LMI Aerospace, Inc. Exhibit 10.5 to Form 8-K


     

    EXHIBIT 10.5

     

    FOR
      INFORMATION PURPOSES ONLY - TO BE EXECUTED ON START DATE

    


    


    EMPLOYMENT
      AGREEMENT

    


    


    LMI
      AEROSPACE, INC.,
      a
      Missouri corporation (the “Corporation”), and DARREL
      E. KEESLING (“Employee”)
      hereby agree as follows:

    


    1. Employment.
      The
      Corporation hereby employs Employee, and Employee accepts employment from the
      Corporation, upon the terms and conditions hereinafter set forth in this
      Employment Agreement (“Agreement”). 

    


    2. Term
      of Employment. 

    


    (A) The
      initial term of Employee’s employment under this Agreement shall commence on the
      date of this Agreement (the “Commencement Date”) and shall terminate on December
      31, 2009; provided, however, that this Agreement shall automatically extend
      for
      successive one-year terms unless not later than October 31 of any year beginning
      in 2009, either party has given written notice to the other party of its or
      his
      intention not to extend the term of this Agreement (in which case, this
      Agreement shall terminate at the end of the then-current term); and provided,
      further, that the term of employment may be terminated upon the earlier
      occurrence of any of the following events:

    


    (1) Upon
      the
      termination of the business or corporate existence of the
      Corporation;

     

                                                  
      (2) At
      the
      Corporation’s option, in the event the Corporation determines that Employee is
      not performing the duties required of him hereunder to the satisfaction of
      the
      Corporation;

     

    (3) Upon
      the
      death of Employee;

    


    (4) At
      the
      Corporation’s option, if Employee shall suffer a permanent disability. For the
      purposes of this Agreement, “permanent disability” means any physical or mental
      impairment that renders Employee unable for a period of six (6) months or more
      to perform the essential job functions of his position, even with reasonable
      accommodation, as determined by a physician selected by the Corporation.
      Employee acknowledges and agrees that he shall voluntarily submit to a medical
      and/or psychological examination for the purpose of determining his continued
      fitness to perform the essential functions of his position whenever requested
      to
      do so by the Corporation. If the Corporation elects to terminate the employment
      relationship under this subparagraph (4), the Corporation shall notify Employee
      or his representative in writing, and the termination shall become effective
      on
      the date that such notification is given;

     

    (5) At
      the
      Corporation’s option, upon ten (10) calendar days’ written notice to Employee,
      in the event of any breach or default by Employee of any of the terms of this
      Agreement or of any of Employee’s duties or obligations hereunder. In lieu of
      providing ten (10) calendar days’ advance written notice, the Corporation, at
      its sole option, may terminate Employee’s services immediately and pay him an
      amount that is equivalent to ten (10) calendar days of his salary, less any
      deductions required by law;

     

    (6) At
      the
      Corporation’s option, without any advance notice, in the event that Employee
      engages in conduct that, in the opinion of the Corporation, (1) constitutes
      dishonesty of any kind (including, but not limited to, any misrepresentation
      of
      facts or falsification of records) in Employee’s relations, interactions or
      dealings with the Corporation or its customers; (2) constitutes a felony; (3)
      potentially may or will expose the Corporation to public disrepute or disgrace,
      or potentially may or will cause harm to the customer relations, operations
      or
      business prospects of the Corporation; (4) constitutes harassment or
      discrimination towards any person associated with the Corporation, whether
      an
      employee, agent or customer, based upon that person’s race, color, national
      origin, sex, age, disability, religion or other protected status; (5) reflects
      disruptive or disorderly conduct, including but not limited to, acts of
      violence, fighting, intimidation or threats of violence against any person
      associated with the Corporation, whether an employee, agent or customer, or
      possessing a weapon while on the Corporation’s premises or while acting on
      behalf of the Corporation; (6) is indicative of abusive or illegal drug use
      while on the Corporation’s premises or while acting on the Corporation’s behalf;
      or (7) constitutes a willful violation of any governmental rules or regulations;
      or

     

    (7) At
      Employee’s option, after providing the Corporation with at least thirty (30)
      calendar days advance written notice of his intention to terminate the
      employment relationship.

     

    If
      employment is terminated for any of the reasons set forth in subparagraphs
      (3)
      through (7) of this section 2(A), Employee shall be entitled to receive only
      the
      Base Salary (as that term is hereinafter defined) accrued but unpaid as of
      the
      date of the termination and shall be ineligible to receive any additional
      compensation or severance pay. If, on the other hand, employment is terminated
      by the Corporation during the term of this Agreement for any reason other than
      those set forth in paragraphs (3) through (7) of this section 2(A), subject
      to
      the conditions set forth in paragraphs 2(C) and (D) of this Agreement, the
      Corporation shall provide severance pay to Employee in an amount based upon
      his
      length of service with the Corporation. Specifically, the Corporation shall
      provide Employee with six (6) months of Base Salary if he has less than five
      (5)
      years of service with the Corporation as of the date of his termination and
      with
      twelve (12) months of Base Salary if he has five (5) or more years of service
      with the Corporation as of the date of his termination.

    


    (B) If
      Employee’s employment with the Corporation is terminated in conjunction with a
      change in the control of the Corporation or in conjunction with the sale of
      substantially all of the operating assets of the Corporation, the Corporation
      will provide Employee with severance pay under the circumstances specified
      in
      subparagraphs (1) and (2) of this section 2(B), and the conditions set forth
      in
      paragraphs 2(C) and (D) of this Agreement. For the purposes of this Agreement,
      a
“change in control” is defined as the sale of substantially all of the operating
      assets of the Corporation or the acquisition of more than fifty percent (50%)
      of
      the stock of the Corporation by a group of shareholders or an entity that
      acquires control of the Corporation (a “Purchaser”). 

    


    (1) If
      the
      change in control or the sale results in the involuntary termination of Employee
      or results in Employee electing to terminate his employment for a good reason
      as
      determined by the Corporation in its sole discretion (such as the Purchaser
      refusing to offer full time employment to Employee on terms comparable to those
      provided by the Corporation prior to the acquisition or the Purchaser requiring
      Employee to move to a new location), the Corporation shall provide Employee
      with
      severance pay in an amount that is equal to two times his annual Base Salary
      and
      shall pay Employee any reasonably anticipated Performance Bonus for the fiscal
      year in which he was terminated, on a prorated basis. 

    


    (2) If
      Employee voluntarily terminates his employment without a good reason (as
      determined by the Corporation in its sole discretion) within ninety (90) days
      after the change in control or the sale, the Corporation shall provide Employee
      with six (6) months of Base Salary if he has less than five (5) years of service
      with the Corporation as of the date of his termination and with twelve (12)
      months of Base Salary if he has five (5) or more years of service with the
      Corporation as of the date of his termination. 

    


    (C) The
      severance pay provided for in section 2(A) of this Agreement shall be paid
      in
      equal monthly installments, unless the Corporation, within its sole discretion,
      elects to pay the present value of the severance pay in a lump sum within thirty
      (30) calendar days of the termination. For purposes of calculating the present
      value of the severance pay, the discount rate shall be the prime rate quoted
      in
      the Wall Street Journal on the day the Corporation elects to pay the present
      value of the severance pay in a lump sum.

     

    


    (D) Notwithstanding
      anything to the contrary, (i) the amount of severance pay provided under this
      Agreement shall not under any circumstances exceed the limitations set forth
      in
§ 280G of the Code, and (ii) the Corporation’s obligation to pay the severance
      pay provided for in this section 2 shall be conditioned on Employee’s execution
      of a written release satisfactory to the Corporation.

     

    3. Compensation.

    


    (A) During
      the period from the Commencement Date to December 31, 2007, the Corporation
      shall compensate Employee for Employee’s services rendered hereunder by paying
      to Employee an annual salary (the “Base Salary”) of Two Hundred Forty Thousand
      Dollars ($240,000.00), prorated for the months employed in 2007. During the
      period from January 1, 2008 to December 31, 2008, Employee’s Base Salary shall
      be Two Hundred Fifty Thousand Dollars ($250,000.00). During the period from
      January 1, 2009 to December 31, 2009, Employee’s Base Salary shall be Two
      Hundred Sixty Thousand Dollars ($260,000.00). Thereafter, as long as this
      Agreement remains in effect, the annual Base Salary that the Corporation shall
      pay to Employee for his services rendered hereunder will be Two Hundred Sixty
      Thousand Dollars ($260,000.00). Payment of this salary will be made in
      accordance with the payroll policies of the Corporation in effect from time
      to
      time. Notwithstanding anything in this paragraph to the contrary, the
      Corporation reserves the right to deduct or withhold all amounts from Employee’s
      salary as may be required by law or otherwise mutually agreed to by the parties
      hereto.

    


    (B) With
      respect to each complete fiscal year of the Corporation during which (i)
      Employee is employed under the terms of this Agreement as of the last day of
      such fiscal year, and (ii) the Corporation’s “Annual Income from Operations” (as
      that term is hereinafter defined) is more than Ten Million Dollars
      ($10,000,000.00), the Corporation shall pay to Employee, in addition to the
      Base
      Salary, an annual “Performance Bonus.” 

    


    The
      amount of the annual Performance Bonus (if any) shall be equal to:

    


    
      	 	
              (1)

            	
              5.00%
                of Employee’s Base Salary; plus

            


    

    


    
      	 	
              (2)

            	
              0.625%
                of the Corporation’s Annual Income from Operations that is above Ten
                Million Dollars ($10,000,000.00). In the event the Corporation does
                not
                meet its “Annual On-Time Delivery Metric” (as that term is defined in
                Appendix A), the bonus amount described in this Paragraph 3(B)(2),
                shall
                be reduced by up to Twenty-five Percent (25.0%), such amount to be
                determined by the Compensation Committee of the Board of Directors
                of the
                Corporation.

            


    

    


    The
      Compensation Committee of the Board of Directors of the Corporation retains
      the
      right to modify or adjust the manner in which the Performance Bonus is
      calculated in the event that the Corporation either acquires the assets of
      another entity, or any portion thereof, or sells its assets, or any portion
      thereof, to another entity.

    


    In
      the
      event the Corporation’s Annual Income from Operations for any given fiscal year
      is less than Ten Million Dollars ($10,000,000.00), Employee shall not be
      entitled to a Performance Bonus with respect to such fiscal year. 

    


    For
      purposes of the calculation of the Performance Bonus, the Corporation’s “Annual
      Income from Operations” means the consolidated Income from Operations of the
      Corporation and its subsidiaries, for a given fiscal year, as determined by
      the
      firm of independent certified public accountants providing auditing services
      to
      the Corporation, using generally accepted accounting principles consistently
      applied, and calculated without regard to (a) any bonus paid to the
      Corporation’s Chairman of the Board, (b) federal and state income tax, (c) any
      interest expense or other income and expense as they appear on the Corporation’s
      annual audited financial statements, (d) any expenses or income related to
      the
      disputed claim with the Lockheed Corporation ongoing at the time of execution
      of
      this Agreement, and (e) any income or loss attributable to any other corporation
      or entity (including the assets of a corporation or entity that constitute
      an
      operating business) acquired by or merged into the Corporation subsequent to
      the
      effective date of this Agreement. The Corporation shall pay to Employee any
      Performance Bonus due Employee hereunder not later than fifteen (15) days after
      the receipt by the Corporation of its annual audited financial statements,
      which
      the Corporation expects to receive within ninety (90) days after the end of
      each
      fiscal year of the Corporation.

    


    (C) In
      addition to the Base Salary and Performance Bonus (if any), Employee shall be
      entitled to receive such bonus compensation as the Compensation Committee of
      the
      Board of Directors of the Corporation may authorize from time to
      time.

    


    (D) As
      further inducement to Employee to enter into this Agreement, the Compensation
      Committee has approved the grant to Employee of __________ (_________) shares
      of
      restricted stock under the LMI Aerospace, Inc. 2005 Long-Term Incentive Plan
      (the “Plan”), subject to an accrued vesting of thirty-three percent (33%) of
      such grant upon each anniversary of the date of the grant, subject to the terms,
      conditions and limitations set forth in the Plan and documents evidencing the
      award of such grant.

    


    4. Duties
      of Employee.

    


    (A) Employee
      shall serve as Chief Operating Officer or in such other positions as may be
      determined by the Board of Directors of the Corporation, and Employee shall
      perform such duties on behalf of the Corporation and its subsidiaries by such
      means, at such locations, and in such manner as may be specified from time
      to
      time by the Chief Executive Officer or Board of Directors of the
      Corporation.

    


    (B) Employee
      agrees to abide by and conform to all rules established by the Corporation
      applicable to its employees.

    


    (C) Employee
      acknowledges that he is being employed as a full-time employee, and Employee
      agrees to devote so much of Employee’s entire time, attention and energies to
      the business of the Corporation as is necessary for the successful operation
      of
      the Corporation and shall endeavor at all times to improve the business of
      the
      Corporation. Employee shall not accept any business commitments other than
      with
      the Corporation without the advance written consent of the Corporation’s Chief
      Executive Officer.

    


    5. Expenses.
      During
      the period of Employee’s employment, except as otherwise specifically provided
      in this Agreement, the Corporation will pay directly, or reimburse Employee
      for,
      all items of reasonable and necessary business expenses approved in advance
      by
      the Corporation if such expenses are incurred by Employee in the interest of
      the
      business of the Corporation. The Corporation shall also reimburse Employee
      for
      automobile expenses incurred by Employee in the performance of Employee’s duties
      hereunder. The amount of such reimbursement shall be in accordance with the
      automobile expense reimbursement policy adopted (and as it may be modified
      from
      time to time) by the Corporation’s Board of Directors. All such expenses paid by
      Employee will be reimbursed by the Corporation upon presentation by Employee,
      from time to time (but not less than quarterly), of an itemized account of
      such
      expenditures in accordance with the Corporation’s policy for verifying such
      expenditures.

    


    6. Fringe
      Benefits.

    


    (A) Employee
      shall be entitled to participate in any health, accident and life insurance
      program and other benefits that have been or may be established by the
      Corporation for salaried employees of the Corporation.

    


    (B) Employee
      shall be entitled to an annual vacation without loss of compensation for such
      period as may be determined by the Board of Directors of the
      Corporation.

    


    (C) The
      Corporation shall furnish to Employee during the term of his employment an
      automobile selected by the Corporation to aid Employee in the performance of
      his
      duties. Upon agreement of the Corporation and Employee, the Corporation may,
      in
      lieu of the automobile, provide Employee with a Five Thousand Dollar ($5,000.00)
      annual automobile allowance.

    


    7. Covenants
      of Employee.

    


    (A) During
      the term of Employee’s employment with the Corporation and for all time
      thereafter, Employee covenants and agrees that Employee will not in any manner
      directly or indirectly, except as required in Employee’s duties to the
      Corporation, disclose or divulge to any person, entity, firm or company
      whatsoever, or use for Employee’s own benefit or the benefit of any other
      person, entity, firm or company, directly or indirectly, any knowledge, devices,
      information, techniques, customer lists, business plans or other data belonging
      to the Corporation or developed by Employee on behalf of the Corporation during
      his employment with the Corporation, without regard to whether all of the
      foregoing matters will be deemed confidential, material or important, the
      parties hereto stipulating, as between them, that the same are important,
      material, confidential and the property of the Corporation, that disclosure
      of
      the same to or use of the same by third parties would greatly affect the
      effective and successful conduct of the business of the Corporation and the
      goodwill of the Corporation, and that any breach of the terms of this
      subparagraph (A) shall be a material breach of this Agreement.

     

    (B) During
      the term of Employee’s employment with the Corporation and for a period of two
      (2) years or one (1) year with respect to subparagraph (4) below (the “Covenant
      Term”) after cessation for whatever reason of such employment (except as
      hereinafter provided in subparagraph (C) of this paragraph 7), Employee
      covenants and agrees that Employee will not in any manner directly or
      indirectly:

     

                     (1)    solicit,
      divert, take away or interfere with any of the customers (or their respective
      affiliates or successors) of the Corporation;

     

     (2)    engage
      directly or indirectly, either personally or as an employee, partner, associate
      partner, officer, manager, agent, advisor, consultant or otherwise, or by means
      of any corporate or other entity or device, in any business which is competitive
      with the business of the Corporation. For purposes of this covenant a business
      will be deemed competitive if it is conducted in whole or in part within any
      geographic area wherein the Corporation is engaged in marketing its products,
      and if it involves the manufacture of component parts for the aerospace industry
      or any other business which is in any manner competitive, as of the date of
      cessation of Employee’s employment, with any business then being conducted by
      the Corporation or as to which the Corporation has then formulated definitive
      plans to enter;

     

    (3)    induce
      any salesman, distributor, supplier, manufacturer, representative, agent, jobber
      or other person transacting business with the Corporation to terminate their
      relationship with the Corporation, or to represent, distribute or sell products
      in competition with products of the Corporation; or

     

    (4)    induce
      or
      cause any employee of the Corporation to leave the employ of the
      Corporation.

     

    


    (C) The
      parties agree that the Covenant Term provided for in the preceding subparagraph
      (B) shall be:

     

    


                    (1)reduced
      to six (6) months after cessation for whatever reason of Employee’s employment
      with the Corporation in the event all of the operating assets or all of the
      common stock of the Corporation is sold to any entity or individuals
      unaffiliated with the Corporation, its successors or assigns; or

     

    


                    (2)eliminated
      if the business currently operated by the Corporation is terminated, and the
      assets of the Corporation are liquidated.

     

    


    (D) All
      the
      covenants of Employee contained in this paragraph 7 shall be construed as
      agreements independent of any other provision of this Agreement, and the
      existence of any claim or cause of action against the Corporation, whether
      predicated on this Agreement or otherwise, shall not constitute a defense to
      the
      enforcement by the Corporation of these covenants.

     

    


    (E) It
      is the
      intention of the parties to restrict the activities of Employee under this
      paragraph 7 only to the extent necessary for the protection of legitimate
      business interests of the Corporation, and the parties specifically covenant
      and
      agree that should any of the provisions set forth therein, under any set of
      circumstances not now foreseen by the parties, be deemed too broad for such
      purpose, said provisions shall automatically be amended and modified to the
      minimum extent necessary in order for the provision(s) in question to be valid
      and enforceable.

     

    


    8. Documents.
      Upon
      cessation of Employee’s employment with the Corporation, for whatever reason,
      all documents, records (including without limitation, customer records),
      notebooks, invoices, statements or correspondence, including copies thereof,
      relating to the business of the Corporation then in Employee’s possession,
      whether prepared by Employee or others, will be delivered to and left with
      the
      Corporation, and Employee agrees not to retain copies of the foregoing documents
      without the written consent of the Corporation.

    


    9. Remedies.
      In the
      event of the breach by Employee of any of the terms of this Agreement,
      notwithstanding anything to the contrary contained in this Agreement, the
      Corporation may terminate the employment of Employee in accordance with the
      provisions of paragraph 2 of this Agreement. It is further agreed that any
      breach or evasion of any of the terms of this Agreement by Employee will result
      in immediate and irreparable injury to the Corporation and will authorize
      recourse to injunction and/or specific performance as well as to other legal
      or
      equitable remedies to which the Corporation may be entitled. In addition to
      any
      other remedies that it may have in law or equity, the Corporation also may
      require an accounting and repayment of all profits, compensation, remuneration
      or other benefits realized, directly or indirectly, as a result of such breaches
      by Employee or by a competitor’s business controlled, directly or indirectly, by
      Employee. No remedy conferred by any of the specific provisions of this
      Agreement is intended to be exclusive of any other remedy and each and every
      remedy given hereunder or now or hereafter existing at law or in equity by
      statute or otherwise. The election of any one or more remedies by the
      Corporation shall not constitute a waiver of the right to pursue other available
      remedies. Employee expressly agrees to pay all reasonable costs and attorneys’
fees incurred by the Corporation in order to enforce Employee’s obligations
      under this Agreement, regardless of whether litigation is commenced or
      prosecuted to a judgment.

    


    10. Severability.
      All
      agreements and covenants contained herein are severable, and in the event any
      of
      them shall be held to be invalid by any court of competent jurisdiction, this
      Agreement, subject to subparagraph 7(E) hereof, shall continue in full force
      and
      effect and shall be interpreted as if such invalid agreements or covenants
      were
      not contained herein.

    


    11. Waiver
      or Modification.
      No
      waiver or modification of this Agreement or of any covenant, condition or
      limitation herein shall be valid unless in writing and duly executed by the
      party to be charged therewith, and no evidence of any waiver or modification
      shall be offered or received in evidence in any proceeding, arbitration or
      litigation between the parties hereto arising out of or affecting this
      Agreement, or the rights or obligations of the parties hereunder, unless such
      waiver or modification is in writing, duly executed as aforesaid, and the
      parties further agree that the provisions of this paragraph 11 may not be waived
      except as herein set forth. Failure of the Corporation to exercise or otherwise
      act with respect to any of its rights hereunder in the event of a breach of
      any
      of the terms or conditions hereof by Employee shall not be construed as a waiver
      of such breach nor prevent the Corporation from thereafter enforcing strict
      compliance with any and all of the terms and conditions hereof.

    


    12. Assignability.
      This
      Agreement may be assigned by the Corporation to another entity that purchases
      substantially all of the assets of the Corporation or acquires a majority of
      the
      stock of the Corporation. The services to be performed by Employee hereunder
      are
      personal in nature, and, therefore, Employee shall not assign Employee’s rights
      or delegate Employee’s obligations under this Agreement, and any attempted or
      purported assignment or delegation not herein permitted shall be null and
      void.

    


    13. Successors.
      Subject
      to the provisions of paragraph 12, this Agreement shall be binding upon and
      shall inure to the benefit of the Corporation and Employee and their respective
      heirs, executors, administrators, legal administrators, successors and
      assigns.

    


    14. Notices.
      Any
      notice or other communication required or permitted hereunder shall be in
      writing and shall be deemed to have been given if delivered personally, by
      over-night courier, or by certified or registered mail, return receipt
      requested, if to the Corporation, to:

    


    


    Ronald
      S.
      Saks, President

    LMI
      AEROSPACE, INC.

    P.O.
      Box
      900

    St.
      Charles, MO 63302-0900

    


    and,
      if
      to Employee, to:

    


    Darrel
      E.
      Keesling

    1306
      Parkview Valley Drive

    Ballwin,
      MO 63011-4206

    


    or
      to
      such other address as may be specified by either of the parties in the manner
      provided under this paragraph 14.

    


    15. Construction.
      This
      Agreement shall be deemed for all purposes to have been made in the State of
      Missouri and shall be governed by and construed in accordance with the laws
      of
      the State of Missouri, notwithstanding either the place of execution hereof,
      nor
      the performance of any acts in connection herewith or hereunder in any other
      jurisdiction.

    


    16. Venue.
      The
      parties hereto agree that any suit filed arising out of or in connection with
      this Agreement shall be brought only in the United States District Court for
      the
      Eastern District of Missouri, unless that court lacks jurisdiction, in which
      case such action shall be brought only in the Circuit Court for St. Louis
      County, Missouri.

    


    17. Disclosure
      of Existence of Agreement.
      To
      preserve the Corporation’s rights under this Agreement, the Corporation may
      advise any third party of the existence of this Agreement and its terms, and
      Employee specifically releases and agrees to indemnify and hold the Corporation
      harmless from any liability for doing so.

    


    18. Agreement
      Drafted by the Corporation’s Counsel; Interpretation.
      Each
      party hereto acknowledges that the Corporation’s counsel, Gallop, Johnson &
Neuman, L.C., prepared this Agreement on behalf of and in the course of its
      representation of the Corporation and not Employee. Employee acknowledges and
      represents that: (a) he has been advised to seek the advice of independent
      counsel and (b) he has had the opportunity to seek the advice of independent
      counsel. Notwithstanding the foregoing, if a question of interpretation arises,
      this Agreement shall be construed as if drafted jointly by the parties, and
      no
      presumption or burden of proof shall arise favoring or disfavoring any party
      by
      virtue of the authorship of any provision of this Agreement.

    


    19. Review
      by and Approval of Compensation Committee.
      This
      Agreement, including each element of Employee’s compensation provided for in
      paragraph 3 has been reviewed and approved by the Compensation
      Committee.

    


    20. Entire
      Agreement.
      This
      Agreement constitutes the entire agreement between the parties with respect
      to
      the subject matter hereof and supersedes any and all prior employment,
      consulting and similar agreements, written and/or oral between the Corporation
      and Employee. Employee hereby waives and releases all rights and claims under
      any such employment, consulting or other similar agreements or with respect
      thereto.

    


    The
      parties have executed this Agreement on this _____________ day of February,
      2007.

    


    


     

                “CORPORATION”

    


                LMI
      AEROSPACE,
      INC.

     

    


                By:
      __________________________

                Ronald
      S. Saks,
      President

    


    


                “EMPLOYEE”

    


    


                _______________________________

                Darrel
      E.
      Keesling