<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Commission file
ended June 30, 1996 number 1-5761
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LABARGE, INC.
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(Exact name of registrants specified in its charter)
Delaware 73-0574586
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
707 North Second Street, St. Louis, Missouri 63102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-231-5960
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.01 par value American Stock Exchange, Inc.
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
As of August 30, 1996, 15,601,891 shares of common stock of the registrant
were outstanding; the aggregate market value of the shares of common stock of
the registrant held by non-affiliates was approximately $57,187,000, based upon
the closing price of the common stock on the American Stock Exchange, Inc. on
August 30, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
See "Exhibits" on pages 9 through 11.
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PART I
Statements contained in this Report which are not historical facts are forward
looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created thereby.
Important factors which would cause the Company's actual results to differ
materially from those projected in, or inferred by, forward looking statements
are (but are not necessarily limited to) the following: the impact of
increasing competition or deterioration of economic conditions in the Company's
markets; further cutbacks in defense spending by the U.S. Government; failure
of the U.S. Food and Drug Administration to give final clearance to the Laser
Lancet(TM) developed for Venisect, Inc.; unexpected increases in the cost of
raw materials, labor and other resources necessary to operate the Company's
business; and the availability, amount, type and cost of financing for the
Company and any changes to that financing.
Item 1. Business
General Development of Business
LaBarge, Inc. (the "Company") became a Delaware corporation in 1968 as the
successor by merger to a company founded in 1953. The Company is engaged in
the engineering and manufacture of sophisticated electronic systems and
devices and complex interconnect systems.
For the past four years, the Company has focused on expanding into commercial
markets using the technologies it had historically developed for the defense
and aerospace markets. The Company has focused on markets which require
significant engineering effort to develop electronic products which are capable
of surviving harsh environmental conditions including temperature, shock and
vibration while maintaining high performance reliability. The Company's focus
is on the following markets: telecommunications, geophysical, medical,
aerospace and defense.
Commercial sales have grown from 10% of total sales in fiscal 1992 to 54% in
fiscal 1996. The extent of the change is further evidenced by the fact that
during the second half of fiscal 1996, the commercial sales were 66% of total
sales.
In fiscal 1996, the Company purchased the assets for $2.7 million and assumed
$.4 million of the liabilities of SOREP Technology Corporation ("SOREP") in
Houston, Texas. SOREP was renamed LaBarge/STC, Inc. and will continue to
operate at its Houston location.
LaBarge/STC, Inc. is engaged in the design and manufacture of custom hybrid
circuits and high temperature electronic assemblies used in oil and gas
exploration, drilling and production. This acquisition supports the Company's
efforts to expand in the geophysical market. In LaBarge/STC, Inc.'s most
recent fiscal year, sales were approximately $6 million and operating profit
was approximately 15%.
Also in fiscal 1996, the Company announced the formation of LaBarge Clayco
Wireless L.L.C., which is a fifty-fifty joint venture of LaBarge Wireless,
Inc., a wholly-owned subsidiary of LaBarge, Inc. and Clayco Construction
Company. LaBarge Clayco Wireless
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will provide engineering, project management, construction, installation and
testing services for the rapidly growing wireless telecommunications industry.
This joint venture complements the Company's activities in the design and
manufacture of sophisticated cable assemblies and electronic products used in
wireless telecommunications.
While fiscal 1996 did not bring final FDA clearance to market the Laser
Lancet(TM) as was hoped, although there can be no such assurance, management
remains confident that clearance will be received. The Laser Lancet(TM) was
developed for Venisect, Inc. under a technology licensing agreement with
Venisect. When, and if, cleared by the FDA, the Company will manufacture the
product as the market (see "Medical Market") demands. Any impact on the
Company's future sales cannot yet be determined.
In the second quarter of fiscal 1995, the Company sold its operations in
Flippin, Arkansas for $10.5 million in cash and $2.9 million in assumed
liabilities. The proceeds from the sale were used to reduce debt.
On June 25, 1996, the Company entered into a new lending agreement with
Boatmen's National Bank in St. Louis on terms far more favorable than those
previously available to the Company. Management believes this new agreement
will give the Company greater flexibility to pursue new opportunities for
growth.
Financial Information About Industry Segments
The Company conducts its operations through one industry segment, electronics
design and manufacturing and markets its products to the telecommunications,
geophysical, medical, aerospace and defense markets. In each market, the
Company engineers and manufactures sophisticated electronic systems and devices
and complex interconnect assemblies.
Narrative Description of Business
GENERAL. The Company engineers, manufactures, tests and sells sophisticated
electronic systems and devices and complex interconnect assemblies. Markets
for the Company's products are: telecommunications (primarily the wireless
segment), geophysical, medical equipment, aerospace, defense and various other
commercial/industrial markets. The Company's manufacturing facilities are
located in Arkansas, Missouri, Oklahoma and Texas. The Company employs
approximately 710 people.
The Company's backlog at June 30, 1996, was approximately $62.2 million, as
compared to $52.1 million at July 2, 1995. The backlog at June 30, 1996,
consisted of: $38.4 million of orders for various defense products compared to
$27.3 million at July 2, 1995 and $23.8 million of orders for commercial
products compared to $24.8 million at July 2, 1995. Generally, lead times on
commercial products are much shorter and orders are placed on a just-in-time
delivery basis. Substantially all of the defense backlog at June 30, 1996 is
pursuant to contracts containing cancellation and termination provisions.
Approximately $9.1 million of this backlog is not scheduled to ship within the
next 12 months pursuant to the shipment schedules contained in those contracts.
This compares to $4.7 million at year-end 1995.
MANUFACTURING. The Company has organized its engineering and production to
provide independent plant locations with specific design and manufacturing
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capabilities, which can serve most, if not all, markets. This approach allows
local management at each facility to concentrate the necessary attention on
specific customer needs and at the same time control all key aspects of the
engineering and manufacturing processes. Compliance with federal, state and
local environmental laws is not expected to materially affect the capital
expenditures, earnings or competitive position of the Company.
MARKETING. The Company has divided its business development efforts along
market lines, each headed by a business unit manager. This approach allows
each business unit to thoroughly understand and concentrate on the needs of the
customers in that market. There are four such business units at this time that
are supported by approximately eleven additional sales personnel and
approximately twenty-nine engineers and technicians. The Company seeks to
develop strong, long-term customer relationships, which will provide the basis
for future sales. These close relationships allow the Company to better
understand the customers' business needs and identify ways to provide greater
value to such customers.
DEFENSE MARKET. The Company designs and manufactures products to Department of
Defense (DOD) and prime contractor specifications. The makeup of such products
varies with customer needs. In the past, products have included military
communications systems, multiplexers, command receivers, automatic direction
finding systems, printed circuit board assemblies, flexible printed circuitry
and various interconnect assemblies and systems. These products are used in
numerous military programs, including (among many others, the AEGIS Radar
System, Abrams M-1 Tank and the Bradley Fighting Vehicle, and are also
utilized in various naval shipboard command, control and communications
systems. Approximately 48% of total Company sales in fiscal 1996 were defense
related compared to 58% in 1995. In the fourth fiscal quarter of 1996, just
34% of sales were attributed to the defense market. The Company believes this
is more representative of future defense contributions.
In 1995 and prior years, the Company was dependent on the defense market for
more than 50% of its business. With the reductions in defense spending, and
the Company's growing commercial business, this dependence is declining. The
Company is, however, identifying new defense opportunities as many of the large
prime contractors are increasingly using subcontractors as a way to reduce
overhead costs.
AEROSPACE MARKET. The Company designs and manufactures high temperature cable
assemblies for jet engines; complex wiring harnesses for space launch vehicles
(including the Atlas/Centaur Rocket and the Space Shuttle); and a variety of
cable assemblies and wiring harnesses for satellites. Approximately 6% of the
Company's fiscal 1996 sales were for aerospace applications.
TELECOMMUNICATIONS MARKET. The Company's primary focus in the
telecommunications is on the rapidly growing wireless segment of the market,
with special emphasis on Personal Communication Systems ("PCS"). The Company
designs and manufactures sophisticated RF (radio frequency), data and power
cables; lightning protection equipment; and, a variety of ancillary
electrical/electronic equipment. The products are predominantly used in
wireless network construction, commonly referred to as infrastructure.
Through its wholly-owned subsidiary, LaBarge Wireless, Inc., the Company, during
1996, entered into a fifty-fifty joint venture with Clayco Construction Company
of St. Louis.
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The joint venture company, LaBarge Clayco Wireless L.L.C., provides cell-site
engineering, project management, construction, equipment installation and
testing services. LaBarge Clayco was formed late in the year and had little
impact on fiscal 1996 results. Given the rapid growth in PCS infrastructure
deployment, LaBarge Clayco could grow rapidly in 1997.
Approximately 26% of fiscal 1996 sales were attributable to the
telecommunications market.
MEDICAL MARKET. The Company designed and developed the Laser Lancet(TM), a
small medical laser, for Venisect, Inc. under a technology licensing agreement
with Venisect. The Company and Venisect are awaiting FDA clearance to market
the device for the purpose of perforating the skin to collect capillary blood
for clinical testing. While there can be no assurance, upon FDA clearance the
Company will manufacture the Laser Lancet(TM) for distribution by Venisect.
The Company believes there are other applications for similar laser technology.
One such application is laser-assisted transdermal drug delivery. During the
year, Venisect began clinical trials to demonstrate the viability of this
application.
In addition to its laser work with Venisect, the Company engineers and
manufactures a variety of electronic and electro-mechanical assemblies for use
in medical diagnostic equipment. Sales of all medical products accounted for
approximately 5% of the Company's total sales in fiscal 1996.
GEOPHYSICAL MARKET. The Company designs and manufactures a variety of
electronic products used in oil and gas exploration, drilling and production.
Products include cabling, seismic analysis computer, down-hole instrumentation
and high-power drive controls. Through its newly acquired subsidiary,
LaBarge/STC, Inc., it also designs and produces hybrid circuits used in the
same applications. Approximately 10% of fiscal 1996 sales were to the
geophysical industry. The Company expects this percentage to grow, due in part
to the acquisition.
SALES AND DISTRIBUTION. The Company has fifteen employees whose primary
responsibility is sales. Additionally, the Company's engineering and plant
management employees are very involved in sales activities. The Company's 1996
sales were made primarily to existing or prior customers, and are based upon
established relationships. With few exceptions, the Company's sales are made
pursuant to fixed-price contracts. Larger, long-term government contracts
generally have provisions for milestone or progress payments. The Company
normally carries inventories only related to specific contracts, and title
passes to the customer when products are shipped.
COMPETITION. There is intense competition in all of the Company's target
market areas. While the Company is not aware of another entity that competes
in all of its markets, there are numerous companies, many larger than the
Company, which compete in each of these markets. Frequently, the Company's
customers have the ability to produce the products contracted to the Company
but, because of cost, capacity, engineering capability or other reasons, order
such products from the Company. The principal methods of competition are
price, service, quality and reliability, engineering expertise, technical
capability and overall project management capability. In fiscal 1996, sales to
8 customers represented approximately 78% of the Company's total sales revenue;
sales to Lockheed Martin Corporation (aerospace and
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defense markets) accounted for approximately 26%; Northern Telecom
(telecommunications market), approximately 25% and the U.S. Government,
approximately 6%. In fiscal 1995, sales to 7 customers represented 75% of the
Company's total sales revenue; sales to Lockheed Martin Corporation (aerospace
and defense markets) accounted for approximately 33.5%; General Electric
(aerospace, defense and medical markets), approximately 12.4%; and United
Defense (defense market), approximately 9.6% of sales.
Financial Information About Foreign and Domestic Operations and Export Sales
No information has been included hereunder because the Company's foreign sales
in fiscal 1996 were less than 10% of total Company revenue.
Capital Structure
HISTORY. Since fiscal 1987, the Company has undergone numerous changes in its
capital structure. These changes have included the issuance and redemption of
several classes of preferred stock and the borrowing and repayment of various
debt.
During 1995, the Company sold its operation in Flippin, Arkansas for $10.5
million in cash and $2.9 million in assumed liabilities. The Company used $1.6
million of the proceeds plus $3.4 million in new 12% Subordinated Notes due in
1998 to redeem all $5 million of 15% Subordinated Notes due in 1997. The
balance of the proceeds were used to reduce senior debt.
During fiscal 1996, the Company purchased the assets of SOREP Technology
Corporation (renamed LaBarge/STC, Inc.) for approximately $2.7 million. The
Company also committed approximately $.25 million in a new fifty-fifty joint
venture (LaBarge Clayco Wireless L.L.C.) through its LaBarge Wireless, Inc.
subsidiary.
On June 25, 1996, the Company entered into a new lending agreement with
Boatmen's National Bank in St. Louis replacing its former agreement with Sanwa
Business Credit Corporation. The new agreement provides for a $3 million term
loan and a $17 million revolving credit facility based on a borrowing base
formula tied to accounts receivable and inventory. Both loans are secured by
the assets of the Company and mature in July 1999. The term loan requires
quarterly principal payments of $.15 million beginning October 1, 1996.
Interest on both loans is variable with prime or LIBOR. At June 30, 1996 the
rate was 8.25%.
The capital structure as of June 30, 1996 consists of:
(dollars in thousands)
<TABLE>
<S> <C>
15,601,891 shares of common stock............... $ 156
Additional paid-in capital...................... 13,527
Retained earnings............................... 4,073
Less treasury stock............................. (1)
12% Subordinated Notes.......................... 3,386
Long-term senior debt........................... 7,033
Short-term senior debt.......................... 1,033
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$29,207
=======
</TABLE>
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The ratio of debt to equity as of June 30, 1996 was .64 to 1.
Item 2. Properties
The Company's principal facilities, which are deemed adequate and
suitable for the Company's business, are as follows:
<TABLE>
<CAPTION>
Year of
Principal Land Buildings Termination
Location Use (Acres) (sq. ft.) of Lease
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<S> <C> <C> <C> <C>
St. Louis, MO Offices - 11,121 1996
Tulsa, OK Manufacturing
and Offices 3 49,359 2002
Joplin, MO Manufacturing
and Offices 5 50,400 Owned
Joplin, MO Manufacturing 33,000 1997
Berryville, AR Manufacturing
and Offices 7 27,000 Owned
Huntsville, AR Manufacturing
and Offices 6 45,000 1997
Houston, TX Manufacturing
and Offices 3 8,900 1999
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</TABLE>
Item 3. Legal Proceedings
The Company is a party to various legal proceedings arising out of the normal
course of business. The Company believes that none of these proceedings,
individually or in the aggregate, will have a material adverse effect on the
financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no items submitted to a vote of the security holders in the quarter
ended June 30, 1996.
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PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Reference is made to the information contained in the section entitled "Stock
Price and Cash Dividends" on page 16 filed herewith.
Item 6. Selected Financial Data
Reference is made to the information contained in the section entitled
"Selected Financial Data" on page 16 filed herewith.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Reference is made to the information contained in the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 36 through 39 filed herewith.
Item 8. Consolidated Financial Statements and Supplementary Data
Reference is made to the Index to Consolidated Financial Statements and
Schedule contained on page 15 filed herewith.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
This information will be included in the Company's definitive proxy materials
to be filed within 120 days after the end of the Company's fiscal year covered
by this report.
Item 11. Executive Compensation
This information will be included in the Company's definitive proxy materials
to be filed within 120 days after the end of the Company's fiscal year covered
by this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information will be included in the Company's definitive proxy materials
to be filed within 120 days after the end of the Company's fiscal year covered
by this report.
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Item 13. Certain Relationships and Related Transactions
This information will be included in the Company's definitive proxy materials
to be filed within 120 days after the end of the Company's fiscal year covered
by this report.
PART IV
Item 14. Exhibits, Consolidated Financial Statement Schedules and Reports on
Form 8-K
a. Consolidated Financial Statements.
See Index to Consolidated Financial Statements and Schedule which
follows.
b. Reports on Form 8-K and 8-K/A
1. On May 28, 1996, the Company filed a current report on Form 8-K
as of May 15, 1996 to report the purchase of SOREP Technology
Corporation in Houston, Texas.
2. On July 22, 1996, the Company filed a Form 8-K/A as an
amendment to the Form 8-K dated May 15, 1996 to include financial
statements SOREP and pro forma financial information as required by
Form 8-K.
c. Exhibits
d. Financial Statement Schedule.
See Index to Consolidated Financial Statements and Schedule which
follows.
e. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description Page
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3.1 Restated Certificate of Incorporation, dated October 26, 1995,
previously filed as Exhibit 3.1(i) to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 1, 1995 and
incorporated herein by reference.
3.2 By-Laws, as amended, previously filed as Exhibit 3.2(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
October 1, 1995 and incorporated herein by reference.
10. First Amendment and Restatement to the LaBarge Employees Savings
Plan executed on May 3, 1990 and First Amendment to the First
Amendment and Restatement of the LaBarge, Inc. Employees Savings
Plan executed on June 5, 1990, previously filed as Exhibits (i)
and (ii), respectively, to the LaBarge, Inc. Employees Savings
Plan's Annual Report on Form 11-K for the year ended December 31,
1990 and incorporated herein by reference.
</TABLE>
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Page
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10.1(a) Second Amendment to the First Amendment and Restatement of the
LaBarge, Inc. Employees Savings Plan executed on November 30,
1993. Previously filed with the Securities and Exchange
Commission on the Company's Current Report on Form S-3 on July
23, 1996 and is incorporated herein by reference.
10.1(b) Third Amendment to the First Amendment and Restatement of the
LaBarge, Inc. Employees Savings Plan executed on March 24, 1994.
Previously filed with the Securities and Exchange Commission on
the Company's Current Report on Form S-3 on July 23, 1996 and is
incorporated herein by reference.
10.1(c) Fourth Amendment to the First Amendment and Restatement of the
LaBarge, Inc. Employees Savings Plan executed on October 26,
1995. Previously filed with the Securities and Exchange
Commission on the Company's Current Report on Form S-3 on July
23, 1996 and is incorporated herein by reference.
10.2 LaBarge, Inc. 1987 Incentive Stock Option Plan. Previously
filed with the Securities and Exchange Commission on the
Company's Current Report on Form S-3 on July 23, 1996 and is
incorporated herein by reference.
10.2(a) First Amendment to the LaBarge, Inc. 1987 Incentive Stock
Option Plan. Previously filed with the Securities and Exchange
Commission on the Company's Current Report on Form S-3 on July
23, 1996 and is incorporated herein by reference.
10.3 LaBarge, Inc. 1993 Incentive Stock Option Plan. Previously
filed with the Securities and Exchange Commission on the
Company's Current Report on Form S-3 on July 23, 1996 and is
incorporated herein by reference.
10.3(a) First Amendment to the LaBarge, Inc. 1993 Incentive Stock
Option Plan. Previously filed with the Securities and Exchange
Commission on the Company's Current Report on the Company's
Current Form S-3 on July 23, 1996 and is incorporated herein by
reference.
10.4 Management Retirement Savings Plan of LaBarge, Inc. Previously
filed with the Securities and Exchange Commission on the
Company's Current Report on the Company's Current Form S-3 on
July 23, 1996 and is incorporated herein by reference.
10.5 Asset Purchase Agreement dated May 15, 1996 among registrant,
SOREP Technology Corporation and its shareholders, previously
filed as Exhibit 10.i to the Company's Current Report on Form
8-K filed with the Commission on May 28, 1996 and incorporated
herein by reference.
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Page
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10.6 Loan Agreement dated June 25, 1996 among The Boatmen's National
Bank of St. Louis, registrant, LaBarge Wireless, Inc. and
LaBarge/STC, Inc. Previously filed with the Securities and
Exchange Commission on the Company's Current Report on the
Company's Current Form S-3 on July 23, 1996 and is incorporated
herein by reference.
10.7 LaBarge, Inc. 1995 Incentive Stock Option Plan
10.8 Operating Agreement for LaBarge Clayco Wireless L.L.C., a
fifty-fifty joint venture between LaBarge Wireless, Inc. a
wholly-owned subsidiary of LaBarge, Inc. and Clayco Construction
Company.
27 Article 5 Financial Data Schedule. 42
24(a) Independent Auditors' Consent. 12
Schedule
Number Description Page
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VIII Valuation and Qualifying Accounts. 40-41
All other schedules have been omitted as they are
not applicable, not significant, or the
required information is given in the
consolidated financial statements or notes
thereto.
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INDEPENDENT AUDITORS' CONSENT
The Board of Directors
LaBarge, Inc.:
We consent to incorporation by reference in the Registration Statement
No. 33-31330 on Form S-8 of LaBarge, Inc. of our report dated August 13,
1996, relating to the consolidated balance sheets of LaBarge, Inc. and
subsidiaries as of June 30, 1996 and July 2, 1995, and the related
consolidated statements of operations, stockholders' equity and cash
flows and related schedule for each of the years in the three-year
period ended June 30, 1996, which report appears in the June 30, 1996
Annual Report on Form 10-K of LaBarge, Inc.
s/KPMG Peat Marwick LLP/s
-------------------------
St. Louis, Missouri
September 18, 1996
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: September 18, 1996
------------------
LaBarge, Inc.
By s/William J. Maender/s
--------------------------
William J. Maender
Vice President - Finance
(Chief Financial and
Accounting Officer)
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Craig E. LaBarge and William J. Maender and each
of them, and substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign this Report, any and all
amendments to this Report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this Report as
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
s/Pierre L. LaBarge, Jr./s Chairman Emeritus and 8/13/96
- ---------------------------- Director
Pierre L. LaBarge, Jr.
s/Craig E. LaBarge/s President (Chief Executive 8/13/96
- ---------------------------- Officer) and Director
Craig E. LaBarge
s/J. C. Kuhn, Jr./s Executive Vice President 8/13/96
- ---------------------------- (Chief Operating Officer) and
J. C. Kuhn, Jr. Director
s/William J. Maender/s Vice President Finance (Chief 8/13/96
- ---------------------------- Financial and Accounting
William J. Maender Officer) and Secretary
s/Gus G. Casten/s Director 8/13/96
- ----------------------------
Gus G. Casten
s/Richard P. Conerly/s Director 8/13/96
- ----------------------------
Richard P. Conerly
s/R. Hal Dean/s Director 8/13/96
- ----------------------------
R. Hal Dean
s/Edward J. Nestor, Jr./s Director 8/13/96
- ----------------------------
Edward J. Nestor, Jr.
s/James P. Shanahan, Jr./s Director 8/13/96
- ----------------------------
James P. Shanahan, Jr.
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LABARGE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
PAGE NUMBER
<S> <C>
Consolidated Financial Statements
---------------------------------
Independent Auditors' Report 17
Consolidated Statements of Operations,
Years Ended June 30, 1996
July 2, 1995 and July 3, 1994 18
Consolidated Balance Sheets, June 30, 1996
and July 2, 1995 19
Consolidated Statements of Cash Flows,
Years Ended June 30, 1996
July 2, 1995 and July 3, 1994 20
Consolidated Statements of Stockholders' Equity,
Years Ended June 30, 1996
July 2, 1995 and July 3, 1994 21
Notes to Consolidated Financial Statements,
Years Ended June 30, 1996
July 2, 1995 and July 3, 1994 22-35
Management's Discussion and Analysis of
Financial Condition and
Results of Operations 36-39
<CAPTION>
Form
SCHEDULE 10-K
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<S> <C>
VIII - Valuation and Qualifying Accounts 40-41
All other schedules have been omitted as they are
not applicable, not significant, or the
required information is given in the
consolidated financial statements or notes
thereto.
</TABLE>
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LaBarge, Inc.
SELECTED FINANCIAL DATA
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED
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JUNE 30, July 2, July 3, June 27, June 28,
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Net sales $ 75,060 $ 61,646 $ 73,143 $ 81,582 $ 77,690
Earnings from operations 4,980 2,436 4,082 4,187 5,574
Earnings from continuing operations
before extraordinary items and cumulative
effect of accounting change 3,540 1,321 2,356 1,915 2,592
Loss from discontinued operations - - - - (715)
Extraordinary items - - - - (1,077)
Cumulative effect of accounting change - - - - 2,335
Net earnings $ 3,540 $ 1,321 $ 2,356 $ 1,915 $ 3,133
Earnings (loss) per common share:
Continuing operations before extraordinary
items and cumulative effect of
accounting change $ .23 $ .09 $ .16 $ .13 $ .10
Discontinued operations - - - - (.05)
Extraordinary items - - - - (.08)
Cumulative effect of accounting change - - - - .17
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings per common share $ .23 $ .09 $ .16 $ .13 $ .14
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $ 41,550 $ 31,608 $ 44,477 $ 43,362 $ 46,027
Long-term obligations 10,419 6,467 15,143 18,073 20,449
Convertible preferred stock - - - - 1,387
Dividends declared and accreted on preferred stock - - - - 1,231
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</TABLE>
Certain events occurring during the above reporting periods involving
acquisitions, divestiture, joint venture, refinancings, discontinued
operations and extraordinary items affect the comparability of financial
data presented on a year-to-year basis.
STOCK PRICE AND CASH DIVIDENDS: LaBarge, Inc.'s Common Stock is listed
on the American Stock Exchange, under the trading symbol of LB. As of
August 30, 1996, there were approximately 4,000 holders of record of
LaBarge, Inc.'s Common Stock. No cash dividends have been paid during the
aforementioned periods. The following table indicates the quarterly high
and low closing prices for the stock for the fiscal years 1996 and 1995,
as reported by the American Stock Exchange.
<TABLE>
<CAPTION>
1995-96 HIGH LOW
<S> <C> <C>
July-September 4 7/16 2 3/8
October-December 3 15/16 2 5/8
January-March 5 3 1/4
April-June 10 3/4 4 1/2
<CAPTION>
1994-95 HIGH LOW
<S> <C> <C>
July-September 1 7/8 1 1/16
October-December 1 3/4 1 3/16
January-March 1 1/2 1 3/16
April-June 3 1 1/4
</TABLE>
-16-
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
LaBarge, Inc.:
We have audited the consolidated financial statements of LaBarge, Inc. and
subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule 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 financial position of LaBarge, Inc. and
subsidiaries as of June 30, 1996 and July 2, 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended June 30, 1996, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
set forth therein.
s/KPMG Peat Marwick LLP/s
- -------------------------
St. Louis, Missouri
August 13, 1996
-17-
<PAGE> 18
LaBarge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars and shares in thousands except per share data)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------
JUNE 30, July 2, July 3,
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 75,060 $ 61,646 $ 73,143
- ----------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 61,103 51,391 60,798
Selling and administrative expenses 8,977 7,819 8,263
- ----------------------------------------------------------------------------------------------------------------------------
70,080 59,210 69,061
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS FROM OPERATIONS 4,980 2,436 4,082
- ----------------------------------------------------------------------------------------------------------------------------
Interest expense 1,355 1,725 2,117
Equity in loss of joint venture 93 - -
Other income, net 239 291 138
- ----------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES 3,771 1,002 2,103
INCOME TAX EXPENSE (BENEFIT) 231 (319) (253)
- ----------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 3,540 $ 1,321 $ 2,356
============================================================================================================================
NET EARNINGS PER COMMON SHARE $ .23 $ .09 $ .16
============================================================================================================================
AVERAGE COMMON SHARES OUTSTANDING 15,314 15,223 15,135
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-18-
<PAGE> 19
LaBarge, Inc.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
JUNE 30, July 2,
1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 935 $ 143
Accounts and notes receivable, net 13,455 9,017
Inventories 17,577 14,133
Prepaid expenses 286 293
Deferred tax assets, net 1,013 758
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 33,266 24,344
- -------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 3,194 2,676
DEFERRED TAX ASSETS, NET 2,237 2,492
INVESTMENT IN JOINT VENTURE 157 -
OTHER ASSETS, NET 2,696 2,096
- -------------------------------------------------------------------------------------------------------------------------
$ 41,550 $ 31,608
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 400 $ 2,500
Current maturities of long-term debt 633 1,670
Trade accounts payable 7,614 5,013
Accrued employee compensation 3,302 1,398
Other accrued liabilities 1,427 994
Current liabilities from discontinued operations - 269
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 13,376 11,844
- -------------------------------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS:
Long-term debt 10,419 6,467
- -------------------------------------------------------------------------------------------------------------------------
10,419 6,467
- -------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value. Authorized 20,000,000
shares; issued 15,601,891 shares at June 30, 1996
and 15,227,316 shares at July 2, 1995 156 152
Additional paid-in capital 13,527 12,554
Retained earnings 4,073 600
Less stock in treasury, at cost, 187 shares at June 30,
1996 and 5,391 shares at July 2, 1995 (1) (9)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 17,755 13,297
- -------------------------------------------------------------------------------------------------------------------------
$ 41,550 $ 31,608
=========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-19-
<PAGE> 20
LaBarge, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------
JUNE 30, July 2, July 3,
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 3,540 $ 1,321 $ 2,356
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Undistributed loss in equity of joint venture 93 - -
Depreciation and amortization 864 922 1,054
Accretion of discount on long-term assets
from business divestitures (21) (30) (35)
Accretion of discount on note
from discontinued operations 6 38 48
Gain from sale of operating facility in Flippin, Arkansas - (154) -
Changes in assets and liabilities:
Accounts and notes receivable, net (3,955) 2,118 185
Inventories (2,701) (1,040) (1,356)
Prepaid expenses 20 (89) (202)
Deferred taxes - (378) (401)
Trade accounts payable 2,514 (2,167) 2,580
Accrued liabilities 1,754 (614) 391
Current liabilities from discontinued operations, net (275) (125) (75)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,839 (198) 4,545
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,102) (648) (321)
Additions to other assets of continuing operations (496) (118) (204)
Acquisition of SOREP Technology (net of cash acquired) (1,802) - -
Sale of operating facility in Flippin, Arkansas - 9,890 -
Collection of note receivable 621 - -
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (2,779) 9,124 (525)
- -----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 6,900 - -
Repayments of long-term debt (3,986) (8,631) (3,340)
Exercise of stock warrants and options 910 101 56
Sale (purchase) of common stock to treasury 8 (93) -
Net change in short-term borrowings (2,100) (300) (900)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,732 (8,923) (4,184)
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 792 3 (164)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 143 140 304
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 935 $ 143 $ 140
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-20-
<PAGE> 21
LaBarge, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands except share data)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY STOCK
-------------- PAID-IN EARNINGS --------------
SHARES PAR VALUE CAPITAL (DEFICIT) SHARES COST
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 27, 1993 15,102,917 $ 151 $ 12,438 $ (3,033) - $ -
Net earnings - - - 2,356 - -
Exercise of stock options 24,000 - 16 - - -
Exercise of warrants 39,960 - 40 - - -
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 3, 1994 15,166,877 $ 151 $ 12,494 $ (677) - $ -
Net earnings - - - 1,321 -
Exercise of warrants 60,439 1 60 - - -
Purchase of common to treasury - - - - (63,391) (93)
Exercise of stock options - - - (44) 58,000 84
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JULY 2, 1995 15,227,316 $ 152 $ 12,554 $ 600 (5,391) $ (9)
Net earnings - - - 3,540 - -
Exercise of warrants 300,000 3 897 - - -
Purchase of common to treasury - - - - (24,221) (88)
Exercise of stock options 74,575 1 76 (67) 29,425 96
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 15,601,891 $ 156 $ 13,527 $ 4,073 (187) $ (1)
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
-21-
<PAGE> 22
LaBarge, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996, July 2, 1995 and July 3, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
LaBarge, Inc. and subsidiaries (the "Company") are engaged in the design and
manufacture of electronic assemblies for the following markets:
telecommunications, geophysical, medical, aerospace and defense.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of LaBarge, Inc. and
its wholly-owned subsidiaries. The investment in a fifty-percent owned joint
venture is accounted for on the equity method. Significant intercompany
accounts and transactions have been eliminated.
ACCOUNTING PERIOD
The Company uses a fiscal year ending the Sunday closest to June 30. Fiscal
years 1996 and 1995 consisted of 52 weeks compared to 53 weeks for fiscal 1994.
INCOME RECOGNITION
Sales and related cost of sales are recognized as specific contract terms are
fulfilled under the percentage-of-completion method (usually when units are
shipped, the units-of-delivery method). The percentage-of-completion method
gives effect to the most recent contract value and estimates of costs at
completion. When appropriate, contract prices are adjusted for increased scope
and other changes ordered or caused by the customer.
Since some contracts extend over a long period of time, revisions in cost and
contract price during the progress of work have the effect of adjusting current
period earnings applicable to performance in prior periods. When the current
contract estimate indicates a loss, provision is made for the total anticipated
loss.
INVENTORIES
The Company procures materials and manufactures products to customer
requirements.
Raw materials are stated at the lower of cost or market as determined by the
weighted average cost method.
In accordance with industry practice, the Company's work in process consists of
actual
-22-
<PAGE> 23
production costs, including factory overhead and tooling costs, reduced by
costs attributable to units for which sales have been recognized. Such costs
under contracts are determined by the average cost method based on the
estimated average cost of all units expected to be produced under the contract.
Consistent with industry practice, amounts relating to long-term contracts are
classified as current assets although a portion of these amounts is not
expected to be realized within one year.
Revenues to be realized on delivery of products against existing unfilled
orders, contract modifications and estimated additional orders will be
sufficient to absorb inventoried costs.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost and includes additions and
improvements which extend the remaining useful life of the assets.
Depreciation is computed on the straight-line method.
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates in effect for the year in which those temporary differences are expected
to be recovered or settled.
CASH EQUIVALENTS
The Company considers cash equivalents to be temporary investments which are
readily convertible to cash, such as certificates of deposit, commercial paper
and treasury bills with original maturities of less than three months.
EMPLOYEE BENEFIT PLANS
The Company has a contributory savings and profit-sharing plan covering certain
employees. The Company's policy is to fund and expense savings plan and
profit-sharing costs as incurred.
The Company offers a non-qualified deferred compensation program to certain key
employees whereby they may defer a portion of annual compensation for payment
upon retirement. The program is unfunded; however, the Company purchases
Company-owned life insurance contracts through which the Company will recover
its entire cost upon the death of the employee.
EARNINGS PER COMMON SHARE
Earnings per common share is computed as net earnings divided by the weighted
average number of common shares outstanding during the year. The potential
dilution from the exercise of stock options is not considered material.
RECLASSIFICATIONS OF PRIOR YEAR AMOUNTS
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
121, "Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which became effective on January 1, 1996. The adoption of SFAS No. 121
does not have a
-23-
<PAGE> 24
material impact on the Company's consolidated financial statements or results
of operations.
Also in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires companies to measure employee stock compensation
plans based on the fair value method of accounting or to continue to apply APB
No. 25, "Accounting for Stock Issued to Employees," and provide pro forma
footnote disclosures under the fair value methods in SFAS No. 123. The Company
will continue to apply the principles of APB No. 25 and provide pro forma fair
value disclosures although the effect is not considered material to the
Company's financial position or results of operations.
2. ACQUISITIONS AND DIVESTITURES OF BUSINESSES
Acquisitions
On May 15, 1996, the Company, through its wholly-owned subsidiary LaBarge/STC,
Inc., acquired the assets for cash of approximately $2.7 million and assumed
approximately $.4 million of liabilities of SOREP Technology Corporation. The
total acquisition cost exceeded the estimated fair value of the net assets
acquired by $.4 million. Such amount is recorded as goodwill and will be
amortized on a straight-line basis over a 10-year period. The combination was
accounted for by the purchase method. The results of operations of
LaBarge/STC, Inc. have been included in the accompanying consolidated financial
statements from the date of acquisition.
Pro forma unaudited consolidated results of operations for fiscal 1996 and
1995, as if the acquisition had been completed at the beginning of each period,
follow:
<TABLE>
<CAPTION>
(dollars in thousands except per share data)
YEAR ENDED
------------------------
JUNE 30, July 2,
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Net sales $81,699 $64,369
- ------------------------------------------------------------------------
Net earnings from operations 6,680 2,445
- ------------------------------------------------------------------------
Net earnings 4,941 1,210
- ------------------------------------------------------------------------
Net earnings per common share $ .32 $ .08
========================================================================
</TABLE>
The pro forma data has been adjusted, net of income taxes, to reflect interest
expense and the amortization of goodwill. Such pro forma adjustments are not
necessarily indicative of what the actual consolidated results of operations
might have been had the acquisition been effective at the beginning of each
year presented.
Joint Venture
On May 7, 1996, the Company, through its wholly-owned subsidiary LaBarge
Wireless Inc., entered into a fifty-fifty joint venture -- LaBarge Clayco
Wireless L.L.C. The results of operations and investment in this joint venture
will be reported using the equity method of accounting.
Divestiture
On December 2, 1994, the Company divested its operation in Flippin, Arkansas.
The
-24-
<PAGE> 25
business was sold for $10.5 million in cash and $2.9 million in assumed
liabilities. $1.6 million of the proceeds plus $3.4 million in 12%
Subordinated Notes, due in May 1998, were used to redeem $5 million of 15%
Subordinated Notes due in 1997. The balance of the proceeds were used to
reduce senior debt. Sales of the Flippin operation were $7.3 million in fiscal
1995 to the date of divestiture and $19 million in fiscal 1994. The
comparability of the results of operations for fiscal years 1996, 1995 and 1994
are affected by this divestiture.
3. ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, July 2,
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Billed shipments, net of progress
payments $12,860 $6,668
Unbilled costs and accrued profits,
net of progress payments - 901
- ------------------------------------------------------------------------
Trade receivables -- gross 12,860 7,569
Less allowance for doubtful accounts 187 168
- ------------------------------------------------------------------------
Trade receivables -- net 12,673 7,401
Current portion of notes receivable 600 1,168
Other current receivables 182 448
- ------------------------------------------------------------------------
$13,455 $9,017
========================================================================
</TABLE>
Unbilled amounts represent revenues recognized on contracts less applicable
progress payments received for which billings have not been presented to the
customers at year end. Unbilled amounts are usually billed within the month
following the closing date as units are delivered to the customer. All
receivables are due within the current year.
Progress payments are payments from customers in accordance with contractual
terms for contract costs incurred to date. Such payments are credited to the
customer at the time of shipment.
Notes receivable consist of a note from a former officer of the Company
totaling $.6 million. At July 2, 1995, also included was a note from a prior
divestiture of $.22 million and a note from a customer for $.35 million. Both
were paid in fiscal 1996.
Other current receivables include funds on deposit in escrow and amounts due
from employees for travel advances and other miscellaneous sources.
-25-
<PAGE> 26
4. INVENTORIES
Inventories consist of the following:
(dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, July 2,
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Raw materials $14,042 $ 8,609
Work in process 4,779 6,181
- ------------------------------------------------------------------------
18,821 14,790
Less progress payments 1,244 657
- ------------------------------------------------------------------------
$17,577 $14,133
========================================================================
</TABLE>
In accordance with contractual agreements, the government has a security
interest in the inventories identified with related contracts for which
progress payments have been received.
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Property, plant and equipment is summarized as follows:
(dollars in thousands) Estimated
JUNE 30, July 2, useful life
1996 1995 in years
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Land $ 36 $ 36 -
Building and improvements 1,869 1,845 5-33
Leasehold improvements 1,566 1,314 2-10
Machinery and equipment 7,211 6,227 2-20
Furniture and fixtures 1,721 1,475 3-10
Construction in progress 3 - -
- ------------------------------------------------------------------------
12,406 10,897
Less accumulated depreciation
and amortization 9,212 8,221
- ------------------------------------------------------------------------
$ 3,194 $ 2,676
========================================================================
</TABLE>
Property, plant and equipment, depreciation and amortization expenses were
$.695 million and $.739 million, for the fiscal years ended June 30, 1996 and
July 2, 1995, respectively.
-26-
<PAGE> 27
6. SHORT- AND LONG-TERM OBLIGATIONS
Short-term borrowings, long-term debt and the current maturities of long-term
debt consist of the following:
<TABLE>
<CAPTION>
(dollars in thousands)
JUNE 30, July 2,
1996 1995
- ------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM BORROWINGS:
Revolving credit agreement:
Balance at period end $ 400 $2,500
Interest rate at period end 8.25% 10.5%
Average amount of short-term borrowings
outstanding during period $ 5,823 $2,472
Average interest rate for period 10.07% 9.70%
Maximum short-term borrowings
at any month-end $ 9,800 $5,000
========================================================================
Total short-term borrowings $ 400 $2,500
========================================================================
LONG-TERM DEBT:
Senior lender:
Revolving credit agreement $ 4,500 $2,500
Term loan 3,000 805
Chemical Bank term loan - 1,071
12% Subordinated Notes 3,386 3,386
Industrial revenue bond due
semiannually through 2001, interest at 5% 134 180
Other 32 195
- ------------------------------------------------------------------------
11,052 8,137
Less current maturities 633 1,670
- ------------------------------------------------------------------------
Total long-term debt, less current maturities $10,419 $6,467
========================================================================
</TABLE>
The average interest rate was computed by dividing the sum of daily interest
costs by the sum of the daily borrowings for the respective periods.
Total cash payments for interest in 1996, 1995 and 1994 were $1.4 million, $1.8
million and $2.1 million, respectively.
SENIOR LENDER
On June 25, 1996 the Company entered into a three-year, $20 million secured
senior lending agreement with Boatmen's National Bank of St. Louis, replacing
the $18 million secured lending agreement with Sanwa Business Credit
Corporation which was to expire on July 1, 1996. The new facility consists of
a $3 million term loan with equal quarterly amortization beginning October 1,
1996 of $.15 million and a $17 million revolving credit agreement based on a
borrowing base formula against receivables and inventories. The entire
facility bears interest at the prevailing prime rate, or at the Company's
option, 250 basis points over LIBOR. Through various performance criterion,
this rate can be lowered to 25 basis points below prime, or at the Company's
option, 175 basis points over LIBOR. The Company must meet various covenants
on a quarterly basis throughout the agreement, all of which have been met as of
June 30, 1996. Availability under the revolver at June 30, 1996 was
approximately $15.5 million of which the Company borrowed $4.9 million. Under
the terms of the agreement, the
-27-
<PAGE> 28
Company pays a .375% fee on committed but unused funds.
A portion of the proceeds of this loan were used to repay the remaining debt
owed to Chemical Bank.
In addition to the senior lending agreement, the Company has outstanding $3.4
million of 12% Subordinated Notes due in May 1998. These notes require monthly
payments of interest.
The aggregate maturities of long-term obligations, excluding the revolving
credit agreement which expires July 1, 1999, are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
FISCAL YEAR
---------------------------------------------------
<S> <C>
1997 .................................... $ 633
1998 .................................... 4,018
1999 .................................... 633
2000 .................................... 1,233
2001 and thereafter ..................... 35
---------------------------------------------------
</TABLE>
7. OPERATING LEASES
The Company operates certain of its manufacturing facilities in leased premises
and with leased equipment under noncancellable operating lease agreements
having an initial term of more than one year and expiring at various dates
through 2002. The real property leases require the Company to pay maintenance,
insurance and real estate taxes.
At June 30, 1996, the future minimum lease payments under operating leases for
continuing operations with initial noncancellable terms in excess of one year
are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
FISCAL YEAR
---------------------------------------------------
<S> <C>
1997 .................................... $1,148
1998 .................................... 866
1999 .................................... 668
2000 .................................... 266
2001 .................................... 244
---------------------------------------------------
</TABLE>
Rental expense under operating leases is as follows:
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
JUNE 30, July 2, July 3,
1996 1995 1994
- --------------------------------------------------------------
<S> <C> <C> <C>
Initial term of more than one year $ 860 $ 933 $ 999
Short-term rentals 390 300 419
- --------------------------------------------------------------
$1,250 $1,233 $1,418
==============================================================
</TABLE>
-28-
<PAGE> 29
8. EMPLOYEE BENEFIT PLANS
The Company has a contributory profit-sharing plan which qualifies under
Section 401(k) of the Internal Revenue Code for employees meeting certain
service requirements. The plan allows eligible employees to contribute up to
15% of their compensation, with the Company matching 50% of the first $25 per
month and 25% of the excess of the first 8% of this contribution. During 1996,
1995 and 1994, Company matching contributions were $.141 million, $.136 million
and $.172 million, respectively.
At the discretion of the Board of Directors, the Company may also make
contributions dependent on profits each year for the benefit of all eligible
employees under the amended plan. There were no such contributions for the
years ended June 30, 1996, July 2, 1995 and July 3, 1994.
In 1992, the Company started a deferred compensation plan for selected
employees who, due to Internal Revenue Service guidelines, could not take full
advantage of the contributory profit-sharing plan. This plan, which is not
required to be funded, allows eligible employees to defer portions of their
current compensation and the Company guarantees a return of 2% over the prime
interest rate on the deferral (compounded daily from the date of deferral). To
support the deferred compensation plan, the Company has elected to purchase
Company-owned life insurance. The costs associated with the plan for 1996 are
$.06 million for the guaranteed return and $-0- for the expense of the
Company-owned life insurance. The cash surrender value of the Company-owned
life insurance is in other assets. The liability for the deferred compensation
is in accrued employee compensation.
9. OTHER INCOME, NET
The components of other income, net are as follows:
(dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------
JUNE 30, July 2, July 3,
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 152 $ 131 $ 126
Gain on disposal of
operating facility in Flippin, Arkansas - 154 -
Other, net 87 6 12
- --------------------------------------------------------------------
$ 239 $ 291 $ 138
====================================================================
</TABLE>
-29-
<PAGE> 30
10. INCOME TAXES
Income tax expense (benefit) attributable to earnings from continuing
operations consists of:
(dollars in thousands)
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
YEAR ENDED JUNE 30, 1996:
U.S. FEDERAL $ 72 $ - $ 72
STATE AND LOCAL 159 - 159
---- ----- -----
$231 $ - $ 231
==== ===== =====
YEAR ENDED JULY 2, 1995:
U.S. Federal $ 19 $(321) $(302)
State and Local 40 (57) (16)
---- ----- -----
$ 59 $(378) $(318)
==== ===== =====
YEAR ENDED JULY 3, 1994:
U.S. Federal $ 46 $(341) $(295)
State and Local 102 (60) 42
---- ----- -----
$148 $(401) $(253)
==== ===== =====
</TABLE>
Income tax expense (benefit) attributable to income from continuing operations
differed from the amounts computed by applying the U.S. Federal income tax rate
of 34% as a result of the following:
<TABLE>
<CAPTION>
(dollars in thousands)
JUNE 30, July 2, July 3,
1996 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 1,282 $ 341 $ 715
Increase (reduction) in income taxes
resulting from:
Change in valuation allowance (1,163) (672) (1,039)
State and local tax 110 26 67
Other 2 (13) 4
- -------------------------------------------------------------------------
$ 231 $(318) $ (253)
=========================================================================
</TABLE>
-30-
<PAGE> 31
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
(dollars in thousands)
JUNE 30, July 2,
1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Accounts receivable due to allowance
for doubtful accounts $ 71 $ 140
Inventories due to additional costs inventoried
for tax purposes pursuant to the Tax Reform
Act of 1986 and inventory reserves 273 215
Accrued liability, settlement of lawsuit
with a note payable - 102
Deferred compensation 236 194
Accrued vacation 217 119
Accrued health insurance 95 67
Accrued workers' compensation 61 61
Net operating loss carryforwards 5,665 6,945
Tax credit carryforwards 511 472
- ---------------------------------------------------------------------------
TOTAL GROSS DEFERRED TAX ASSETS 7,129 8,315
LESS VALUATION ALLOWANCE 3,616 4,779
- ---------------------------------------------------------------------------
NET DEFERRED TAX ASSETS $3,513 $3,536
- ---------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment, principally
due to differences in depreciation and
capitalized interest $ (182) $ (225)
Software amortization (81) (61)
- ---------------------------------------------------------------------------
TOTAL GROSS DEFERRED TAX LIABILITIES $ (263) $ (286)
- ---------------------------------------------------------------------------
NET DEFERRED TAX ASSETS $3,250 $3,250
===========================================================================
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not, will be realized. The net deferred assets
reflects management's estimate of the amount which will be realized from future
profitability which can be predicted with reasonable certainty.
The net change in the total valuation allowance for the years ended June 30,
1996 and July 2, 1995 were decreases of $1.2 million and $.67 million,
respectively.
At June 30, 1996, the Company has net operating loss carryforwards for federal
income tax purposes of $16.6 million which are available to offset future
federal taxable income through 2003. The Company also has investment tax
credit carryforwards for federal income tax purposes of approximately $.2
million which are available to reduce future federal income taxes through 2001.
In addition, the Company has alternative minimum tax credit carryforwards of
approximately $.3 million which are available to reduce future regular federal
income taxes over an indefinite period.
Total cash payments for income taxes in all years presented were not material.
-31-
<PAGE> 32
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company considers the carrying amounts of cash and cash equivalents,
receivables and accounts payable to approximate fair value because of the short
maturity of these financial instruments.
Amounts outstanding under the Secured Senior Lending Agreement are also
considered to be carried on the financial statements at their estimated fair
values because they were entered into recently and accrue interest at rates
which generally fluctuate with interest rate trends.
At June 30, 1996, the 12% Subordinated Notes for which the carrying value is
$3.4 million has an approximate fair value of $3.5 million and is computed
based on the present value of expected cash flows discounted at rates currently
available to the Company for long-term debt with similar terms and remaining
maturities.
12. INDUSTRY SEGMENT INFORMATION
The Company is engaged in the design, engineering, manufacturing and sale of
electronic systems and devices and complex cables and wiring harnesses for the
telecommunications, geophysical, medical, aerospace and defense markets.
Customers accounting for more than 10% of net sales for the years ended June
30, 1996, July 2, 1995 and July 3, 1994 follow:
<TABLE>
<CAPTION>
Customer 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C>
Lockheed Martin .............. 26% 34% 33%
Northern Telecom ............. 25% 1% -
General Electric ............. 5% 12% 18%
------------------------------------------------------
</TABLE>
Sales for export did not exceed 10% of sales in any fiscal year.
13. LITIGATION AND CONTINGENCIES
The Company is involved in litigation arising in the normal course of business.
In the opinion of management, the ultimate resolution of the litigation will
not have a material adverse effect on the operating results or financial
position of the Company.
-32-
<PAGE> 33
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data is set forth below:
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
1996 FIRST SECOND THIRD FOURTH
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $13,361 $14,910 $21,424 $25,365
Gross profit 2,039 2,427 4,041 5,450
Earnings from operations
before income taxes 92 441 1,303 1,935
Income tax expense 5 27 86 113
Net earnings $ 87 $ 414 $ 1,217 $ 1,822
Net earnings per common share $ .01 $ .03 $ .08 $ .12
=======================================================================
1995 First Second Third Fourth
- -----------------------------------------------------------------------
Net sales $17,111 $16,206 $14,770 $13,559
Gross profit 2,772 2,883 2,463 2,137
Earnings from operations
before income taxes 188 494 275 45
Income tax expense (benefit) 11 29 16 (375)
Net earnings $ 177 $ 465 $ 259 $ 420
Net earnings per common share $ .01 $ .03 $ .02 $ .03
=======================================================================
</TABLE>
Due to the divestiture of the Company's Flippin, Arkansas operation on December
2, 1994 and the acquisition of SOREP Technology Corp. in the fourth quarter of
fiscal 1996, the comparability of quarterly data is impacted. Sales from the
Company's former Flippin, Arkansas operation were $4.7 million in the first
quarter and $2.6 million in the second quarter of fiscal 1995.
The significant increase in sales and profits in the third and fourth quarters
of 1996 is largely due to sales to the telecommunication market.
15. STOCK OPTION PLANS
The Company has three incentive stock option plans for key management
personnel. Under the 1987 Plan, the Company was authorized to grant options
for up to 200,000 shares of common stock. The 1993 Plan authorized 300,000
shares to be granted. The 1995 Plan authorized 400,000 shares to be granted.
Under all plans, the term of the granted option is ten years and the vesting
period is two years.
-33-
<PAGE> 34
The following tables show the status of each plan as of the beginning of
the year, the activity throughout fiscal 1996 and the balances at June
30, 1996:
<TABLE>
<CAPTION>
THE 1987 PLAN
-------------
Range of Weighted
# of Shares Exercise Average
Granted Unexercised Prices Price Exercisable
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AS OF JULY 2, 1995 200,000 65,000 $1.24 $ 1.24 65,000
- 39,000 .66 .66 39,000
- 3,000 1.13 1.13 3,000
- -------------------------------------------------------------------------------------------
- 107,000 $ - $ 1.01 107,000
ACTIVITY DURING FISCAL 1996:
GRANTED - - - - -
FORFEITED - - - - -
EXERCISED - (27,000) $.66-1.13 $ .71 (27,000)
- -------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 200,000 80,000 $.66-1.24 $ 1.13 80,000
===========================================================================================
</TABLE>
Under this plan, 93,000 shares previously granted were exercised prior
to fiscal 1996.
<TABLE>
<CAPTION>
THE 1993 PLAN
-------------
Range of Weighted
# of Shares Exercise Average Average
Granted Unexercised Prices Price Exercisable Price
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF JULY 2, 1995 212,000 97,000 $ 1.13 $1.13 - -
- 115,000 1.31-1.44 1.38 - -
- --------------------------------------------------------------------------------------------------
- 212,000 $ - $ .63 - -
ACTIVITY DURING FISCAL 1996:
GRANTED 50,000 50,000 $3.98-4.38 $4.18 - -
- --------------------------------------------------------------------------------------------------
50,000 50,000 $3.98-4.38 $4.18 - -
FORFEITED - - - - - -
EXERCISED - (77,000) $ 1.13 $1.13 (77,000) -
PRIOR GRANTS VESTING - - 1.13 - 97,000 $1.13
- --------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 262,000 185,000 $1.13-4.38 $ 2.30 20,000 $1.13
==================================================================================================
SHARES AVAILABLE
UNDER 1993 Plan 38,000
=======
</TABLE>
As of June 30, 1996, no options had been granted under the 1995 Plan.
All stock options are granted at fair market value of the common stock at the
grant date. The weighted average fair value of the stock options granted in
fiscal 1996 was $4.18 per share.
The Company accounts for the plans in accordance with Accounting Principles
Board Opinion No. 25, under which no compensation cost has been recognized for
stock option awards.
During 1995, Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" (SFAS 123) was issued and requires companies to
disclose the estimated fair value compensation expense related to stock-based
plans. The Company has calculated the fair market value of stock options
granted in 1996 to be $1.48 per share. The Company used the Black-Scholes
option pricing model with the following weighted average assumptions:
Risk-free interest rate of 6.5%;
-34-
<PAGE> 35
expected dividend yield of 0%; expected life of four years and volatility of
60%.
Based on this calculation, the Company's pro forma net income and earnings per
share for 1996 would have been $3.4 million and $.22 per share, respectively.
Because the SFAS 123 method of accounting has not been applied to options
granted prior to July 3, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
16. WARRANTS
On May 28, 1996, warrants for 300,000 shares of common stock were exercised at
$3 per share by the Company's former lender. These warrants were issued in
1992 as part of a refinancing. The Company has filed a Registration Statement
on Form S-3 with the Securities and Exchange Commission to register these
shares for sale by the holder thereof.
-35-
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Statements contained herein which are not historical facts are forward looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
which are intended to be covered by the safe harbors created thereby.
Important factors which could cause the Company's actual results to differ
materially from those projected in, or inferred by, forward looking statements
are (but are not necessarily limited to) the following: the impact of
increasing competition or deterioration of economic conditions in the Company's
markets; further cutbacks in defense spending by the U.S. Government; failure
of the U.S. Food and Drug Administration to give final clearance to the Laser
Lancet(TM) developed for Venisect, Inc.; unexpected increases in the cost of
raw materials, labor and other resources necessary to operate the Company's
business; and the availability, amount, type and cost of financing for the
Company and any changes to that financing.
Fiscal 1996 was an exciting year for the Company. Much was accomplished during
the year. Some of the more significant events are summarized below:
On May 7, 1996, the Company, through its wholly-owned subsidiary LaBarge
Wireless Inc., entered into a fifty-fifty joint venture with Clayco
Construction Company of St. Louis, Missouri. The new company, LaBarge Clayco
Wireless L.L.C., provides engineering, project management, construction,
equipment installation and testing services for the rapidly growing wireless
telecommunications industry. LaBarge Clayco Wireless complements LaBarge's
efforts in the design production and sale of equipment for this segment of the
telecommunications market.
On May 15, 1996, the Company, through its wholly-owned subsidiary LaBarge/STC,
Inc., purchased the assets for approximately $2.7 million and assumed $.4
million of liabilities of SOREP Technology Corporation in Houston, Texas.
LaBarge/STC, Inc. is engaged in the manufacture of custom hybrid circuits and
high-temperature electronic assemblies used in oil and gas exploration,
drilling and production. The acquisition furthers the Company's efforts to
expand its geophysical business. In its most recent fiscal year, sales were
approximately $6 million and operating profits were approximately 15%.
On June 25, 1996, the Company entered into a three-year, $20 million secured
senior lending agreement with Boatmen's National Bank of St. Louis. The new
facility consists of a $3 million term loan and a $17 million revolving credit
facility based on a borrowing formula against receivables and inventories.
Both loans bear interest at the prevailing prime rate or below. Availability
under the revolver was $15.5 million on June 30, 1996 of which the Company had
borrowed $4.9 million. This loan should provide sufficient borrowing capacity
to meet the Company's anticipated needs.
The Company has designed and developed the Laser Lancet(TM), a small medical
laser, for Venisect, Inc. under a technology licensing agreement from Venisect.
The Company and Venisect are awaiting FDA clearance to market the device for
the purpose of perforating the skin to collect capillary blood for clinical
testing. While there can be no assurance, both companies remain confident that
clearance will be received. Upon FDA clearance the Company will manufacture
the Laser Lancet(TM) for
-36-
<PAGE> 37
distribution by Venisect.
During the year, the Company continued to develop new commercial customers.
The Company is focusing its resources on the telecommunications, geophysical,
medical and aerospace markets. For the year, sales to commercial customers
totaled approximately 54% of the Company's total sales versus 46% to defense
customers. This compares to a commercial sales of 42% in fiscal 1995 and 41%
in fiscal 1994. In the fourth quarter, however, commercial sales amounted to
61% of the total, an indication of how significantly the mix of business has
changed.
Backlog at June 30, 1996, was approximately $62.2 million of which 62% was for
defense products and 38% was for commercial products. Of the backlog, $9.1
million is not due to ship for more than one year. This backlog provides a
solid base for future years.
On December 2, 1994 (fiscal 1995), the Company sold its operation in Flippin,
Arkansas for $10.5 in cash and $2.9 million in assumed liabilities. The
proceeds were used to reduce debt. $7.3 million in sales of the Flippin
operation were included in total Company sales in fiscal 1995. Flippin sales
in fiscal 1994 were $19 million. This affects the comparability of certain
values year to year.
RESULTS OF OPERATIONS -- 1996 - 1995 - 1994
Net sales for fiscal year 1996 were $75.1 million, up 22% from the $61.6
million in fiscal 1995 and compared to $73.1 million in fiscal 1994. Excluding
the former Flippin, Arkansas operation, sales were in 1996 up 39% over sales of
approximately $54 million in both 1995 and 1994.
The sales increase in 1996 can be attributed primarily to growth in the
telecommunications market, and to a lesser extent, the geophysical market.
Management expects to see continued growth in both of these markets in fiscal
1997.
Sales to the defense industry were approximately $37 million in fiscal 1996,
$35 million in 1995 and $43 million in 1994.
Gross margin increased in 1996 due to the higher volume of sales in relation to
fixed costs. Gross margin in 1996 was 18.6% compared to 16.6% in 1995 and
16.9% in 1994.
Selling and administrative expenses were $9.0 million in 1996 versus $7.8
million in 1995 and $8.3 million in 1994. The increase in cost in 1996
occurred in the second half of the year and is attributable to the increased
efforts by the Company to expand its commercial business base.
Interest expense in 1996 is down compared to prior years due to the lower debt
level throughout the period. In fiscal 1996 interest expense was $1.4 million
versus $1.8 million in fiscal 1995 and $2.1 million in 1994. Interest costs
are expected to decline again in fiscal 1997, barring any significant rate
increases during the year.
The amount shown as "Equity in loss of joint venture" $.1 million represents
the Company's 50% portion of the loss sustained by LaBarge Clayco Wireless
L.L.C. during its initial period of operation from May 7, 1996 through June 30,
1996. The results of operation of the joint venture are being reported using
the equity method of accounting.
-37-
<PAGE> 38
Other income, net includes interest income from notes receivable and
miscellaneous short term and overnight investments. In addition, other items of
income or expense not classified elsewhere, or minor in amount, are included in
this heading. For fiscal 1996, the amount was $.2 million compared to $.3
million in 1995 and $.1 million in 1994.
The Company continues to have significant tax loss carryforwards which, in
accordance with SFAS 109, resulted in $3.2 million of deferred tax assets, net
of the related valuation allowance as of June 30, 1996. Net deferred tax
assets remained unchanged in fiscal 1996 and increased in fiscal 1995 and 1994
resulting in deferred tax benefits for 1996, 1995 and 1994 respectively of
$-0-, $.4 million and $.4 million, respectively.
NET EARNINGS
Net earnings for 1996 were $3.5 million compared to $1.3 million in 1995 and
$2.4 million in 1994. Earnings per common share were $.23 in 1996, $.09 in
1995 and $.16 in 1994.
FINANCIAL CONDITION AND LIQUIDITY
Prior to fiscal 1996, the Company took important steps to improve its financial
condition and position itself to grow in new commercial markets.
During 1995, the Company sold its operation in Flippin, Arkansas for $10.5
million in cash and $2.9 million in assumed liabilities. The Company used $1.6
million of the proceeds plus $3.4 million in new 12% Subordinated Notes due in
1998 to redeem all $5 million of 15% Subordinated Notes due in 1997. The
balance of the proceeds were used to reduce senior debt. As a result of the
Flippin sale and the subsequent debt reduction, the Company's balance sheet was
significantly strengthened.
During 1996, warrants to purchase 300,000 shares of common stock of the Company
were exercised at $3 per share. The warrants were originally issued to the
Company's then senior lender as part of a 1992 refinancing. This exercise
provided $.9 million in additional equity to the Company.
During the year, the Company collected a note receivable prior to its original
due date at its book value of $.6 million. The cash was used to reduce debt.
In 1996, the Company entered into a three-year loan agreement which provides
sufficient working capital to finance the anticipated internal growth of the
Company over the next three years. The agreement provides for a $3 million
term loan and a $17 million revolving credit facility based on a borrowing base
formula. Both loans are secured by the Company's assets and expire July 1,
1999. The entire facility bears interest at the prevailing prime rate or
below. On June 30, 1996, the Company had $15.5 million in its revolving credit
line available of which it had borrowed $4.9 million.
The aggregate maturities of all debt over the next three years, excluding the
revolving credit agreement, are $.6 million in 1997, $4 million in 1998 and $.6
million in 1999. The Company expects to meet these obligations with cash
generated from operations and available funds under its revolving credit
agreement.
Shareholders' equity increased to $17.8 million at June 30, 1996 from $13.3
million at July 2, 1995 and $12.0 million at July 3, 1994. Debt was $11.5
million at June 30, 1996, $10.6 million at July 2, 1995 and $19.6 million at
July 3, 1994.
-38-
<PAGE> 39
During the fiscal year 1996, the Company generated $1.8 million in cash from
operations which it used, in addition to bank borrowings, to purchase SOREP
Technology Corp. for $1.8 million in net cash, and to purchase additional
equipment for operating the business. In 1995, the Company used cash to
support operations totaling $.2 million, but with the sale of Flippin for net
cash of $9.9 million, was able to reduce debt by $8.9 million.
As of June 30, 1996, accounts receivable were up $4.5 million compared to the
prior year end, due to the higher level of sales in the fiscal 1996 fourth
quarter. Inventories were up $3.4 million from the prior year end to support
the higher level of shipments. Accounts payable were up $2.6 million and
reflect the higher level of inventory and sales.
At June 30, 1996, the Company's capital structure consisted of $17.8 million of
common stockholders' equity and $11.5 million of debt.
-39-
<PAGE> 40
Schedule VIII
LABARGE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
YEARS ENDED JUNE 30, 1996
JULY 2, 1995, AND JULY 3, 1994
Allowance for Doubtful Accounts
This account represents amounts which may become uncollectible in future
periods.
<TABLE>
<CAPTION>
Balance Additions Balance
Beginning Charged to End of
Year of Period Expense Deductions Period
------ --------- ---------- ---------- -------
<S> <C> <C> <C> <C>
1994 $ 127 $ 13 $ - $ 140
1995 140 28 - 168
1996 168 59 40 187
</TABLE>
Inventory Reserve
This account is used to write-off inventory which becomes valueless in future
periods, but as of the balance sheet date, is included at cost.
<TABLE>
<CAPTION>
Balance Additions Deductions Balance
Beginning Charged to from Reserve End of
Year of Period Expense for Write-offs Period
------ --------- ---------- -------------- -------
<S> <C> <C> <C> <C>
1994 $ 455 $ 913 $ 851 $ 517
1995 517 369 786 100
1996 100 330 233 197
</TABLE>
-40-
<PAGE> 41
Deferred Tax Asset Valuation Allowance
This account is used to reduce the value of the Company's Deferred Tax Asset as
a result of Net Loss Carryforwards from prior periods.
<TABLE>
<CAPTION>
Increases Decreases
Balance Due to Lower Due to Earnings Balance
Beginning Expected & Higher Expected End of
Year of Period Value of Asset Value of Asset Period
------ --------- -------------- ----------------- -------
<S> <C> <C> <C> <C>
1994 $ 6,490 $ - $ 1,039 $5,451
1995 5,451 - 672 4,779
1996 4,779 - 1,163 3,616
</TABLE>
-41-
<PAGE> 1
Exhibit 10.7
Page 1 of 8
LABARGE, INC.
1995 INCENTIVE STOCK OPTION PLAN
I.
Purpose of the 1995 Incentive Stock Option Plan
The purpose of the 1995 Incentive Stock Option Plan (the "Plan") is to
promote the interests of LaBarge, Inc. ("Company") and its stockholders by
providing a method whereby Company employees may be encouraged to invest in the
Company's Common Stock, thereby increasing their proprietary interest in its
business, providing them with additional incentive to remain in the employ of
the Company and increasing their personal interest in its continued success and
progress. These employees will be granted options ("Options") to purchase
shares of the Common Stock, $.01 par value, of the Company ("Common Stock"). It
is intended that Options issued hereunder will constitute Incentive Stock
Options within the meaning of Section 422A of the lnternal Revenue Code of
1986, as amended from time to time (the "Code").
II.
Administration of the 1995 Plan
A. The Committee. The Plan shall be administered by the Human
Resources Committee of the Board of Directors of the Company or such other
committee as shall be designated by the Board of Directors (the "Committee").
The Committee shall consist of not less than four Directors of the Company, and
shall be appointed by the Board of Directors. A majority of the members of the
Committee shall constitute a quorum. Any decision or determination reduced to
writing and signed by all the members of the Committee shall be fully as
effective as if it had been made by a majority vote at a meeting duly called
and held. The Committee may appoint a chairman from among the members and a
secretary (who need not be a member) and make such rules and regulations for
the conduct of its business as it shall be deemed advisable. No member of the
Committee shall be liable in the absence of bad faith, for any act or omission
with respect to his or her service on the Committee. Service on the Committee
shall constitute service as a Director of the Company so that members of the
Committee shall be entitled to identification and reimbursement as Directors of
the Company.
B. Authority of the Committee. Subject to the expressed
provisions of the Plan, the Committee shall have plenary authority to
determine, in its discretion, the employees to whom options are granted, and
the time or times within which (during the term of the
1
<PAGE> 2
Option) all or a portion of such Options may be exercised. In making such
determination, the Committee may take into account the nature of the services
rendered or expected to be rendered by the respective employees, their present
and potential contributions to the Company's success, the anticipated number of
years of effective service remaining and such other factors as the Committee in
its discretion shall deem relevant. Subject to the express provisions of the
Plan, Section 422A of the Code and any regulations or rulings thereunder, the
Committee shall also have plenary authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the terms and conditions of the respective Options (which terms and conditions
need not be the same in each case), to impose restrictions on any shares issued
upon the exercise of any Option and to determine the manner in which such
restrictions may be removed, and to make all other determinations deemed
necessary or advisable in administering the Plan. The Committee may specify in
the original terms of any option or, if not so specified, shall determine
whether any authorized leave of absence or absence of military or governmental
service or for any other reason shall constitute a termination of employment
for purposes of the Plan. Subject to the provisions of Article X, the
determination of the Committee on the matters referred to in the Plan shall be
conclusive; provided that it shall be the Board of Directors of the Company
which shall determine whether unissued or treasury shares shall be issued upon
the exercise of any Option.
C. Each option shall be evidenced by an option agreement which
shall contain such terms and conditions as may be approved by the Committee,
and the said agreement shall be signed by an officer of the Company and the
employee.
III.
Shares Subject to the 1995 Plan
An aggregate of 400,000 shares of Common Stock shall be subject to the
Plan, subject to adjustment in accordance with Section VIII hereof. Such shares
may be either authorized but unissued shares or shares now or hereafter held in
the treasury of the Company.
In the event that any Option under the Plan expires unexercised or is
terminated, surrendered or canceled, the shares theretofore subject to such
Option, or the unexercised portion thereof, shall again become available for
Option under the Plan, including to the former holder of such Option, upon such
terms as the Committee shall determine in accordance with the Plan and which
terms may be more or less favorable than those applicable to such former
Option.
2
<PAGE> 3
IV.
Granting Date
The action of the Committee with respect to the granting of an Option
shall take place on such date as a majority of the members of the Committee at
a meeting shall make a determination with respect to the granting of an Option
or, in the absence of a meeting, on such date as of which written designation
covering such Option shall have been executed by all members of the Committee.
The effective date of the grant of an Option (the "Granting Date") shall be the
date specified by the Committee in its determination or designation relating to
the award of such Option or, in the absence of such a Specification, the date
on which the action of the Committee relating to the award of such Option took
place.
V.
Eligibility
Options may be granted only to those employees who are deemed
appropriate by the Committee.
VI.
Terms and Conditions of Options
A. Option Price. Subject to the provision of subparagraph VI.F.
below, the purchase price of the stock under each Option shall be determined by
the Committee, but shall not be less than 100% of the fair market value of the
stock on the Granting Date for such option; provided, however, that the option
price shall not be less than the par value of the stock subject to the Option.
The fair market value of the stock shall be, for purposes of the Plan,
determined under the regulations or rulings under Section 422A of the Code.
B. Term of Option. Subject to the provisions of subparagraph
VI.F below, the term of each Option granted under the Plan shall be for a
period not exceeding ten years from the Granting Date. Each Option granted
under the Plan may be exercised by the employee as stated in his individual
Option, but in no event may any Option be exercised before two years of
continued employment with the Company, or a subsidiary, immediately following
the Granting Date.
C. Restrictions on Transfer and Exercise.
(1) Except as hereinafter provided, no Option granted pursuant to the
Plan
3
<PAGE> 4
may be exercised at any time unless the holder thereof is then an employee of
the Company. Options granted under the Plan shall not be affected by any change
of employment so long as the grantee continues to be an employee of the
Company.
(2) The Option of any optionee whose employment is terminated for
any reason, other than for death, disability (as defined in Section 105(d) (4)
of the Code) or discharged for cause, shall terminate on the earlier of three
months after termination of employment or the date that such Option expires in
accordance with its term.
(3) In the event of the death of an optionee (a) while an employee
of the Company or a subsidiary or (b) within three months after the termination
of the employment of the optionee, or in the event of the termination of
employment by an optionee for permanent disability, the Option may be exercised
as follows:
(a) In the event of the death of an optionee during employment or
within three months after the termination of employment, each
Option granted to such optionee shall be exercisable or
payable (at the option of the Company and, if paid, at a
price equal to the excess of the fair market value over the
option price) to the extent provided therein but not later
than one year after his or her death (but not beyond the
stated duration of the Option). Any such exercise or payment
shall be made only: (1) by or to the executor or administrator
of the estate of the deceased optionee or person or persons to
whom the deceased optionee's rights under the Option shall
pass by will or the laws of descent and distribution; and (2)
to the extent, if any, that the deceased optionee was
entitled at the date of his or her death.
(b) In the case of an optionee who becomes disabled, the Option
shall terminate on the earlier of one year after termination
or employment or the date that such Option expires in
accordance with its terms. During such period, the Option
may be exercised by an optionee who becomes disabled with
respect to the same number of shares, in the same manner and
to the same extent as if the optionee had continued employment
during such period.
(4) The Option shall lapse immediately upon termination of
employment of the optionee through discharge for cause as determined by the
Committee in its sole discretion.
4
<PAGE> 5
(5) Each Option granted under the Plan shall, by its terms, not be
transferable otherwise than by will or the laws of descent and distribution.
During the optionee's lifetime, an Option granted under the Plan can be
exercised only by him or her.
D. Manner of Exercise. An Option shall be exercised by giving a
written notice to the President of the Company stating the number of shares of
Common Stock with respect to which the Option is being exercised and containing
such other information as may be requested and by tendering payment in full
therefore with a cashier's or certified check; Common Stock already owned by
the Employee having a fair market value equal to the option price; or a
combination of a cashier's or certified check and Common Stock already owned by
the Employee having an aggregate fair market value equal to the option price.
For purposes of this Subsection 4 (d), "fair market value" is the closing price
per share of Common Stock on the American Stock Exchange on the day immediately
preceding the day on which an Option is exercised, or if there is no sale on
such day, the closing price per share on the last previous day which a sale is
reported. If Common Stock is not listed on the American Stock Exchange on the
day immediately preceding the day an Option is exercised, the closing price of
a share of Common Stock as reported by the exchange upon which it is then
listed, or if it is not then listed on any exchange, the closing price per
share of Common Stock as reported by an automated quotation system shall be
used to determine fair market value. If Common Stock is not listed on any
exchange or its price reported by an automated quotation system on the day
immediately preceding the day an Option is exercised, the Committee shall
determine the fair market value of Common Stock for purposes of this Subsection
4 (d) on the date of exercise of the Option.
E. Limitations on Issuance of Stock Option Shares. The Company
shall not be required, upon the exercise of any Option, to issue or deliver any
shares of stock prior to (a) the authorization of such shares for listing on
any stock exchange on which the Company's stock may then be listed, and (b)
such registration or other qualification of such shares under applicable
securities laws as the Company shall determine to be necessary or advisable. If
shares issuable on the exercise of Options have not been registered under the
Securities Act of 1933 ("the Act") or there is not available a current
Prospectus meeting the requirements of the Act with respect thereto, optionees
may be required to represent at the time of each exercise of Options that the
shares purchased are being acquired for investment and not with a view to
distribution; and the Company may place a legend on the stock certificate to
indicate that the stock may not be sold or otherwise disposed of except in
accordance with the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
5
<PAGE> 6
F. Limitation on Options.
(1) Notwithstanding the provision of paragraph VI.A and B above,
if any optionee, at the time an Option is granted, owns (as defined in Section
425(d) or the Code) Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, any subsidiary
thereof or of the Company's parent (if any), the option price for such Option
shall be at least 110% of the fair market value of the stock subject to such
Option, and such Option by its terms shall not be exercisable after the
expiration of 5 years from the date such Option is granted.
(2) The aggregate fair market value (determined as of the time the
Option is granted) of the stock with respect to which Incentive Stock Options
(as defined in Section 422A of the Code) are exercisable for the first time by
an employee during any calendar year (under this Plan or any other plan of the
Company) shall not exceed $100,000.
VII.
Stockholder and Employment Rights
A holder of an Option shall have none of the rights of a stockholder
with respect to any of the shares subject to Option until such shares shall be
issued upon the exercise of the Option.
Nothing in the Plan or in any Option granted pursuant to the Plan
shall, in the absence of an express provision to the contrary, confer on any
individual any right to be or to continue in the employ of the Company or its
subsidiaries or shall interfere in any way with the right of the Company or any
of its subsidiaries to terminate the employment of any individual at any time.
VIII.
Adjustments to Common Stock
The aggregate number of shares of Common Stock of the Company on which
Options may be granted hereunder, the number of shares thereof covered by each
outstanding Option and the price per share thereof in each such Option may all
be appropriately adjusted, as the Board of Directors may determine, for any
increase or decrease in the number of shares of stock of the Company resulting
from a subdivision or consolidation of shares whether through reorganization,
recapitalization, stock split or combination of shares, or the payment of a
stock dividend or the increase or decreasing such shares effected without
receipt of consideration by the Company. No
6
<PAGE> 7
fractional shares of stock shall be issued upon exercise of any Option, and in
case fractional share shall become subject to an Option by reason of a stock
dividend or otherwise, the optionee holding such Option shall not be entitled
to exercise it with respect to such fractional share.
Subject to any required action by the stockholders, if the Company
shall be the surviving corporation in any merger or consolidation, any Option
granted hereunder shall pertain to and apply to the securities to which a
holder of the number of shares of stock subject to the Option would have been
entitled. Upon a dissolution of the Company, or a merger or consolidation in
which the Company is not the surviving corporation, every Option outstanding
hereunder shall terminate, provided, however, that the case of such
dissolution, merger or consolidation, then during the period thirty days prior
to the effective date of such event, each holder of an Option granted pursuant
to the Plan shall have a right to exercise the Option, in whole or in part.
IX.
Effective Date and Termination Effective Date
A. Effective Date. The Plan shall become operative and in effect
on the date the Plan is approved by a vote of majority of all members of the
Board of Directors, provided, however that the Plan shall be submitted to the
Stockholder of the Company for approval within twelve months of the date of
adoption of the Plan, and if such approval shall not be obtained by a vote of
the holders of a majority of the total outstanding capital stock of the Company
entitled to vote, voting as a single class, the Plan shall be null and void and
all Options, if any, granted thereunder shall automatically be canceled.
B. Termination. The Plan shall remain in effect until and shall
terminate within 10 years from the date the Plan is adopted or the Plan was
approved by the shareholders, whichever is earlier, but it may be terminated at
an earlier date by action of the Board of Directors. Except as provided in
subparagraph A above, termination of this Plan shall not affect the rights of
grantees under Options theretofore granted to purchase stock under the Plan,
and, all such Options shall continue in force and in operation after
termination of the Plan, except as provided in subparagraph A above and except
as may be terminated through death or other termination of employment in
accordance with the terms of the Plan.
7
<PAGE> 8
X.
Amendments
The Board of Directors shall have complete power and authority to
amend the Plan, provided, however, that except as expressly permitted in the
Plan, the Board of Directors shall not, without the affirmative vote of
the holders of a majority of the voting stock of the Company, make any
amendment which would (a) abolish the Committee without designating such other
committee, change the qualifications of its members, or withdraw the
administration of the 1995 Plan from its supervision, (b) increase the maximum
number of shares for which options may be granted under the Plan, (c) amend the
formula for determination of the purchase price of shares on which options may
be granted, (d) extend the term of the Plan or change the minimum option price,
or (e) amend the requirements as to the employees eligible to receive Options.
XI.
Government and Other Regulations
The obligation of the Company to sell or deliver shares under Options
granted pursuant to the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by the registrations with any governmental
agencies as may be required.
XII.
Loan Agreements
Each Option shall be subject to the condition that the Company shall
not be obliged to issue or transfer any of its stock to a holder of an Option,
in the exercise thereof, if at any time the Committee or the Board of Directors
shall determine that the issuance or transfer of such stock would be in
violation of any covenant in any of the Company's loan agreements or other
contracts.
The Company hereby agrees to the provisions of this Plan, and in
witness thereof, has caused this Agreement to be executed on this 2nd day of
May, 1995.
ATTEST: LABARGE, INC.
William J. Maender By Craig E. LaBarge
- --------------------------- ---------------------------
Secretary President
<PAGE> 1
EXHIBIT 10.8
Page 1 of 18
OPERATING AGREEMENT
OF
LABARGE CLAYCO WIRELESS L.L.C.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - FORMATION............................................................................1
1.1. Organization.......................................................................1
1.2. Agreement..........................................................................1
1.3. Name...............................................................................1
1.4. Articles of Organization...........................................................1
1.5. Term...............................................................................1
1.6. Registered Agent and Office........................................................1
1.7. Principal Office...................................................................1
1.8. Persons Considered to be Members...................................................2
1.9. Units..............................................................................2
ARTICLE II - NATURE OF BUSINESS..................................................................2
ARTICLE III - ACCOUNTING AND RECORDS.............................................................2
ARTICLE IV - RIGHTS AND DUTIES OF MANAGERS AND MEMBERS...........................................2
4.1. Board of Managers..................................................................2
4.2. Authority of Managers to Bind the Company..........................................2
4.3. When Consent of All Members Required...............................................3
4.4. Meetings of Managers ..............................................................4
4.5. Minutes............................................................................4
4.6. Managers and Members Shall Have No Exclusive Duty To Company.......................4
4.7. Officers...........................................................................5
ARTICLE V - LIABILITY OF MEMBERS.................................................................5
5.1. Limitation of Liability............................................................5
5.2. Representaions and Warranties......................................................5
ARTICLE VI - CAPITAL CONTRIBUTIONS...............................................................5
6.1. Capital Contributions..............................................................5
6.2. Maintenance of Capital Accounts....................................................5
ARTICLE VII - ALLOCATIONS AND DISTRIBUTIONS......................................................6
7.1. Allocations of Tax Profits and Tax Losses..........................................6
7.2. Built-in Gains and Built-in Losses.................................................6
7.3. Authority to Vary Allocations......................................................6
7.4. Distributions......................................................................6
ARTICLE VIII - TAXES.............................................................................6
8.1. Elections..........................................................................6
8.2. Taxes of Taxing Jurisdictions......................................................6
8.3. Tax Matters Partner................................................................6
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IX - TRANSFER OF MEMBERSHIP INTERESTS....................................................7
9.1. Restrictions on Transfer..........................................................7
9.2. Right to Purchase and Sell in Event of Deadlock...................................7
ARTICLE X - DISSOCIATION OF A MEMBER.............................................................8
10.1. Dissociation......................................................................8
10.2. Rights of Dissociated Member......................................................8
ARTICLE XI - DISSOLUTION AND WINDING UP..........................................................9
11.1. Dissolution.......................................................................9
11.2. Effect of Dissolution.............................................................9
11.3. Distribution of Assets on Dissolution.............................................9
11.4. Completion of Winding Up; Certificate of Dissolution.............................10
ARTICLE XII - INDEMNIFICATION...................................................................10
12.1. Indemnificadon of Members, Managers and Officers.................................10
12.2. Discretionary Indemnification of Employees.......................................10
12.3. Determination of Indemnitee's Compliance with Standard of Conduct................10
12.4. Advance Payment of Expenses......................................................10
12.5 Non-Exclusivity; Survival of Indemnification.....................................11
12.6. Insurance on Indemnitees.........................................................11
12.7. Interpretation...................................................................11
ARTICLE XIII - MISCELLANEOUS PROVISIONS.........................................................11
13.1. Entire Agreement.................................................................11
13.2. No Partnership Intended, Except for Tax Purposes.................................11
13.3. Rights of Creditors and Third Parties under Agreement............................12
13.4. Non-Competition..................................................................12
13.5. Definitions......................................................................12
SCHEDULE A ....................................................................................15
</TABLE>
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<PAGE> 4
OPERATING AGREEMENT
OF
LABARGE CLAYCO WIRELESS L.L.C.
This Operating Agreement ("Agreement") of LaBarge Clayco Wireless L.L.C.
(the, "Company"), is made and entered into effective May 8, 1996, by and among
the Members of the Company.
ARTICLE I
FORMATION
1.1. Organization - The Members hereby organize the Company as a
Missouri limited liability company pursuant to the provisions of the Missouri
Limited Liability Company Act (the "Act").
1.2. Agreement - For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members hereby agree to the
terms and conditions of the Agreement, as it may from time to time be amended
according to its terms.
1.3. Name - The name of the Company is LaBarge Clayco Wireless L.L.C.
All business of the Company shall be conducted under its legal name or under
such fictitious or assumed business names as may be determined by the Members.
1.4. Articles of Organization - Articles of Organization (as so filed
and as hereafter duly amended, the "Articles"), for the Company were filed on
March 21, 1996 with the Secretary of State of Missouri, under the name of
Wireless Systems L.L.C.
1.5. Term - The Company shall be dissolved and its affairs wound up
in accordance with the Act and the Agreement on May 1, 2020, unless the term
shall be extended by amendment to the Agreement and the Articles, or unless the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or the Agreement.
1.6. Registered Agent and Office - The registered agent for the
service of process and the registered office shall be that person and location
reflected in the Articles.
1.7. Principal Office - The principal office of the Company shall be
located in either the City of St. Louis or St. Louis County, Missouri.
<PAGE> 5
1.8. Persons Considered to be Members - "Member" means a person who
has agreed to be bound by the Agreement and who has been admitted as a member of
the Company pursuant to the Act, but excludes a Dissociated Member.
1.9. Units - For purposes of this Agreement, Members' interests shall
be divided into units of interest ("Units"), as set forth on Schedule A.
ARTICLE II
NATURE OF BUSINESS
The Company may engage in any lawful business permitted by the Act or
the laws of any jurisdiction in which the Company may do business. The Company
shall have the authority to do all things necessary or convenient to accomplish
its purpose and operate its business.
ARTICLE III
ACCOUNTING AND RECORDS
The Company shall maintain at its principal office such records as may
be required by the Act or other applicable laws.
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS AND MEMBERS
4.1. Board of Managers - The members shall appoint a Board of Managers
comprised of four individuals, two of whom shall be appointed by each of the
Members.
4.2. Authority of Managers to Bind the Company - Except as otherwise set
forth in the Agreement, the Board of Managers shall have the authority to bind
the Company, and exercise such authority through officers, agents or committees
of the Company designated by the Board of Managers (but with respect to agents
or committees, only to the extent of the authority granted). In particular and
without limitation, the Board of Managers has the authority to:
4.2.1. Institute, prosecute and defend any proceeding in the
Company's name, or
4.2.2. Purchase, receive, lease or otherwise acquire, and sell,
convey, mortgage, pledge, lease, exchange, and otherwise dispose of
Company personal property provided that the dollar amount of such
transaction or the value of property involved in such transactions does
not exceed limits set by the Members from time to time,
4.2.3. Enter into contracts and guaranties, incur liabilities,
borrow money, issue notes, bonds and other obligations, and secure any
of its obligations by mortgage or pledge of any of the Company's
property or income provided that the dollar amount
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<PAGE> 6
of such transaction or the value of property involved in such
transactions does not exceed limits set by the Members from time to
time, or
4.2.4. Manage and operate any Company property, or
4.2.5. Establish Company offices and exercise the powers of the
Company within or without the State of Missouri, or
4.2.6. Purchase insurance for the benefit of the Company, or
4.2.7. Make donations to the public welfare or for religious,
charitable, scientific, literary or educational purposes
provided that the amount of such donations does not exceed limits set by
the Members from time to time, or
4.2.8. Generally do any other act that furthers the business and
affairs of the Company that is not expressly required by the Agreement
or applicable law to be approved by all of the Members.
4.3. When Consent of All Members Required - Notwithstanding any other
provision of the Agreement, the affirmative vote or written consent of all of
the Members shall be required to approve the following actions:
4.3.1. The continuation of the Company after a Dissolution Event
(as defined in Article XI), or
4.3.2. The amendment of the Agreement, or
4.3.3. The merger or consolidation of the Company with another
entity, or
4.3.4. The dissolution and liquidation of the Company other
than as the result of a Dissolution Event, or
4.3.5. The sale of substantially all the assets of the Company,
or any Company real estate, or
4.3.6. The call for additional capital contributions, the
issuance of additional Units to any one or more Members, or the
admission of additional Members, or
4.3.7. The authorization of any indemnification pursuant to
Article XII, other than the mandatory indemnification provided in
Section 12.1.
4.3.8. Lend money, invest and reinvest the Company's funds, and
receive and hold property as security for repayment, provided that no
money shall be loaned to Members other than as advances for business
expenses to be incurred in the ordinary course of business of the
Company without the consent of all Members, or
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<PAGE> 7
4.3.9. Engage in any of the transactions described in
Sections 4.2.2, 4.2.3 or 4.2.7 which involve amounts or values exceeding
limits set by the Members, or
4.3.10. Participate in corporations, partnerships,
joint ventures, limited liability companies or other associations of any
kind with any person or persons, or
4.4. Meetings of Managers - Meetings of the Managers for such
business as may properly come before the Managers may be called by any Manager.
Meetings of the Members for any purpose may be called by any Member. The
times, dates, places and purposes of Managers' or Members' meetings shall be
designated in a written notice given in person or mailed by the person or
persons calling the meeting to each other Manager or Member entitled to vote at
the meeting, not less than two nor more than thirty days before the date of the
meeting; if mailed, the notice shall be addressed to such Manager or Member at
the Manager's or Member's address on the records of the Company. If a meeting
is adjourned to a different date, time or place, notice need not be given of
the new date, time or place if the new date, time or place is announced at the
meeting before an adjournment is taken. Any Member or Manager may waive notice
of a meeting before or after the meeting. All waivers of notice must be in
writing, be signed by the Member or Manager entitled to the notice and be
delivered to the Company for inclusion in the appropriate records. Neither the
business to be transacted at, nor the purpose of, a meeting must be specified
in a written waiver of notice. Attendance at a meeting shall constitute a
waiver of notice of the meeting, unless at the beginning of the meeting the
Manager or Member gives written notice of objection to holding the meeting or
transacting business at the meeting. A Manager or Member may vote in person or
by proxy. No proxy shall be valid for more than eleven months after the date
of its execution unless a longer period is expressly provided in the
appointment form. Any action required or permitted to be taken at a Managers'
or Members' meeting may be taken without a meeting, without prior notice and
without a vote if one or more written consents describing the action to be
taken are signed and dated by all of the Managers or Members. Unless otherwise
provided herein, two Managers will constitute a quorum at a meeting of the
Board of Managers, provided at least one Manager appointed by each of the
Members is present, and the vote by a majority of the Managers present at a
meeting at which a quorum is present shall be required to approve any matter
presented to the Board of Managers for vote, provided such matter receives the
affirmative vote of at least one Manager appointed by each of the Members.
4.5. Minutes - The Managers, the Members and each committee shall
keep minutes of its proceedings, which shall be open for inspection by any
Member upon reasonable prior notice to the Company.
4.6. Managers and Members Shall Have No Exclusive Duty To Company.
A Manager or a Member may have other business interests and may engage in other
activities in addition to those relating to the Company. Neither the Company
nor any Member shall have any right, by virtue of this Agreement, to share or
participate in such other activities or investments of a Member or the income or
proceeds derived therefrom. Neither a Member nor a Manager shall incur no
liability to the Company or to any of the Members as a result of engaging in any
other business.
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<PAGE> 8
4.7. Officers - The number and titles of officers of the Company
and other persons who may act as authorized agents of the Company shall be fixed
from time to time by the Managers. The officers shall have such titles, duties,
authorities and responsibilities as may be delegated to them from time to time
by the Managers. The officers shall be elected from time to time by, and serve
at the pleasure of, the Managers, provided that each officer, to be elected,
must receive the affirmative vote of at least one Manager appointed by each
Member. Managers may remove an officer, with or without cause, at any time,
subject to any contractual rights of such officer. In the event of the death,
resignation or removal of an officer, the Managers shall elect a successor who
shall serve the remainder of the term of his or her predecessor.
ARTICLE V
LIABILITY OF MEMBERS
5.1. Limitation of Liability - No Member shall be liable as such for the
liabilities of the Company.
5.2. Representations and Warranties - Each Member hereby represents
and warrants to the Company and each other Member that the Member is acquiring
the Member's Units for the Member's own account as an investment and without an
intent to distribute the Units; and the Member acknowledges that the Units have
not been registered under the Securities Act of 1933 or any state securities
laws, and that in addition to the other restrictions provided herein the Units
may not be resold or transferred by the Member without appropriate registration
or the availability of an exemption from such requirements. Each Member agrees
to hold harmless and indemnify the Company, its officers, directors, agents and
other Members, from and against any loss or damages incurred as a result of any
breach of such representation and warranty.
ARTICLE VI
CAPITAL CONTRIBUTIONS
6.1. Capital Contributions - The initial Members shall make the
initial capital contributions in cash and receive Units as shown on Schedule A.
No interest shall accrue on any capital contribution and no Member shall have
the right to withdraw or be repaid any capital contribution except as provided
in this Agreement. Should additional capital be required, the Members shall
contribute the additional capital in proportion to their Units.
6.2. Maintenance of Capital Accounts - The Company shall establish and
maintain a capital account for each Member according to the Regulations under
Code Section 704. A Member's capital account shall initially be the agreed
value of the initial capital contributed by such Member. Each Member's capital
account shall thereafter be credited with (i) the amount of the Member's
additional cash contributions (if any), (ii) the agreed value of the Member's
additional contributions of property (if any), and (iii) the Member's share of
Tax Profits excluding Built-in Gains and Built-in Losses, and shall be debited
with (a) the amount of cash withdrawals and distributions, (b) the agreed value
of property distributions and (c) the Member's share of Tax Losses excluding
Built-in Gains and Built-in Losses.
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<PAGE> 9
ARTICLE VII
ALLOCATIONS AND DISTRIBUTIONS
7.1. Allocations of Tax Profits and Tax Losses - Except as may be
required by Section 704(c) of the Code, Tax Profits and Tax Losses shall be
allocated among the Members in proportion to the number of Units held by each.
7.2. Built-in Gains and Built-in Losses - Built-in Gains and Built-in
Losses shall be allocated to the Members according to the principles of Code
Section 704(c) and the regulations thereunder.
7.3. Authority to Vary Allocations - The Members have the authority to
vary these allocations to the extent necessary to comply with federal income tax
laws, so long as there is no material adverse effect on the amounts
distributable to any holder of Units.
7.4. Distributions - From time to time, the Members shall determine
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs, including, without limitation, needs for operating expenses,
debt service, acquisitions, and reserves, if any. To the extent such excess
exists, the Members may make distributions to the Members. Such distribution
shall be in cash or property (which need not be distributed proportionately) or
partly in both, as determined by the Members. Interests in property distributed
in kind shall be distributed pro rata to all Members to the extent practicable
except as otherwise agreed by all the Members. All distributions shall be paid
to the holders of Units in proportion to the number of Units held by each.
ARTICLE VIII
TAXES
8.1. Elections - The Members may make any tax elections for the
Company allowed under the Code or the tax laws of any state or other
jurisdiction having taxing jurisdiction over the Company.
8.2. Taxes of Taxing Jurisdictions - To the extent that the laws of any
taxing jurisdiction require, each Member will submit an agreement indicating
that the Member will make timely income tax payments to the taxing jurisdiction
and that the Member accepts personal jurisdiction of the taxing jurisdiction
with regard to the collection of income taxes attributable to the Member's
income, and interest, and penalties assessed on such income. The Company may,
where permitted by the rules of any taxing jurisdiction, file a composite,
combined or aggregate tax return reflecting the income of the Company and pay
the tax, interest and penalties of the Members on such income to the taxing
jurisdiction, in which case the Company shall inform the Members of the amount
of such tax interest and penalties so paid.
8.3. Tax Matters Partner - The Members shall designate a tax matters
partner of the Company pursuant to Section 6231 of the Code. The tax matters
partner may not take any
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<PAGE> 10
action contemplated by Sections 6222 through 6232 of the Code without the
consent of the Board of Managers.
ARTICLE IX
TRANSFER OF MEMBERSHIP INTERESTS
9.1. Restrictions on Transfer - A Member may not Transfer or permit the
Transfer of all or any portion of the Member's Units. Any attempted Transfer of
Units, or any part thereof, is null and void ab initio and shall not be
recognized by the Company for any purpose. The foregoing restriction shall not,
however, restrict a Member from (i) pledging or collaterally assigning the
economic rights associated with such Member's Units including such Member's
rights to receive present and future distributions, payments, proceeds,
instruments, property, assets and rights paid or otherwise distributed in
connection with or relating to the Member's Units and all monies, due or to
become due and payable to such Member in connection with or relating to the
Member's Units or otherwise paid, issued or distributed from time to time in
respect of or in exchange therefore (including, without limitation, all proceeds
of dissolution or liquidation of the Company, or payments or distributions in
connection with any merger, consolidation, conversion or reorganization of the
Company) or (ii) selling such Member's Units to the other Member pursuant to
Section 9.2 below.
9.2. Right to Purchase and Sell in Event of Deadlock - So long as there
are only two Members, following an unresolved Deadlock Event (as defined
below), each Member (the "Offering Member") shall have the right, exercisable
from time to time by written notice (a "Sale Proposal") to the other Member
(the "Offeree Member"). to cause a sale of Units at a price (the "Sale Price")
and upon terms (the "Sale Terms") fixed by such Offering Member in such written
notice. Within 30 days following the giving of such notice, the Offeree Member
shall elect, by written notice to the Offering Member (the "Offeree Notice"), to
(i) sell the Offeree Member's Units to the Offering Member at the Sale Price
and upon the Sale Terms or (ii) require the Offering Member to sell its Units to
the Offeree Member at the Sale Price and upon the Sale Terms. If an Offeree
Notice is not given within such 30 days, the Offeree Member shall be deemed to
have given an Offeree Notice electing to sell Offeree's Units to the Offering
Member. Within 30 days of the Offeree Notice, the Members shall execute such
documents and instruments reasonably acceptable to the Members required to
consummate the contemplated transaction. The closing of such transaction shall
take place within (i) 30 days following the date on which any government
regulatory approvals required for consummation of the transaction have been
obtained or otherwise satisfied or (ii) if no such approvals are required, 10
days after the date of execution of such documents and instruments. The Member
selling its Units pursuant to this Section 9.2 shall, and hereby covenants to,
transfer its Units to the other Member free and clear of any and all
encumbrances other than encumbrances arising out of Company financing.
Notwithstanding the foregoing, the Offering Member may withdraw the Sale
Proposal at any time before receipt by it of the Offeree Notice, in which case
the Offeree Member shall have no further right to give an Offeree Notice.
For purposes of this Section 9.2, a "Deadlock Event" shall mean the
inability of the Members to reach agreement with respect to any of the matters
requiring consent of all Members
-7-
<PAGE> 11
pursuant to Section 4.3, above (other than with respect to admission of
additional Members) for a period of 45 calendar days following the date on which
a written proposal for any such action is given by one Member to the other
Member. Such notice shall be deemed to have been given when personally
delivered to the Chief Executive Officer of the other Member or on the date such
notice is mailed to the other Member by registered or certified mail, return
receipt requested, addressed to the other Member, to the attention of its Chief
Executive Officer, at the other Member's address of record as reflected on the
books of the Company.
ARTICLE X
DISSOCIATION OF A MEMBER
10. 1. Dissociation - A Person shall cease to be a Member upon the
happening of any of the following events (a "Dissociation"):
10.1.1. The attempted Transfer of any portion of a Member's
membership interest except to the limited extent permitted under ARTICLE
IX, above; or
10.1.2. The withdrawal of the Member in the exercise of a
statutory withdrawal right; or
10.1.3 The bankruptcy of the Member; or
10.1.4. In the case of a Member that is a limited liability
company or other separate organization other than a corporation, the
dissolution and commencement of winding up of the Member; or
10.1.5. In the case of a Member that is a corporation, the
filing of articles of dissolution for the corporation or the revocation
of its charter (except an involuntary administrative dissolution if the
corporation is promptly reinstated after notice thereof, provided that
applicable state law treats the reinstatement as relating back to and
effective as of the effective date of the administrative dissolution);
or
10.1.6. The sale by a Member of its Units to the other Member
pursuant to Section 9.2, above, or
10.1.7. A claim by any person of a right to all or any portion
of the Member's membership interest on the basis that, notwithstanding
Article IX, such interest has been Transferred to such claimant by
operation of law or otherwise.
10.2. Rights of Dissociated Member - In the event of the Dissociation
of any Member (a "Dissociated Member"):
10.2.1. If the Dissociation is followed by the winding up of the
Company under Article XI, the Dissociated Member shall be entitled to
participate financially in the winding up of the Company to the same
extent as any other Member except that, if
-8-
<PAGE> 12
the Dissociation is in violation of the Agreement, any
distributions to which the Dissociated Member would have been entitled
shall be reduced by the damages sustained by the Company as a result of
the dissolution and winding up; or
10.2.2. If the Dissociation is not followed by the winding up of
the Company under Article XI, the Dissociated Member shall have only the
right to receive the allocations of profits or losses and the
distributions payable with respect to the Dissociated Member's interest.
ARTICLE XI
DISSOLUTION AND WINDING UP
11.1. Dissolution - The Company shall be dissolved and its affairs
wound up, upon the first to occur of the following events (which, unless the
Members agree to continue the business as provided below, shall constitute
"Dissolution Events"):
11.1.1. The expiration of the term set forth in Section 1.5,
unless the business of the Company is continued with the consent of all
of the Members;
11.1.2. The unanimous written consent of all of the Members;
and
11.1.3. The Dissociation of any Member, unless within 90 days
after the Dissociation the Members elect to continue the business of the
Company and, if the Dissociation resulted in the Company having only one
Member, at least one additional Member is admitted within such 90-day
period.
11.2. Effect of Dissolution - Upon dissolution, the Company shall
cease all business except that incident to the winding up of its affairs, but
the Company shall not be terminated, but shall continue in existence until the
winding up of its affairs is completed and a Certificate of Dissolution has
been issued by the Secretary of State of Missouri. The Board of Managers as of
the date of the Dissolution Event shall have full authority over all matters
related to the winding up of the Company.
11.3. Distribution of Assets on Dissolution - Upon the winding up of
the Company, the Company's property shall be distributed:
11.3.1. First to creditors, including Members who are
creditors, to the extent permitted by law, in satisfaction of Company
liabilities;
11.3.2. Then to Members in accordance with Section 7.4.
Liquidation proceeds shall be paid within 90 days after the date of
liquidation. Such distributions shall be in cash or property (which need not be
distributed proportionately) or partly in both, as determined by the Members.
-9-
<PAGE> 13
11.4. Completion of Winding Up; Certificate of Dissolution - The
winding up of the Company shall be completed when all debts, liabilities, and
obligations of the Company have been paid and discharged or reasonably adequate
provision therefor has been made, and all of the remaining property and assets
of the Company have been distributed to the Members. Upon the completion of
winding up of the Company, a Certificate of Dissolution shall be delivered to
the Secretary of State of Missouri for filing. The Certificate of Dissolution
shall set forth the information required by the Act.
ARTICLE XII
INDEMNIFICATION
12.1. Indemnification of Members, Managers and Officers - The Company
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, including but not
limited to an action by or in the right of the Company, by reason of the fact
that such person is or was a Member, Manager or officer of the Company, or is
or was serving at the request of the Company as a manager, director, officer,
employee or agent of another company, 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 he or she reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
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 he or she reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
12.2. Discretionary Indemnification of Employees - The Members may
extend, on a case-by-case basis, the indemnification provided in this Article to
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 such person is or was an employee or agent of the Company other than a
Member, Manager or officer of the Company.
12.3. Determination of Indemnitee's Compliance with Standard of
Conduct - Any indemnification under this Article, unless ordered by a court,
shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of the Member, Manager, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in this Article. The determination shall be made
by the Members.
12.4. Advance Payment of Expenses - Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the Company in
advance of the final disposition of the action, suit or proceeding as authorized
by the Members in the specific case
-10-
<PAGE> 14
upon receipt of an undertaking by or on behalf of the Member, Manager,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the Company as
authorized in this Article.
12.5. Non-Exclusivity; Survival of Indemnification - The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
other provision of law, the Agreement, or any other agreement, vote of Members
or otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a Member, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person; 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.
12.6. Insurance on Indemnitees - In order to satisfy its obligations
hereunder, the Company may purchase and maintain insurance on behalf of any
person who is or was a Member, Manager, officer, employee or agent of the
Company and who is indemnified against liabilities under the provisions of this
Article.
12.7. Interpretation - For the purpose of this Article, references to
"the Company" include all constituent entities absorbed in a consolidation or
merger as well as the Company, so that any person who is or was a manager,
director, officer, employee or agent of such a constituent entity or is or was
serving at the request of such constituent entity as a manager, director,
officer, employee or agent of another company, corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article with respect to the Company as such person would if
he or she had served the Company in the same capacity. For purposes of this
Article, the term "other enterprise" shall include employee benefit plans; the
term "fines" shall include any excise taxes assessed on a person with respect to
an employee benefit plan; and the term "serving at the request of the Company"
shall include any service as a Member, Manager, officer, employee or agent of
the Company which imposes duties on, or involves services by, such Member,
Manager, officer, employee or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he or she 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 Company" as referred to in this
Article.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1. Entire Agreement - The Agreement, together with the Articles,
represents the entire agreement among all the Members and between the Members
and the Company,
13.2. No Partnership Intended, Except for Tax Purposes - The Members
have formed the Company under the Act, and expressly do not intend hereby to
form a partnership under either the Missouri Uniform Partnership Law or the
Missouri Revised Uniform Limited
-11-
<PAGE> 15
Partnership Act or any successor acts. The Members do not intend to be partners
one to another, or partners as to any third party. To the extent any Member, by
work or action, represents to another person that any other Member is a partner
or that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs personal liability
by reason of such wrongful representation. The Members, however, expressly
intend to have the Company treated as a partnership under the Code.
13.3. Rights of Creditors and Third Parties under Agreement - The
Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members, and their successors and assignees. The
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other person. Except and only to the extent provided by
applicable statute, no such creditor or third party shall have any rights under
the Agreement or any agreement between the Company and any Member with respect
to any capital contribution or otherwise.
13.4. Non-Competition - Each Member agrees that, for a period
commencing on the date of this Agreement and terminating on the earlier of (i)
the second anniversary of the date on which such Member ceases to be a Member
and (ii) the date on which a Certificate of Dissolution of the Company is filed
with the Secretary of the State of Missouri, such Member and its officers,
directors, and affiliated companies (collectively, the "Member Group") shall
not, anywhere in the continental United States, without the written consent of
the Company and each of its remaining Members, directly or indirectly, engage in
the business of cell site construction and installation services for entities
involved in the wireless telecommunications industry. In the event of a breech
or threatened breech of any Member or any member of a Member Group of any of the
covenants of such Member under this Section, the Members acknowledge that the
Company may not have an adequate remedy at law for money damages. Accordingly,
in the event of such breech or threatened breech, each Member agrees that the
Company shall be entitled to such equitable and injunctive relief as may be
available to restrain such Member or any member of a Member Group from the
violation of the provisions hereof in addition to any other remedy to which the
Company may be entitled, in equity or at law.
13.5. Definitions - For purposes of this Agreement, unless the context
clearly indicates otherwise, capitalized words or phrases are defined as
follows:
13.5.1. "Built-in Gains" means allocations, pursuant to Code
Section 704(c), taken into account in determining Tax Profits or Tax
Losses, to the extent such allocations are attributable to the excess of
the agreed value over the tax basis, both as shown on Schedule A, of
property contributed to the Company.
13.5.2. "Built-in Losses" means allocations pursuant to Code
Section 704(c), taken into account in determining Tax Profits and Tax
Losses, to the extent such allocations are attributable to the excess of
the tax basis over the agreed value, both as shown on Schedule A, of
property contributed to the Company.
13.5.3. "Code" and "Regulations" mean, respectively, the
Internal Revenue Code of 1986, and the regulations promulgated
thereunder, in either case as amended
-12-
<PAGE> 16
from time to time. A reference to a Section of the Code shall refer to the
corresponding provision of any successor law.
13.5.4. "Tax Profits" and "Tax Losses" for any taxable year mean the net
income or loss of the Company as reported for federal income tax purposes as to
such taxable year, calculated by (i) including all amounts allocated to all
Members under Code Sections 702(a)(1) through 702(a)(8), (ii) increased by
tax-exempt income and (iii) decreased by expenditures described in Code Section
705(a)(2)(B).
l3.5.5. "Transfer" means any disposition, directly or indirectly, by
operation of law or otherwise, voluntarily or involuntarily, by intestacy, will,
trust or estate distribution, or inter vivos action, including any sale,
assignment, gift, exchange, pledge, encumbrance or other creation of a security
interest, attachment, creation of any interest in the Company or distribution
from the Company for the benefit of creditors, or (without limitation) other
transfer or disposition of a Member's interest in the Company or any right,
title or interest therein, whether absolute or as security, whether voluntary or
involuntary, including any Transfer by operation of law; "Transfer" when used as
a verb means to effect or attempt to effect a Transfer.
13.5.6. The following terms are defined in the Sections indicated.
Act - 1.1
Agreement - Preamble
Article - 1.4
Dissociated Member - 10.2
Dissociation - 10.1
Dissolution Events - 11.1
Member(s) - 4.1
Unit(s) - 4.2
-13-
<PAGE> 17
IN WITNESS WHEREOF, we have hereunto set our hands and seals as of the
date first above written.
LABARGE WIRELESS, INC,
By Craig E. LaBarge
--------------------------------
Craig E. LaBarge
President
CLAYCO CONSTRUCTION COMPANY,
INC.
By Robert G. Clark
--------------------------------
Robert G. Clark
President
-14-
<PAGE> 18
SCHEDULE A
Initial Capitalization
<TABLE>
<CAPTION>
Member Initial Capital Contribution (Cash) Units Issued
- ------ ----------------------------------- ------------
<S> <C> <C>
LaBarge Wireless, Inc. $250,000 100,000
Clayco Construction $250,000 100,000
Company, Inc,
</TABLE>
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUN-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 935
<SECURITIES> 250
<RECEIVABLES> 13,455
<ALLOWANCES> (187)
<INVENTORY> 17,577
<CURRENT-ASSETS> 33,266
<PP&E> 3,194
<DEPRECIATION> 9,212
<TOTAL-ASSETS> 41,550
<CURRENT-LIABILITIES> 13,376
<BONDS> 0
0
0
<COMMON> 156
<OTHER-SE> 17,599
<TOTAL-LIABILITY-AND-EQUITY> 41,550
<SALES> 75,060
<TOTAL-REVENUES> 75,060
<CGS> 61,103
<TOTAL-COSTS> 70,080
<OTHER-EXPENSES> (146)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,355
<INCOME-PRETAX> 3,771
<INCOME-TAX> 231
<INCOME-CONTINUING> 3,540
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,540
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
