SCHEDULE 14A
(Rule 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy [ ] Confidential, for Use of the Commission
Statement Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LMI AEROSPACE, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title to each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
LMI Aerospace, Inc.
3600 Mueller Road
St. Charles, Missouri 63302
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 13, 1999
TO OUR SHAREHOLDERS:
The Annual Meeting of the Shareholders of LMI Aerospace, Inc., a Missouri
corporation, will be held at the Club Hotel by Doubletree, St. Louis Airport,
4600 Natural Bridge Road, St. Louis, Missouri 63134, at 10:00 a.m. local time on
Thursday, May 13, 1999 for the following purposes:
1. To elect two Class I Directors for a term expiring in 2002 or
until their successors are elected and qualified;
2. To ratify the selection of Ernst & Young LLP to serve as the
Company's independent auditor; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 31, 1999, as the
record date for the determination of Shareholders entitled to notice of and to
vote at the meeting and any adjournment thereof. A list of all Shareholders
entitled to vote at the meeting, arranged in alphabetical order and showing the
address of and number of shares registered in the name of each Shareholder, will
be open during usual business hours to the examination of any Shareholder for
any purpose germane to the annual meeting for ten days prior to the meeting at
the office of the Company set forth above.
A copy of the Company's annual report for its fiscal year ended December 31,
1998, accompanies this notice.
By Order of the Board of Directors,
Lawrence E. Dickinson, Secretary
St. Charles, Missouri
April 13, 1999
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN, DATE
AND RETURN YOUR PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE SO THAT YOUR
SHARES MAY BE REPRESENTED AND VOTED AT THE MEETING ACCORDING TO YOUR WISHES.
YOUR PROXY WILL NOT BE USED IF YOU ATTEND AND VOTE AT THE MEETING IN PERSON.
<PAGE>
LMI Aerospace, Inc.
3600 Mueller Road
St. Charles, Missouri 63302
PROXY STATEMENT
Solicitation of Proxies
The enclosed proxy is solicited by the Board of Directors of LMI
Aerospace, Inc. (the "Company") to be voted at the Annual Meeting of
Shareholders of the Company to be held at the Club Hotel by Doubletree, St.
Louis Airport, 9600 Natural Bridge Road, St. Louis, Missouri, beginning at 10:00
a.m. local time on Thursday, May 13, 1999, or at any adjournment thereof.
Whether or not you expect to attend the meeting in person, please return your
executed proxy in the enclosed envelope and the shares represented thereby will
be voted in accordance with your wishes. In addition to solicitation by mail,
officers, directors and employees of the Company may solicit personally or by
mail, telephone, or telegraph if proxies are not promptly received. However,
except with respect to printing and mailing expenses, the Company does not
expect to incur out-of-pocket expenses in soliciting proxies. The accompanying
Notice of Annual Meeting, this Proxy Statement and the enclosed form of proxy
are first being mailed or given to Shareholders on or about April 13, 1999.
Banks, brokers, and other custodians, nominees, and fiduciaries will be
requested to send proxy materials to beneficial owners and to request voting
instruction. The Company will reimburse them for their out-of-pocket expenses in
so doing.
Revocation of Proxy
If, after sending in your proxy, you decide to vote in person or desire
to revoke your proxy for any other reason, you may do so by notifying the
Secretary of the Company in writing of such revocation at any time prior to the
voting of the proxy. An executed proxy with a later date will also revoke a
previously furnished proxy.
Record Date
Only Shareholders of record at the close of business on March 31, 1999
will be entitled to vote at the meeting or any adjournment thereof.
Actions to be Taken Under Proxy
Unless otherwise directed by the giver of the proxy, the persons named
in the enclosed form of proxy, that is, Ronald S. Saks, or, if unable or
unwilling to serve, Lawrence J. LeGrand, will vote:
(A) FOR the election of the persons named herein as nominees for Class I
Directors of the Company for a term expiring at the 2002 Annual Meeting
of Shareholders until their successors have been duly elected and
qualified;
(B) FOR the ratification of the engagement of Ernst & Young LLP as the
Company's independent auditor; and
(C) According to such person's judgment on the transaction of such other
business as may properly come before the meeting or any adjournment
thereof.
Should any nominee named herein for election as a director become unavailable
for any reason, it is intended that the persons named in the proxy will vote for
the election of such other person in his stead as may be designated by the Board
of Directors. The Board of Directors is not aware of any reason that might cause
any nominee to be unavailable to serve.
Voting Securities and Security Ownership of
Certain Beneficial Owners and Management
On March 31, 1999, the record date of the Shareholders entitled to vote
at the Annual Meeting, there were outstanding 8,295,612 shares of Common Stock
$0.02 par value per share, value of the Company, each of which is entitled to
one vote on all matters submitted, including the election of directors.
Under applicable State law and the provisions of the Company's Articles
of Incorporation and By-laws, the affirmative vote of the holders of a majority
of the issued and outstanding shares voting in person or by proxy is required to
approve any matter that may come before the Annual Meeting of Shareholders,
including the election of directors. A majority of the outstanding shares
present or represented by proxy shall constitute a quorum at the meeting. Shares
as to which voting instructions are given on at least one of the matters to be
voted, abstentions from voting, votes which are withheld, and all shares held by
a broker who lacks authority to vote such shares ("broker non-votes"), will be
considered present for purposes of determining the presence of a quorum. For
purposes of determining if a proposal or director nominee has received a
majority vote, abstentions, withheld votes and broker non-votes shall not be
included in the vote totals and, therefore, will have no effect on the vote.
Votes will be counted by duly appointed inspectors of election, whose
responsibilities are to ascertain the number of shares outstanding and the
voting power of each, determine the number of shares represented at the meeting
and the validity of proxies and ballots, count all votes and report the results
to the Company.
The following table sets forth as of March 31, 1999, the beneficial
ownership of each current director (including the nominees for election as
directors), each of the executive officers named in the Summary Compensation
Table set forth herein, the executive officers and directors as a group, and
each other Shareholder known to the Company to own beneficially more than 5% of
the outstanding Common Stock. Unless otherwise indicated, the Company believes
that the beneficial owners set forth in the table have sole voting and
investment power.
Amount and
Nature of
Name of Beneficial Percent of
Beneficial Owner Ownership Class
- ---------------- ---------- ----------
Ronald S. Saks(1) 2,778,043 33.5%
Union Planters Trust &
Investment Management, as 978,238 11.8%
trustee for the Profit
Sharing Plan(2)
Joseph and Geraldine Burstein(3) 599,296 7.2%
Duane E. Hahn(4) 359,883 4.3%
Sanford S. Neuman(5) 286,240 3.5%
Lawrence J. LeGrand(6) 263,200 3.2%
Robert T. Grah(7) 78,643 *
Phillip A. Lajeunesse(8) 55,249 *
Alfred H. Kerth, III 10,000 *
Thomas M. Gunn 2,000 *
Thomas G. Unger 2,000 *
All directors & executive
officers as a group (14 in group) 4,529,760 53.5%
* Less than 1%.
(1) Includes 805 shares held by Union Planters Trust & Investment Management
for the benefit of Mr. Saks. Also includes 2,777,238 shares of Common Stock
held of record by the Ronald S. Saks Revocable Trust U/T/A dated June 21,
1991, for which Mr. Saks is the trustee. Mr. Saks address is 3030 N.
Highway 94, St. Charles, Missouri 63302.
(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) Ronald S. Saks (805); (ii) Duane E. Hahn
(63,783); (iii) Robert T. Grah (30,938); and (iv) Phillip A. Lajeunesse
(14,124). The address of Union Planters Trust & Investment Management is
1401 South Brentwood Blvd., 9th Floor, St. Louis, Missouri 63144.
(3) All such shares of Common Stock are held of record by the 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 63,783 shares of Common Stock held of record by Union Planters
Trust and Investment Management 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 101
Western Avenue, Auburn, Washington 98001.
(5) Mr. Neuman's address is 101 South Hanley, St. Louis, Missouri 63105.
(6) Includes 32,900 shares of Common Stock issuable upon the exercise of
immediately exercisable options to purchase such shares. Mr. LeGrand's
address is 3030 N. Highway 94, St. Charles, Missouri 63302.
(7) Includes 30,938 shares of Common Stock held of record by Union Planters
Trust and Investment Management for the benefit of Mr. Grah. Also includes
16,450 shares of Common Stock issuable upon the exercise of immediately
exercisable options to purchase such shares. Mr. Grah's address is 2104 N.
170th Street E. Avenue, Tulsa, Oklahoma 74116.
(8) Includes 14,124 shares of Common Stock held of record by Union Planters
Trust and Investment Management for the benefit of Mr. Lajeunesse. Also
includes 16,450 shares of Common Stock issuable upon the exercise of
immediately exercisable options to purchase such shares. Mr. Lajeunesse's
address is 2629 Esthner Court, Wichita, KS 67213.
PROPOSAL 1 - ELECTION OF DIRECTORS
Information About The Nominees and Current Directors
The Company's Restated Articles of Incorporation and Amended and
Restated Bylaws provide for a division of the Board of Directors into three
classes. One of the classes is elected each year to serve a three-year term. The
term of each of the current Class I directors expires at the 1999 Annual Meeting
of Shareholders. It is the intention of the persons named in the accompanying
proxy, unless otherwise directed, to vote for the election of the Class I
nominees listed below to serve until the 2002 Annual Meeting of Shareholders.
The following table sets forth for each nominee and director continuing
in office, such director's age, principal occupation for at least the last five
years, present position with the Company, the year in which such director was
first elected or appointed a director (each serving continuously since first
elected or appointed), directorships with other companies whose securities are
registered with the Securities and Exchange Commission, and the class and
expiration of such director's term as director.
Class I: To be elected to serve as director until 2002
Service as
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
Sanford S. Neuman 63 Assistant Secretary of the Company; 1984
A member of the law firm, Gallop,
Johnson & Neuman, L.C. for more
than the last five years.
Duane E. Hahn 46 Vice President, Regional Manager 1990
since 1996; prior thereto, Vice
President and General Manager of
the Auburn facility since 1988;
prior thereto, Assistant General
Manager since 1984.
Class II: To continue to serve as director until 2000
Service as
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
Thomas M. Gunn 55 Retired. Prior to 1997, Senior Vice 1998
President of Business Development
for McDonnell Douglas.
Alfred H. Kerth, III 47 President and Chief Operating Officer 1998
of the Eads Center; prior thereto,
Senior Vice President and Senior
Partner at Fleishman-Hillard in
St. Louis since 1987.
Thomas Unger 50 Chief Executive Officer of ATAB 1999
Corporation since early 1998; prior
thereto, Chief Executive Officer of
Tyee Aircraft since 1982.
Class III: To continue to serve as director until 2001
Service as
Name Age Principal Occupation Director Since
---- --- -------------------- --------------
Ronald S. Saks 55 Chief Executive Officer and President 1984
since 1984.
Joseph Burstein 71 Chairman of the Board of the Company 1984
since 1984.
Lawrence J. LeGrand 47 Chief Operating Officer of the Company 1998
in April 1998; prior thereto, partner
of KPMG Peat Marwick, LLP.
Director's Compensation
The Company paid to each director who is not an employee of the Company
$1,500 for each Board meeting or committee meeting attended, and reimbursed 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 received compensation for services rendered as a director.
Information Concerning the Board of Directors and Committees
During the fiscal year that ended on December 31, 1998, the Board of
Directors held two regular meetings. The Board of Directors held no special
meetings. Each director attended 75% or more of the aggregate of (i) the total
number of meetings of the Board of Directors held during the period and (ii) the
total number of meetings held during the period by all committees of the Board
of Directors on which he served.
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee evaluates significant matters relating to the
audit and internal controls of the Company and reviews the scope and results of
the audits conducted by the Company's independent public accountants. During
fiscal 1998, the Audit Committee met twice. The Compensation Committee reviews
the Company's remuneration policies and practices, including executive
compensation, and administers the Company's stock option plans. During fiscal
1998 the Compensation Committee met twice. See the "Compensation Committee
Report" beginning on page 7 for a discussion of the key elements and policy of
the Company's executive compensation program.
The Board of Directors evaluates and nominates qualified nominees for
election or appointment as directors and qualified persons for selection as
Executive Officers. The Board of Directors will give appropriate consideration
to a written recommendation by a Shareholder for the nomination of a qualified
person to serve as a director of the Company, provided that such recommendation
contains sufficient information regarding the proposed nominee for the Board of
Directors to properly evaluate such nominee's qualifications to serve as a
director.
Section 16(a) Beneficial Reporting Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Form 5 and
amendments thereto (or written representations that no Form 5 is required)
furnished to the Company, the Company believes that all such reports were timely
filed, with the exception that Alfred H. Kerth, III, failed to timely file a
statement of beneficial ownership on Form 4, following his purchase of 10,000
shares of Company Common Stock in August of 1998.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table reflects compensation
paid or payable for fiscal years 1998 and 1997 with respect to the Company's
chief executive officer and each of the four most highly compensated executive
officers whose 1998 salaries and bonuses combined exceeded $100,000 in each
instance.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------------------------------------------------
Restricted Securities All Other
Stock Award Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Other ($)(2) Options (#) ($)
- ------------------------------ ------- ----------- ------------ ------------ --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald S. Saks............... 1998 240,000 70,508 $ 515(1) 0 0 0
President and CEO
1997 150,000 246,266 1,795 0 0 0
Lawrence J. LeGrand.......... 1998 152,800 86,767 0 200,000 32,900 0
COO
Duane E. Hahn................ 1998 150,000 83,796 515(1) 0 0 0
Vice President
1997 105,000 209,748 1,795 0 0 0
Phillip A. Lajeunesse........ 1998 125,000 48,572 515(1) 0 0 0
General Manager
(Wichita, KS) 1997 92,500 102,300 1,795 0 0 0
Robert T. Grah............... 1998 105,000 48,572 515(1) 0 0 0
General Manager
(Tulsa, OK) 1997 69,999 81,736 1,732 0 0 0
<FN>
(1) Represents common stock contributed to the Company's profit sharing and
401(k) plan.
(2) The fair market value at the date of grant is deemed to be $6.079 per share,
based on an independent valuation obtained by the Company as of March 31, 1998,
adjusted for a 2.29 to 1 stock dividend.
</FN>
</TABLE>
Option Grants. The following table sets forth certain information with
respect to grants of stock options pursuant to the Company's 1989 Employee
Incentive Stock Option Plan (the "Option Plan") to each of the Named Officers
during the year ended December 31, 1998. No stock appreciation rights were
granted to the Named Officers during such year.
<PAGE>
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value At
----------------- Assumed Annual Rates Of Stock
- -------------------------------------------------------------------------------- price Appreciation For Option
Percent Of Term
Total ----------------------------------
Number of Options/SARs
Securities Granted To Exercise
Underlying Employees Of Base
Options/SARs In Fiscal Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
(a) (b) (c) (d) (e) (f) (g)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. LeGrand 32,900 (1) 41.9% $6.25 12/31/09 129,318 327,713
<FN>
(1) The option listed above was granted at fair market value on the date of
grant. The potential realizable value assumes a rate of annual compound
stock price appreciation of 5% and 10% from the date the option was
granted over the full option term. Such rates are required by the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future prices of the Common Stock.
</FN>
</TABLE>
Option Exercises and Fiscal Year End Values. The following table sets
forth certain information concerning option exercises and option holdings for
the year ended December 31, 1998 with respect to each of the Named Officers. No
options were exercised by the Named Officers during such year. No stock
appreciation rights were exercised by the Named Officers during such year nor
did any Named Officer hold any stock appreciation rights at the end of that
year.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
Number of
Securities
underlying Value of
Unexercised Unexercised
Options/SARs At In-The-Money
Fiscal Year Ended Options/ SARs At
Share (#) Fiscal Year End
Acquire On Value Exercisable/ ($) Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable(1)
(a) (b) (c) (d) (e)
- ------------------------------------- ---------------- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Duane E. Hahn 0 0 57,575/ 0 250,451/ 0
- ------------------------------------- ---------------- -------------------- -------------------- -------------------
Robert T. Grah 0 0 16,450/ 0 71,557/ 0
- ------------------------------------- ---------------- -------------------- -------------------- -------------------
Phillip A. Lajeunesse 0 0 16,450/ 0 71,557/ 0
- ------------------------------------- ---------------- -------------------- -------------------- -------------------
Lawrence J. LeGrand 0 0 32,900/ 0 0 / 0
<FN>
(1) The monetary value used in this calculation is $6.25 per share, the
fair market value of the stock as of December 31, 1998.
</FN>
</TABLE>
Employment Arrangements with Named Officers
On January 1, 1997, the Company entered into an employment agreement
with Ronald S. Saks providing for his employment as President and Chief
Executive Officer. The agreement is for a six-year period that automatically
extends for successive one-year periods. Mr. Saks' employment agreement provides
for an annual base salary in 1997 of $150,000 and of $240,000 for the remaining
years of his contract payable in equal monthly installments. Mr. Saks is also
entitled to a bonus based on the performance of the Company (the "Performance
Bonus") if its annual net income as of the last day of each fiscal year is more
than $5 million. Such bonus is capped at $120,000 for each year subsequent to
1997.
As of May 1, 1998, the Company entered into an employment agreement
with Lawrence J. LeGrand providing for his employment as the Chief Operating
Officer of the Company. The agreement will terminate on December 31, 2002 and is
automatically extended for successive one-year periods. Mr. LeGrand's employment
agreement provides for an annual base salary of $225,000 payable in equal
monthly installments during the period May 1, 1998 through December 31, 2002.
The agreement provides for a Performance Bonus if the Company's annual net
income as of the last day of each fiscal year is more than $5 million. Such
bonus is capped at $150,000.
On January 1, 1998, the Company entered into an employment agreement
with Duane E. Hahn providing for his employment as the Vice President and
Regional Manager for the Company's facilities located in Auburn, Washington,
Wichita, Kansas, and at the location of the LMI Finishing, Inc. plant in Tulsa,
Oklahoma. The agreement is for a two-year period that automatically extends for
successive one-year periods. Mr. Hahn's employment agreement provides for a base
salary of $150,000 payable in equal monthly installments. Mr. Hahn is also
entitled to a Performance Bonus if the Company's annual net income as of the
last day of each fiscal year is more than $5 million. Such bonus is capped at
$75,000.
On January 1, 1998, the Company entered into an employment agreement
with Phillip A. Lajeunesse providing for his employment as the General Manager
for the Company's facility in Wichita, Kansas. The agreement is for a two-year
period that automatically extends for successive one-year periods. Mr.
Lajeunesse's employment agreement provides for a base salary of $125,000 in 1998
and $135,000 in 1999 payable in equal monthly installments. Mr. Lajeunesse is
also entitled to a Performance Bonus if the Company's annual net income as of
the last day of each fiscal year is more than $5 million. Such bonus is capped
at $50,000.
On January 1, 1998, the Company entered into an employment agreement
with Robert T. Grah providing for his employment as the General Manager for LMI
Finishing Inc.'s facility in Tulsa, Oklahoma. The agreement is for a two-year
period that automatically extends for successive one-year periods. Mr. Grah's
employment agreement provides for a base salary of $105,000 for 1998 and
$115,000 for the 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 August 25, 1998, Precise Machine Partners, L.L.P. entered into an
employment agreement with John R. Krystinik, for his employment as General
Manager of the partnership's facility in Irving, Texas. The agreement is for a
one year term of employment. Mr. Krystinik's employment agreement provides for a
base salary of $130,000 payable in equal monthly installments. Mr. Krystinik is
also entitled to a performance bonus of $30,000.
All such employment agreements provide that in addition to the base
salary and formula based Performance Bonus, the employees may receive such
additional bonus as the Board may authorize, and shall also participate in any
health, accident and life insurance programs and other benefits available to the
employees of the Company. The employment agreements also provide that the
employees are entitled to an annual paid vacation as well as the use of an
automobile.
Each employment agreement described above may be terminated upon: (i)
the dissolution of the Corporation (in the case of Krystinik, the dissolution of
Precise Machine Partners, L.L.P.), (ii) the death or severe disability of the
employee, or (iii) 10 days written notice by the Company to the employee upon
breach or default by the employee of any terms of the agreement.
Compensation Committee Interlocks and Insider Participation
The following persons are on the Compensation Committee of the Company:
Ronald S. Saks, Lawrence J. LeGrand, Sanford S. Neuman, Thomas M. Gunn and
Alfred H. Kerth, III. Mr. Saks is the president and CEO of the Company and Mr.
LeGrand is COO of the Company. Mr. Neuman is a member of the law firm, Gallop,
Johnson & Neuman, L.C., which has provided legal services to the Company in
prior years and is expected to provide legal services to the Company in the
future.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Overall Policy
The Company's executive compensation program is designed to be closely
linked to corporate performance and results via contractual agreements. The
overall compensation plan provides the Company's executive officers with the
opportunity to earn cash compensation based upon annual pretax income targets
and to gain additional stock ownership to drive long term growth in value for
all of the Company's Shareholders. The Company's compensation strategy is to
place significant portions of an executive's compensation package at risk,
thereby motivating these individuals to execute the tactics necessary to insure
continued growth and profitability.
The Compensation Committee was formed in 1998 in conjunction with the
Company's initial public offering. With the exception of the employment
agreement between the Precise Machine Partners, L.L.P. and John R. Krystinik,
the contractual agreements with all current executives were approved by the
Board of Directors prior to the formation of the Compensation Committee. When
the Board approved the current employment agreements it was apprised of
competitive compensation levels of peers in the industry for similar job
functions to create a guideline for evaluating the terms of each employment
contract. Additionally, the Board was knowledgeable about the performance of
each of the executives when assessing the appropriateness of each employment
contract. Since the formation of the Compensation Committee, only the employment
agreement between John R. Krystinik and the Precise Machine Partners, L.L.P. was
issued, no other employment agreements for executives having been issued or
renewed. However, the Compensation Committee is apprised of each executive's
performance at each committee meeting.
Compensation of the President
The base salary and bonus package granted to Mr. Ronald S. Saks,
President of the Company, was based upon compensation packages for presidents
and chief executive officers of peer companies, performance of the Common Stock
of the Company given the significant ownership Mr. Saks has in the Company, and
the financial performance of the Company. Mr. Saks' base salary for 1998 and the
remaining four years covered by his employment agreement is $240,000.00 per
year. Mr. Saks is eligible for a performance bonus of 3% of the Company's pre-
tax income above $5 million, not to exceed $120,000 in any fiscal year. Based
upon the Company's financial performance in 1998, Mr. Saks would have earned the
maximum performance bonus of $120,000. However, in 1998 Mr. Saks approached the
Compensation Committee with a request to have his bonus limited to $70,000.00
for 1998 because the Company failed to reach volume and profitability levels
expected at the time of the Company's initial public offering. The Compensation
Committee did agree to limit Mr. Saks' performance bonus but noted that various
items outside of Mr. Saks' control combined to inhibit the Company's expected
growth and that future requests for similar consideration would not be
entertained.
Ronald S. Saks
Lawrence J. LeGrand
Sanford S. Neuman
Alfred H. Kerth, III
Thomas M. Gunn
Comparison of LMI Aerospace, Inc. Cumulative Total Return
Set forth below is a line graph presentation comparing cumulative
Shareholder returns since June 30, 1998, the date of the Company's initial
public offering, on an indexed basis with the Standard & Poor's Small Cap
Aerospace/Defense Index (the "S & P Aerospace/Defense Index") which is a
nationally recognized industry standard index, and an index of peer companies
selected by the Company. The graph assumes the investment of $100 in LMI
Aerospace, Inc. Common Stock, the S & P Aerospace/Defense Index, and the peer
group index on June 30, 1998, as well as the reinvestment of all dividends.
There can be no assurance that LMI Aerospace, Inc. stock performance will
continue into the future with the same or similar trend depicted in the graph
below.
[EDGAR representation of data points used in printed graphic]
6/30/98 9/1/98 11/3/98 1/7/99 2/19/99
------- ------ ------- ------ -------
LMI 100 79.52 72.29 56.63 59.04
S&P Aerospace/Defense 100 74.58 89.21 100.74 77.26
Peer Group 100 71.33 67.90 78.30 72.42
The peer group companies are weighted based on market capitalization
and are as follows: Aerosonic Corp.; Allied Research Corp.; American Aircarriers
Support Inc.; CADE Industries; DRS Technologies Inc.; EDAC Technologies Corp.;
EDO Corp.; First Aviation Services Inc.; Hawker Pacific Aerospace; Herley
Industries Inc.; Hi-Shear Technology Corp.; SIFCO Industries; and Spacehab Inc.
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 that have occurred during the past fiscal year 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 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.
Sanford S. Neuman, a director of the Company, is a member of the law
firm, Gallop, Johnson & Neuman, L.C. which has provided legal services to the
Company in prior years and is expected to provide legal services to the Company
in the future.
[On August 25, 1998, Precise Machine Partners, L.L.P., a Texas limited
partnership of which a wholly-owned subsidiary of LMI Aerospace, Inc. is the
general partner, agreed to purchase the assets of Precise Machine Company, a
Texas corporation, for $2.7 million and the assumption of certain liabilities.
John R. Krystinik, who has since been retained as the General Manager of Precise
Machine Partners, L.L.P., was the President and the sole shareholder of Precise
Machine Company.]
The terms of each of the foregoing transactions were negotiated on an
arm's-length basis. All future transactions between the Company and its
officers, directors, principal Shareholders and affiliates must be approved by a
majority of the independent and disinterested outside directors.
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.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting of Shareholders and to be available to respond to appropriate
questions. Such representatives will have the opportunity to make a statement if
they desire to do so.
ANNUAL REPORT
The Annual Report of the Company for fiscal 1998 accompanies this
Notice of Annual Meeting and Proxy Statement.
FUTURE PROPOSALS
Shareholder proposals intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Company by December 15, 1999 for
inclusion in the Company's proxy statement and proxy relating to that meeting.
Upon receipt of any such proposal, the Company will determine whether or not to
include such proposal in the proxy statement and proxy in accordance with
regulations governing the solicitation of proxies.
In order for a Shareholder to bring other business before the
Shareholder meeting, timely notice must be given to the Company by February 28,
2000. Such notice must include a description of the proposed business and the
reasons therefor. The Board or the presiding officer at the Annual Meeting may
reject any such proposals that are not made in accordance with these procedures
or that are not a proper subject for Shareholder action in accordance with
applicable law. These requirements are separate from the procedural requirements
a Shareholder must meet to have a proposal included in the Company's proxy
statement.
OTHER BUSINESS
The Board of Directors knows of no other business that will be
presented for consideration at the Annual Meeting other than as set forth in the
Notice that accompanies this Proxy Statement. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matters in accordance with their best
judgment.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 1998 FILED
WITH THE COMMISSION IS AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE, UPON WRITTEN
REQUEST TO LMI AEROSPACE, INC., 3600 MUELLER ROAD, ST. CHARLES, MISSOURI 63302,
ATTENTION: SECRETARY.
By Order of the Board of Directors,
Lawrence E. Dickinson, Secretary
St. Charles, Missouri
April 13, 1999
<PAGE>
PROXY
LMI AEROSPACE, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 13, 1999
The undersigned hereby appoints Ronald S. Saks, with full power of substitution,
or if Ronald S. Saks is unable or declines to exercise such rights hereunder,
the undersigned appoints Lawrence J. LeGrand, with full power of substitution,
the true and lawful attorney and proxy of the undersigned to vote all the shares
of Common Stock, $0.02 par value per share, of LMI Aerospace, Inc. owned by the
undersigned at the Annual Meeting of Shareholders to be held at the Club Hotel
by Doubletree, St. Louis Airport, 9600 Natural Bridge Road, St. Louis, Missouri
at 10:00 a.m. local time, May 13, 1999, and at any adjournment thereof, on the
following items of business as set forth in the Notice of Annual Meeting and
Proxy Statement:
1. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below (or such other person designated
by the Board of Directors to replace any unavailable nominee)
to be allocated among such nominees in his discretion
|_| WITHHOLD AUTHORITY to vote for all nominees listed below
Nominees: Sanford S. Neuman and Duane E. Hahn
Instruction: To withhold authority to vote for any individual nominee, print
that nominee's name on the line provided below:
- ------------------------------------ ---------------------------------------
(Continued on other side)
<PAGE>
(Continued from other side)
2. RATIFICATION OF THE ENGAGEMENT OF ERNST & YOUNG AS INDEPENDENT AUDITOR:
|_| FOR |_| AGAINST |_| WITHHOLD AUTHORITY
3. OTHER MATTERS
In his discretion with respect to the transaction of such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS
SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE DIRECTORS NOMINATED
BY THE BOARD OF DIRECTORS, FOR THE RATIFICATION OF ERNST & YOUNG AND IN
THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS
THEREOF.
DATE ______________________________, 1999
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Please date and sign exactly as your name appears on the envelope. In the case
of joint holders, each should sign. When signing as attorney, executor, etc.,
give full title. If signer is a corporation, execute in full corporate name by
authorized officer.
