as Exhibit H (the "Security Agreement (Receivables and
Inventory)").
3. Section 8.01(g) of the Loan Agreement is hereby amended to provide
in its entirety as follows:
(g) Maintenance of Books and Records. Borrower and each Subsidiary
of Borrower will maintain its books and records in accordance with
generally accepted accounting principals consistently applied and in which
true, correct and complete entries will be made of all its dealings and
transactions. Each Borrower shall maintain detailed and accurate records of
proceeds of the Term Loan and the Revolving Credit Loans (i) received by it
from Lender, (ii) transferred from it to any other Borrower, and (iii)
received by it from another Borrower. Each Borrower acknowledges that its
ability to obtain advances hereunder is made possible by the fact that it
is a co-borrower under this Agreement and the other Transaction Documents
and that each Borrower is engaged in a common enterprise. Each Borrower
agrees that (i) the business operations of each Borrower are interrelated
and complement one another, and such entities have a common business
purpose, and (ii) the proceeds of the Term Loan, the Letter of Credit and
each Revolving Credit Loan hereunder will benefit each Borrower, severally
and jointly, regardless of which Borrower requests or receives part or all
of any advance hereunder.
4. Section 8.01(i) of the Loan Agreement is hereby amended to provide
in its entirety as follows:
(i) Financial Covenants. Borrower will:
(i) Maintain a Consolidated Tangible Net Worth of at least
$15,000,000.00, which minimum Consolidated Tangible Net Worth shall
increase as of the end of each fiscal year of Borrower, commencing
with the fiscal year ending December 31, 1998, by an amount equal to
Seventy-Five (75%) of the after-tax net income shown on Borrower's
consolidated financial statements for such fiscal year, such required
increases to be cumulative for each fiscal year;
(ii) Have Consolidated EBITDA of at least $10,500,000.00 for
each fiscal year of Borrower;
(iii) Deliver a certificate of the principal financial officer
of Borrower containing the financial calculations required in clauses
(i) and (ii) above simultaneously with the financial statements
referred to in Sections 8.01(a)(i) and (ii).
5. Section 8.02(a) of the Loan Agreement is hereby amended by deleting
clause (iii) thereof referencing permitted indebtedness to Norwest Business
Credit, Inc., in the principal amount not to exceed $8,500,000.00.
6. Section 8.02(m) of the Loan Agreement is hereby amended to provide
in its entirety as follows:
(m) Change in Nature or Ownership of Business. Neither Borrower nor
any Subsidiary of Borrower will make or permit any material change in the
nature or ownership of its business. In the case of Borrower, a material
change in ownership shall mean a sale of more than Forty-Three Percent
(43%) of the equity of Borrower.
7. Section 9 of the Loan Agreement is amended by adding the following
new Section 9.19:
9.19. An "Event of Default" (as defined therein) shall occur under or
within the meaning of the Security Agreement (Receivables and Inventory).
8. Schedule 7.10 to the Loan Agreement is amended by deleting the
reference to Borrower's indebtedness to Norwest Business Credit, Inc.
9. Schedule 7.12 to the Loan Agreement is amended by deleting the
reference to UCC-1 Financing Statements filed by Norwest Business Credit, Inc.
Borrower acknowledges and agrees that it is not permitted to grant any Lien upon
any of its Property, assets or revenues which secured its indebtedness to
Norwest Business Credit, Inc., other than in favor of Lender.
10. Borrower shall execute and deliver to Lender the Revolving Credit
Note, the Security Agreement (Receivables and Inventory) and such UCC-1
financing statements as Lender shall require. The UCC-1 financing statements
shall be held in escrow, subject to an escrow agreement in form and substance
acceptable to Lender pursuant to which such financing statements will not be
filed unless and until a Triggering Event occurs. In addition, Borrower will
execute any and all further agreements, documents and instruments, and take any
and all further actions which may be required under applicable law, or which
Lender may from time to time reasonably request, in order to effectuate the
transactions herein contemplated, including, but not limited to, such amendments
to the Term Loan Note and the Reimbursement Agreement as Lender may require.
11. Borrower will deliver to Lender as soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter, a
calculation of its Cash Flow Leverage Ratio as of the end of such fiscal
quarter, certified by the principal financial officer of Borrower.
12. Borrower hereby agrees to reimburse Lender upon demand for all
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by Lender in the preparation,
negotiation and execution of this Amendment and all other agreements, documents,
instruments and certificates relating to the amendment of Borrower's existing
credit facilities with Lender (collectively, the "Loan Documents").
13. All references in the Loan Agreement and the other Transaction
Documents to "the Agreement" and any other references of similar import shall
henceforth mean the Loan Agreement as amended by this Amendment.
14. Except to the extent specifically amended by this Amendment, all of
the terms, provisions, conditions, covenants, representations and warranties
contained in the Loan Agreement shall be and remain in full force and effect and
the same are hereby ratified and confirmed.
15. This Amendment shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns, except that
Borrower may not assign, transfer or delegate any of its rights or obligations
hereunder.
16. Borrower hereby represents and warrants to Lender that:
(a) the execution, delivery and performance by Borrower of this
Amendment are within the corporate powers of Borrower, have been duly
authorized by all necessary corporate action and require no action by or in
respect of, or filing with, any governmental or regulatory body, agency or
official;
(b) this Amendment has been duly executed and delivered by Borrower
and constitutes the legal, valid and binding obligation of Borrower
enforceable against Borrower in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
(b) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law); and
(c) as of the date of this Amendment, all of the representations
and warranties of Borrower set forth in the Loan Agreement and the other
Transaction Documents are true and correct in all material respects and no
Default or Event of Default under or within the meaning of the Loan
Agreement has occurred and is continuing.
17. In the event of any inconsistency or conflict between this
Amendment and the Loan Agreement, the terms, provisions and conditions contained
in this Amendment shall govern and control.
18. This Amendment shall be governed by and construed in accordance
with the substantive laws of the State of Missouri (without reference to
conflict of law principles).
19. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR
RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT BORROWER AND LENDER FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY BORROWER AND
LENDER COVERING SUCH MATTERS ARE CONTAINED IN THE LOAN AGREEMENT AS AMENDED BY
THIS AMENDMENT AND THE OTHER TRANSACTION DOCUMENTS, WHICH LOAN AGREEMENT AS
AMENDED BY THIS AMENDMENT AND OTHER TRANSACTION DOCUMENTS ARE A COMPLETE AND
EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN BORROWER AND LENDER, EXCEPT AS
BORROWER AND LENDER MAY LATER AGREE IN WRITING TO MODIFY THEM.
IN WITNESS WHEREOF, Borrower and Lender have executed this Third
Amendment to Loan Agreement effective as of March 30, 1998.
LMI AEROSPACE, INC. (formerly known as
Leonard's Metal, Inc.)
By
Title:
LMI FINISHING, INC.
By
Title:
LMI ACQUISITION, INC.
By
Title:
MAGNA BANK, NATIONAL ASSOCIATION
By
Title:
<PAGE>
EXHIBIT F
BORROWING BASE CERTIFICATE
Reference is hereby made to that certain Loan Agreement dated as of
August 15, 1996, by and among LMI Aerospace, Inc., formerly known as Leonard's
Metal, Inc., LMI Finishing, Inc. and LMI Acquisition, Inc. (collectively, the
"Borrower") and Magna Bank, National Association ("Bank"), as amended (the "Loan
Agreement"). All terms used herein which are defined in the Loan Agreement shall
have the same meaning herein as in the Loan Agreement.
Borrower hereby reaffirms all warranties made in the Loan Agreement and
certifies and warrants that Borrower holds subject to the security interest of
Bank granted pursuant to the Loan Agreement, as of , the following collateral
(all inventory being shown at the lower cost or market value):
A. Total finished goods Inventory $_______________
Eligible finished goods Inventory to
be included in the Borrowing Base (50%) $____________
B. Total work in process Inventory $_______________
Eligible work in process Inventory
to be included in the Borrowing Base
(30%) $____________
C. Total raw materials Inventory $_______________
Eligible raw materials Inventory
to be included in the Borrowing
Base (65%) $_____________
Total Accounts $_______________
Less Accounts over 90 days ($______________)
Eligible Accounts $_______________
Eligible Accounts to be included in
the Borrowing Base (85%) $_____________
E. Total eligible collateral (A+B+C+D) $_____________
F. Current loan balance $_______________
G. Excess eligible collateral (E-F) $_____________
Borrower further certifies and warrants to Bank that no Default or
Event of Default is existing at the date of this Certificate and, to the best of
the knowledge and belief of the officer of the Borrower executing this
Certificate, there has not been (except as may otherwise be indicated below) any
change since the computation date specified above which will materially reduce
the amount shown above if such amounts were computed as of the date of this
Certificate.
LMI AEROSPACE, INC.
Dated: By:
Title:
LMI FINISHING, INC.
By:
Title:
LMI ACQUISITION, INC.
By:
Title:
<PAGE>
EXHIBIT G
REVOLVING CREDIT NOTE
<PAGE>
EXHIBIT H
SECURITY AGREEMENT
(ACCOUNTS RECEIVABLE AND INVENTORY)
I. Grant of Security Interest. The undersigned, ("Borrower"), for value
received, effective upon the occurrence of a Triggering Event (as hereinafter
defined) sells, assigns, transfers, conveys and mortgages to MAGNA BANK,
NATIONAL ASSOCIATION ("Secured Party") and grants Secured Party a continuing
security interest in all of Borrower's right, title and interest in and to the
following described property and any and all additions, accessions and
substitutions thereto or therefor (hereinafter collectively referred to as the
"Collateral"):
(a) All accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other forms of obligation and other
rights to the payment of money and all of Borrower's rights in, to and
under all purchase orders received by Borrower, now owned or which may
hereafter be created by Borrower (hereinafter collectively referred to as
"Accounts"),
(b) All of Borrower's inventory, including without limitation all
goods, merchandise, materials, raw materials, components, work in progress,
finished goods and other tangible personal property, now owned or hereafter
acquired and held for sale or lease or furnished or to be furnished under
contracts for services or used or consumed in Borrower's business, and all
additions, accessions and substitutions thereto or therefor and any
documents of title representing any thereof (hereinafter collectively
referred to as "Inventory"), and
(c) All proceeds, including without limitation proceeds which
constitute property of the types described in (a) and (b) above and
insurance proceeds, and all products, of (a) and (b) above, and any
indemnities, warranties and guaranties payable by reason of loss or damage
to or otherwise with respect to any of the foregoing items;
to secure the payment of (i) any and all indebtedness, liabilities and
obligations of Borrower to Secured Party under any note or notes of Borrower
evidencing any loan or advance now or hereafter made by Secured Party to
Borrower, (ii) any and all indebtedness, liabilities and obligations of Borrower
under this Agreement, (iii) any and all other indebtedness, liabilities and
obligations of Borrower to Secured Party of every kind and character, now
existing or hereafter arising, absolute or contingent, joint or several or joint
and several, otherwise secured or unsecured, due or not due, direct or indirect,
expressed or implied in law, contractual or tortious, liquidated or
unliquidated, at law or in equity, or otherwise, and whether heretofore or
hereafter incurred or given by Borrower as principal, surety, endorser,
guarantor or otherwise, and whether created directly or acquired by Secured
Party by assignment or otherwise and (iv) any and all costs of collection, legal
expenses and attorneys' fees and expenses incurred by Secured Party upon the
occurrence of an Event of Default under this Agreement, in collecting or
enforcing payment of any such indebtedness, liabilities or obligations or in
preserving, protecting or realizing on the Collateral hereunder or in
representing Secured Party in connection with bankruptcy or insolvency
proceedings (hereinafter collectively referred to as the "Obligations").
The term "Triggering Event" shall have the meaning ascribed to it in that
certain Loan Agreement dated August 15, 1996 by and between Borrower and Secured
Party, as amended by that certain Third Amendment to Loan Agreement dated as of
March 30, 1998, and as the same may be further modified or amended (the "Loan
Agreement").
II. Covenants. Borrower hereby represents, warrants, covenants and
agrees that:
(a) Borrower is a corporation and (i) it is duly organized, validly
existing and in good standing under the laws of the State of Missouri, (ii)
it has full corporate power and authority to borrow money from Secured
Party and to grant to Secured Party a security interest in the property
hereby stated to be granted, (iii) the officer(s) of Borrower executing
this Agreement have been duly elected and qualified and have been duly
authorized and empowered to execute, deliver and perform the terms of this
Agreement on behalf of Borrower and (iv) the execution, delivery and
performance of this Agreement by Borrower do not and will not violate any
of the terms or provisions of the Articles or Certificate of Incorporation
or By-Laws of Borrower; (b) the execution, delivery and performance of this
Agreement by Borrower do not and will not violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to Borrower or the terms of
any indenture, agreement, document, instrument or undertaking to which
Borrower is a party or by which it is bound; (c) no financing statement
(other than any which may be filed on behalf of Secured Party) covering any
of the Collateral is now or will be on file in any public office during the
term of this Agreement; (d) all information furnished to Secured Party by
Borrower concerning the Collateral or the financial condition of Borrower
for the purposes of obtaining credit hereunder is, or will be, at the time
furnished, true, correct and complete; (e) that except for the security
interest granted hereby, Borrower is, or, as to Collateral acquired after
the date hereof, will be, the sole and absolute owner of the Collateral,
free and clear of any and all liens, claims, security interests and
encumbrances, and Borrower will defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest
therein; (f) Borrower's principal place of business and the location of the
office where it keeps its books and records respecting the Accounts is that
given at the end of this Agreement and all other places of business of
Borrower or locations of its Inventory are listed on Exhibit A attached
hereto and incorporated herein by reference. If Borrower changes its
principal place of business, or the location of any of the Inventory, or
the location of the office where it keeps its books and records respecting
the Accounts, or acquires any other places of business, it will immediately
notify Secured Party in writing; and (g) none of the Accounts is evidenced
by a promissory note or other instrument.
III. Collection, Preservation and Disposition of Collateral. Until such
time as Secured Party shall notify Borrower of the revocation of such power and
authority (which right of revocation Secured Party may exercise only after the
occurrence of an Event of Default hereunder), Borrower:
(a) May, in the ordinary course of its business, at its own
expense, sell, lease or furnish under contracts for service any of the
Inventory normally held by Borrower for such purpose, and use and consume,
in the ordinary course of its business, any raw materials, work in process
or materials normally held by Borrower for such purpose;
(b) Will, at its own expense, endeavor to collect, as and when due,
all amounts due with respect to any Accounts, and shall take such action
with respect to collection of Accounts as Secured Party may reasonably
request or, in the absence of such request, as Borrower may deem advisable;
and
(c) May grant, in the ordinary course of business, to any party
obligated on any Account (an "Account Debtor"), any rebate, refund or
allowance to which such party may be lawfully entitled, and may accept, in
connection therewith, the return of goods, the sale or lease of which shall
have given rise to an Account. Secured Party may, however, at any time
after the occurrence of an Event of Default hereunder, notify any Account
Debtor to make payment to Secured Party of any amounts due or to become due
thereunder and enforce collection of any of the Accounts by suit or
otherwise and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than
the original period) any indebtedness thereunder or evidenced thereby. Upon
request of Secured Party (which request may be made only after the
occurrence of an Event of Default hereunder), Borrower will, at its own
expense, notify any Account Debtor to make payment to Secured Party of any
amounts due or to become due thereunder.
At all times after the occurrence of an Event of Default hereunder,
unless Secured Party shall otherwise direct Borrower in writing, Borrower will:
(a) Forthwith upon receipt transmit and deliver to Secured Party,
in the form received, all cash, checks, drafts, chattel paper and other
instruments or writings for the payment of money (properly endorsed, where
required, so that such items may be collected by Secured Party) which may
be received by Borrower at any time in full or partial payment or otherwise
as proceeds of any of the Collateral. Except as Secured Party may otherwise
consent in writing, any such items which may be received by Borrower will
not be commingled with any other of Borrower's funds or property, but will
be held separate and apart from Borrower's own funds and property and upon
express trust for Secured Party until delivery is made to Secured Party.
Borrower will comply with the terms and conditions of any consent given by
Secured Party pursuant to the provisions of this paragraph; and
(b) Deposit to the credit of a deposit account (herein called the
"Collateral Account") of Borrower with Secured Party as security for
payment of the Obligations all items or amounts which are delivered by
Borrower to Secured Party on account of partial or full payment or
otherwise as proceeds of any of the Collateral. Borrower shall have no
right to withdraw any funds deposited in the Collateral Account. Secured
Party may, from time to time, in its discretion, apply all or any of the
then balance, representing collected funds in the Collateral Account,
toward payment of the Obligations whether or not then due, in such order of
application as Secured Party may determine, and Secured Party may, from
time to time, in its discretion (but without any obligation to do so),
release all or any of such balance to Borrower.
IV. Adjustments and Returned and Repossessed Goods. After the
occurrence of an Event of Default hereunder, in the event Borrower obtains
possession (by return, repossession or otherwise) of any goods, the sale or
lease of which shall have given rise to any Account, Borrower will not later
than ten (10) days thereafter, pay to Secured Party the greater of the unpaid
purchase price of such goods or the amount of any rebate, refund or allowance
granted by Borrower in connection with obtaining possession of such goods. After
the occurrence of an Event of Default hereunder, in the event Borrower grants to
any Account Debtor any other rebate, refund or allowance (other than any
allowance which has been deducted in computing the net amount of such invoice),
Borrower will not later than ten (10) days thereafter, pay to Secured Party the
amount of such rebate, refund or allowance so granted.
V. Certificates, Schedules and Reports. Borrower will from time to
time, as Secured Party may request, prepare and deliver to Secured Party at
Borrower's expense (i) schedules identifying each Account and (ii) such
additional schedules, certificates, test verifications, and reports respecting
the Collateral and the proceeds thereof as Secured Party may request. Any such
schedule, certificate or report shall be executed by a duly authorized officer
or partner, as the case may be, of Borrower and shall be in such form and detail
as Secured Party may specify. Any such schedule identifying any Account shall be
accompanied (if Secured Party so requests) by the originals or true and correct
copies (as Secured Party requests) of the invoice and other documents evidencing
such Account and evidence of shipment or performance. Borrower shall immediately
notify Secured Party of the occurrence of any event causing loss or depreciation
in value of any of the Inventory, and the amount of such loss or depreciation.
VI. Additional Agreements of Borrower. Borrower covenants and agrees
that:
(a) It will, upon request of Secured Party, execute such financing
statements and other documents (and pay the cost of filing or recording the
same in all public offices deemed necessary by Secured Party) and do such
other acts and things as Secured Party may from time to time request or
deem necessary to establish and maintain a valid first priority security
interest in the Collateral, this agreement of Borrower to include its
execution of applications and certificates of title naming Secured Party as
a secured party and the delivery of such to Secured Party;
(b) It will keep all Inventory at the locations named in Article
II(f) hereof unless Secured Party shall otherwise consent in writing;
(c) It will keep its books and records concerning Accounts at the
place stated in Article II(f) hereof, which books and records will be of
such character as will enable Secured Party or its designees to determine
at any time the status thereof, and Borrower will not, unless Secured Party
shall otherwise consent in writing, duplicate any such books or records at
any other address;
(d) It will furnish Secured Party such information concerning
Borrower, the Collateral and the Account Debtors as Secured Party may from
time to time reasonably request;
(e) It will permit Secured Party and its designees, from time to
time, to inspect the Inventory and to inspect, audit and make copies of and
extracts from all books and records and all other papers in the possession
of Borrower, and will, upon request of Secured Party, deliver to Secured
Party all of such books, records and papers which pertain to the Collateral
and the Account Debtors;
(f) It will, upon request of Secured Party, stamp on its books and
records concerning the Collateral, a notation, in form and substance
satisfactory to Secured Party, of the security interest of Secured Party
hereunder;
(g) Except for the sale or lease of Inventory in the ordinary
course of its business, it will not sell, lease, assign or create or permit
to exist any lien or encumbrance upon or security interest in any
Collateral to or in favor of anyone other than Secured Party;
(h) It will at all times keep all Collateral insured against loss,
damage, theft and other risks, in such amounts and companies and under such
policies and in such form, all as shall be satisfactory to Secured Party,
which policies shall provide that loss thereunder shall be payable to
Secured Party (and Secured Party may apply any proceeds of such insurance
which may be received by it toward payment of Obligations, whether or not
due, in such order of application as Secured Party may determine) and shall
provide for thirty (30) days' minimum written notice of cancellation or
amendment to Secured Party and that coverage in favor of Secured Party will
not be impaired in any way by any act, omission or default of Borrower or
any other person and, if Secured Party so requests, such policies and
certificates thereof shall be deposited with Secured Party;
(i) It will reimburse Secured Party for all expenses, including
without limitation reasonable attorneys' fees and expenses, incurred by
Secured Party in seeking to collect or enforce any rights under this
Agreement or incurred by Secured Party in seeking to collect or enforce any
of the Obligations;
(j) To the extent, if any, it shall have advised Secured Party that
any of the Collateral is being acquired with any advance made by Secured
Party, such proceeds may be disbursed by Secured Party directly to the
seller of such Collateral;
(k) It will pay promptly when due all taxes and assessments on the
Collateral, or for its use or operation, or upon this Agreement or any of
the Obligations, or with respect to the perfection of any security interest
or other lien hereunder (except as otherwise required by law);
(l) It will keep, store and hold all Inventory strictly in
accordance with the terms of any insurance policy covering the same;
(m) It shall notify Secured Party in writing at least fifteen (15)
days in advance of its new name and the effective date of its name change
before changing its name;
(n) It will at all times keep the Inventory in first class order
and repair, excepting any loss, damage or destruction which is fully
covered by proceeds of insurance, and will not use the Collateral in
violation of any law, regulation or insurance policy;
(o) Secured Party may from time to time at its option, perform any
agreement of Borrower hereunder which Borrower shall fail to perform and
take any other action which Secured Party deems necessary for the
maintenance or preservation of any of the Collateral or the interest of
Secured Party therein (including, without limitation, the discharge of
taxes or liens of any kind against the Collateral or the procurement of
insurance or the payment of warehousing charges, landlord's bills or other
charges), and Borrower agrees to forthwith reimburse Secured Party, on
demand, for all expenses of Secured Party in connection with the foregoing,
together with interest thereon at a rate per annum equal to the highest
rate then applicable to Borrower's Obligations under the Loan Agreement
from the date incurred until reimbursed by Borrower. Any amounts not so
reimbursed shall be added to and become a part of the Obligations. Secured
Party may, for the foregoing purposes, act in its own name or that of
Borrower and may also so act for the purpose of adjusting, settling or
canceling any policy of insurance on the Collateral or endorsing any draft
received in connection therewith in payment of a loss or otherwise for all
of which purposes Borrower hereby grants to Secured Party its power of
attorney, irrevocable during the term of this Agreement. This power of
attorney shall not be affected by the subsequent disability or incapacity
of Borrower and shall in all respects constitute a durable power of
attorney.
VII. Defaults. The occurrence of any one of the following events after
a Triggering Event has occurred shall constitute a default ("Event of Default")
by Borrower under this Agreement: (a) non-payment of any principal of or
interest on any of the Obligations owed by Borrower to Secured Party as and when
the same shall become due and payable, whether by reason of demand, acceleration
or otherwise; (b) default by Borrower in the due performance or observance of
any of the terms, provisions, covenants or agreements contained in this
Agreement; (c) any representation or warranty made by Borrower in this Agreement
shall prove to be untrue or incorrect in any material respect; (d) any Obligor
(which term, as used herein, shall mean Borrower and each other party primarily
or secondarily liable to Secured Party on any of the Obligations) shall become
insolvent in either the equity or bankruptcy sense of the term; (e) any Obligor
shall (i) apply for or consent to the appointment of a receiver, trustee,
custodian, liquidator, sequestrator or similar official of such Obligor or of
all or a substantial part of its assets, (ii) be unable, or admit in writing its
inability, to pay its debts as they mature, (iii) make a general assignment for
the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file
a voluntary petition in bankruptcy or seek an arrangement with creditors, or
take advantage of any bankruptcy, reorganization or insolvency law or file an
answer admitting the material allegations of a petition filed against such
Obligor in any bankruptcy, reorganization or insolvency proceedings, or (vi)
take any action to effectuate any of the foregoing; (f) loss, theft, damage,
destruction, sale or encumbrance to or of any of the Collateral or the making of
any levy, seizure or attachment thereof or thereon; (g) death of any Obligor who
is a natural person or of any partner of any Obligor which is a partnership; (h)
dissolution, termination of existence or operations, merger, consolidation or
transfer of a substantial part of the property of any Obligor which is a
corporation or partnership; (i) any event which results in the acceleration of
the maturity of any present or future indebtedness of Borrower to any other
creditor under any note, indenture, agreement or undertaking; or (j) any Obligor
shall be declared by Secured Party to be in default on, or pursuant to the terms
of, (i) any other present or future obligation to Secured Party, including
without limitation any loan, line of credit, revolving credit, guaranty or
letter of credit reimbursement obligation, or (ii) any other present or future
agreement purporting to convey to Secured Party a lien or encumbrance upon, or a
security interest in, any of the property or assets of such Obligor.
VIII. Remedies. Upon the occurrence of an Event of Default: (a)
notwithstanding any provision contained in any agreement secured hereby to the
contrary, Secured Party shall be under no further obligation to make any further
advances required by such agreement; (b) Secured Party may, by written notice to
Borrower effective upon mailing or delivery, declare the principal of and the
interest on all of the Obligations of Borrower to Secured Party to be forthwith
due and payable, whereupon all such indebtedness, liabilities and other
obligations shall become forthwith due and payable, notwithstanding any other
terms thereof or hereof; (c) whether or not such indebtedness, liabilities or
other obligations are declared to be forthwith due and payable, Secured Party
shall have the right to take immediate possession of the Collateral covered
hereby, and, for that purpose may pursue the same wherever said Collateral may
be found, and may enter upon any of the premises of Borrower with or without
force or process of law, wherever said Collateral may be or may be supposed to
be, and search for the same, and, if found, take possession of and remove and
sell and dispose of said Collateral, or any part thereof; (d) Secured Party may
notify any Account Debtor or all Account Debtors to make payments under the
Accounts directly to Secured Party and demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose and realize on the Accounts as Secured
Party may determine; (e) Secured Party may exercise any one or more of the
rights and remedies accruing to a secured party under the Uniform Commercial
Code of the relevant state or states and any other applicable law upon default
by a debtor; and (f) Secured Party may enter, with or without process of law and
without breach of the peace, any premises where the books and records of
Borrower pertaining to the Accounts or the Inventory are or may be located, and
without charge or liability on the part of Secured Party therefor seize and
remove said books and records from said premises or remain upon said premises
and use the same for the purpose of collecting, preparing and disposing of the
Accounts and for the purpose of identifying and locating any of the Inventory.
Borrower shall, upon Secured Party's request, assemble the Collateral and make
the Collateral available to Secured Party at any place designated by Secured
Party which is reasonably convenient to Borrower.
IX. Foreclosure. Foreclosure on the Collateral covered hereby may be
had at public or private sale or sales, disposing of such portion or portions of
the Collateral at each such sale, for cash or on credit, on such terms, at such
place or places and with or without the Collateral being present at such sale,
all as Secured Party in its absolute discretion shall determine from time to
time. In the case of public sale, notice thereof shall be deemed and held to be
adequate and reasonable if such notice shall appear three (3) times in a
newspaper published in the City or County wherein the sale is to be held, the
first such publication being at least ten (10) days before such sale and the
last such publication being not more than three (3) days before such sale. In
the case of a private sale, notice thereof shall be deemed and held to be
adequate and reasonable if such notice shall be mailed to Borrower at its last
known address at least ten (10) days before such sale. The enumeration of these
methods of notice shall not be deemed or construed to render unreasonable any
other method of notice which would otherwise be reasonable under the
circumstances.
X. Application of Proceeds and Deficiency. Secured Party may apply the
net proceeds of any sale, lease or other disposition of the Collateral, after
deducting all costs and expenses of every kind incurred therein or incidental to
the retaking, holding, preparing for sale, selling, leasing or the like of the
Collateral on Borrower's premises, or elsewhere, or in any way related to
Secured Party's rights thereunder (including, without limitation, attorneys'
fees and expenses, court costs, bonds and other legal expenses, insurance,
security guard and alarm expenses incurred in connection with the holding of the
Collateral, advertisements of sale of the Collateral and rental and utilities
expense on the premises or elsewhere in connection with storage and sale of the
Collateral) to the payment, in whole or in part, of the Obligations of Borrower
to the Secured Party, whether due or not due, absolute or contingent, and only
after payment by Secured Party of any other amounts required by any existing or
future provision of law (including Section 9-504(1)(c) of the Uniform Commercial
Code or any comparable statutory provision of any jurisdiction in which any of
the Collateral may at the time be located) need Secured Party account to
Borrower for the surplus, if any. Borrower shall remain liable to Secured Party
for the payment of any deficiency, with interest.
XI. Secured Party's Care of Collateral. Secured Party shall be deemed
to have exercised reasonable care in the custody and preservation of any of the
Collateral in its possession if it takes such action for that purpose as
Borrower requests in writing, but failure of Secured Party to comply with any
such request shall not of itself be deemed a failure to exercise reasonable care
and no failure of Secured Party to preserve or protect any rights with respect
to such Collateral against prior parties or to do any act with respect to the
preservation of such Collateral not so requested by Borrower shall be deemed a
failure to exercise reasonable care in the custody or preservation of such
Collateral.
XII. Amendment and Waiver. Secured Party shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver whatsoever shall be valid unless in writing signed by
Secured Party, and then only to the extent therein set forth. A waiver by
Secured Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Secured Party would otherwise
have had on any future occasion. This Agreement may not be amended except by a
writing duly executed by Borrower and Secured Party.
XIII. Durable Power of Attorney. Borrower hereby makes, constitutes and
appoints Secured Party the true and lawful agent and attorney-in-fact of
Borrower with full power of substitution (a) to receive, open and dispose of all
mail addressed to Borrower relating to the Collateral, (b) if an Event of
Default has occurred, to notify and direct the United States Post Office
authorities by notice given in the name of Borrower and to sign on behalf of
Borrower, to change the address for delivery of all mail addressed to Borrower
relating to the Collateral to an address to be designated by Secured Party, and
to cause such mail to be delivered to such designated address where Secured
Party may open all such mail and remove therefrom any notes, checks,
acceptances, drafts, money orders or other instruments included in the
Collateral in which Secured Party has a security interest under the terms of
this Agreement, with full power to endorse the name of Borrower upon any such
notes, checks, acceptances, drafts, money orders, instruments or other documents
relating to the Collateral or security of any kind and to effect the deposit and
collection thereof, and Secured Party shall have the further right and power to
endorse the name of Borrower on any documents relating to the Collateral, (c) to
sign the name of Borrower to drafts against its debtors, to notices to such
debtors, to assignments and notices of assignments, financing statements or
other public records or notices and all other instruments and documents, (d) to
do any and all things necessary and take such actions in the name and on behalf
of Borrower to carry out the intent of this Agreement, including, without
limitation, the grant of the security interest granted under this Agreement and
to perfect and protect the security interest granted to Secured Party in respect
to the Collateral and Secured Party's rights created under this Agreement.
Borrower agrees that neither Secured Party nor any of its agents, designees or
attorneys-in-fact will be liable for any acts of commission or omission, or for
any error of judgment or mistake of fact or law in respect to the exercise of
the power of attorney granted under this Section. The power of attorney granted
under this Section shall be irrevocable during the term of this Agreement. This
power of attorney shall not be affected by the subsequent disability or
incapacity of the Borrower and shall in all respects constitute a durable power
of attorney.
XIV. Notices. All notices provided for herein shall be in writing and
shall be deemed to have been given when delivered personally or when deposited
in the United States mail, registered or certified mail, return receipt
requested and postage prepaid, addressed as follows, or to such other address as
may hereafter be designated in writing by the respective parties hereto: (a) if
to Secured Party to 1401 S. Brentwood Blvd., St. Louis, Missouri 63144,
Attention: Patricia A. O'Herin, and (b) if to Borrower, to the address of the
principal place of business of Borrower listed at the end of this Agreement.
XV. Remedies Cumulative. All rights, remedies and powers granted to
Secured Party herein or in any other agreement given to Secured Party shall be
cumulative and may be exercised singly or concurrently.
XVI. Applicable Law and Severability. It is the intention of the
parties hereto that this Agreement is entered into pursuant to the provisions of
the Uniform Commercial Code as it is in force in the State of Missouri (the
"Code"). Any applicable provisions of the Code, not specifically included
herein, shall be deemed a part of this Agreement in the same manner as if set
forth herein at length; and any provisions of this Agreement that might in any
manner be in conflict with any provision of the Code shall be deemed to be
modified so as not to be inconsistent with the Code. In all respects this
Agreement and all transactions, assignments and transfers hereunder, and all the
rights of the parties, shall be governed as to validity, construction,
enforcement and in all other respects by the laws of the State of Missouri. To
the extent any provision of this Agreement is not enforceable under applicable
law, such provision shall be deemed null and void and shall have no effect on
the remaining portions of this Agreement. The headings of the paragraphs hereof
shall not be considered in the construction or interpretation of this Agreement.
XVII. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower and Secured Party and their respective
heirs, executors, administrators, personal representatives, successors and
assigns, except that Borrower may not assign any of its rights or delegate any
of its obligations under this Agreement.
XVIII. Other Obligations. Nothing contained in this Agreement shall be
deemed or held to impair or limit in any way the enforcement of the terms of any
instrument evidencing any indebtedness, liability or other obligation of
Borrower to Secured Party. Secured Party shall have no obligation or liability
under any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Borrower thereunder or to take any action to collect or
enforce any claim for payment included in the Collateral.
XIX. Duration of Security Interest. This Agreement shall continue in
full force and effect and the security interest granted hereby and all of the
representations, warranties, covenants and agreements of Borrower hereunder and
all of the terms, conditions and provisions hereof relating thereto shall
continue to be fully operative until such time as (a) Borrower shall have paid
or caused to be paid, or otherwise discharged, all Obligations to Secured Party
and (b) there shall be no remaining obligation of Secured Party to advance funds
to Borrower under any loan agreement or credit agreement or otherwise. Borrower
expressly agrees that to the extent a payment or payments to Secured Party, or
any part thereof, are subsequently invalidated, declared to be void or voidable
or set aside and are required to be repaid to a trustee, custodian, receiver or
any other party under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment or repayment, the obligation
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if said payment had not been made.
XX. Miscellaneous. If more than one party shall execute this Agreement,
the term "Borrower" shall mean all parties signing this Agreement and each of
them, and all such parties shall be jointly and severally obligated hereunder.
The neuter pronoun, when used herein, shall include the masculine and feminine
and also the plural. If this Agreement is not dated when executed by Borrower,
Secured Party is authorized, without notice to Borrower, to date this Agreement.
To the extent of any inconsistencies between the terms and provisions of this
Agreement and the terms and provisions of the Loan Agreement, the terms and
provisions of the Loan Agreement shall govern and control.
IN WITNESS WHEREOF, Borrower has executed this Security Agreement at
St. Louis, Missouri this 30th day of March, 1998.
IN THE EVENT ANY OF THE OBLIGATIONS SECURED HEREBY IS PAYABLE ON
DEMAND, NEITHER THIS AGREEMENT NOR ANYTHING CONTAINED HEREIN SHALL BE DEEMED TO
ALTER OR IMPINGE UPON THE DEMAND CHARACTER OF SUCH OBLIGATION.
--------------------------------
(Borrower)
By
Title:
Address of Principal Place of Business of Borrower
and Location of Books and Records:
3600 Mueller Road
St. Charles, Missouri
<PAGE>
Exhibit A
Additional Locations of Places of Business or Inventory
1. 3030 North Highway 94
St. Charles, Missouri
2. 2629-2635 Esthner Court
Wichita, Kansas
3. 204 H. Street
Auburn, Washington
2104 North 170th Street East Avenue
Tulsa, Oklahoma 74116
Peat Marwick LLP
10 South Broadway Telephone 314 444 1400 Fax 314 444 1470
Suite 900
St. Louis, MO 63102-1761
Securities and Exchange Commission April 29, 1998
Washington, DC 20549
Ladies and Gentlemen:
We were previously principal accountants for Leonard's Metal, Inc. (whose name
has subsequently been changed to LMI Aerospace, Inc.) and subsidiaries. On March
3, 1998, we resigned and withdrew our previously issued audit reports as of and
for the years ended December 31, 1996 and 1995. We have read LMI Aerospace,
Inc.'s statements included in Form S-1 dated April 29, 1998, and we agree with
such statements.
/s/ KPMG Peat Marwick LLP
Exhibit 21.1
List of Subsidiaries
LMI Finishing, Inc.
Leonard's Metal, Inc.
We consent to the reference to our firm under the caption "Experts" and in the
headnotes to "Selected Consolidated Financial Information" and to the use of our
report dated April 20, 1998 (except Note 12, as to which the date is
________________, 1998), in the Registration Statement (Form S-1 No.
333-_________) and related Prospectus of LMI Aerospace, Inc. for the
registration of 2,300,000 shares of its common stock.
Ernst & Young LLP
St. Louis, Missouri
The foregoing consent is in the form that will be signed upon the completion of
the restatement of capital accounts described in Note 12 to the financial
statements.
/s/Ernst & Young LLP
St. Louis, Missouri
April 27, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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