<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
__X__Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the quarterly period ended March 31, 1995
or
_____Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the transition period from_____to_____
Commission File No. 0-8836
NUCLEAR METALS, INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2506761
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2229 Main Street,
Concord, Massachusetts 01742
(Address of Principal Executive Offices) (Zip Code)
(508) 369-5410
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 twelve 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 May 2, 1995 there were issued and outstanding 2,372,164 shares of the
Registrant's Common Stock.
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
FORM 10-Q
for the quarterly period ended March 31, 1995
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information 2
Item I. Financial Statements
Consolidated Balance Sheets,
March 31, 1995 and September 30, 1994 3
Consolidated Statements of Income:
Three Months Ended March 31, 1995 and March 31, 1994 4
Consolidated Statements of Income:
Six Months Ended March 31, 1995 and March 31, 1994 5
Consolidated Statements of Cash Flow:
Six Months Ended March 31, 1995 and March 31, 1994 6
Notes to Consolidated Financial Statements 7
Item II. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-12
SIGNATURES 13
</TABLE>
<PAGE>
PART I
Item 1. FINANCIAL STATEMENTS
PREPARATION OF FINANCIAL STATEMENTS
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission and are subject to year-end audit by independent public
accountants. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. It is suggested that the financial statements be read in
conjunction with the financial statements and notes included in the
Company's most recent Annual Report on Form 10-K.
The information furnished reflects all adjustments which, in the opinion
of management, are necessary for a fair statement of results for the interim
periods. It should also be noted that results for the interim periods are
not necessarily indicative of the results expected for the full year.
-2-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,043,000 $ 1,213,000
Marketable Securities 279,000 497,000
Accounts receivable, net of allowances
for doubtful accounts of $1,290,000 at
March 31, 1995 and
September 30, 1994 5,168,000 5,455,000
Inventories 14,990,000 14,486,000
Deferred income tax benefit 675,000 675,000
Other current assets 558,000 371,000
----------- -----------
Total current assets 22,713,000 22,697,000
----------- -----------
Property, Plant and Equipment 45,412,000 45,867,000
Less accumulated depreciation 29,917,000 29,706,000
----------- -----------
Net property, plant and equipment 15,495,000 16,161,000
----------- -----------
Other assets 1,799,000 1,684,000
----------- -----------
$40,007,000 $40,542,000
----------- -----------
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt $ 2,008,000 $ 1,091,000
Accounts payable and accrued expenses 4,276,000 4,129,000
----------- -----------
Total current liabilities 6,284,000 5,220,000
----------- -----------
Deferred federal and state income taxes 676,000 676,000
----------- -----------
Long term obligations 1,404,000 3,768,000
----------- -----------
Other long-term liabilities 4,626,000 4,626,000
----------- -----------
Stockholders' equity:
Common stock, par value $.10; authorized-
6,000,000 shares; 2,367,164 issued and
outstanding for March 31, 1995 and
2,307,464 issued and outstanding
for September 30,1994 240,000 230,000
Additional paid-in capital 14,101,000 13,752,000
Retained earnings 12,676,000 12,270,000
----------- -----------
Total stockholders' equity 27,017,000 26,252,000
----------- -----------
$40,007,000 $40,542,000
----------- -----------
----------- -----------
</TABLE>
-3-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED:
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
March 31, March 31,
1995 1994
------------- ------------
<S> <C> <C>
Net sales and contract revenues $4,212,000 $4,506,000
---------- ----------
Cost and expenses
Cost of sales 3,972,000 3,770,000
Selling, general and administrative 1,485,000 420,000
Research and development 110,000 174,000
---------- ----------
Total Cost and expenses 5,567,000 4,364,000
---------- ----------
Operating income (loss) (1,355,000) 142,000
Other income 223,000 20,000
Interest expense, net (107,000) (125,000)
---------- ----------
Income (loss) before income taxes and
extraordinary item (1,239,000) 37,000
Benefit for income taxes 939,000 13,000
Extinguishment of Debt, net of taxes of $10,000 585,000 -
---------- ----------
Net income $ 285,000 $ 24,000
---------- ----------
---------- ----------
Per Share Information
Income/(loss) before extraordinary item (0.13) 0.01
Gain on Extinguishment of Debt,
net of taxes of $10,000 0.25 -
---------- ----------
Net income per common and common
equivalent share $ 0.12 $ 0.01
---------- ----------
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 2,347,731 2,297,097
</TABLE>
-4-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED:
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
March 31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Net sales and contract revenues $ 9,839,000 $ 8,806,000
------------ ------------
Cost and expenses
Cost of sales 8,288,000 7,872,000
Selling, general and administrative 2,437,000 1,502,000
Research and development 248,000 408,000
------------ ------------
Total Cost and expenses 10,973,000 9,782,000
------------ ------------
Operating income (loss) (1,134,000) (976,000)
Other income 235,000 78,000
Interest expense, net (216,000) (289,000)
------------ ------------
Income (loss) before income taxes and
extraordinary item (1,115,000) (1,187,000)
Benefit for income taxes 936,000 403,000
Extinguishment of Debt, net of taxes of $10,000 585,000 -
------------ ------------
Net income $ 406,000 $ (784,000)
------------ ------------
------------ ------------
Per Share Information
Income/(loss) before extraordinary item (0.08) (0.34)
Gain on Extinguishment of Debt,
net of taxes of $10,000 0.25 -
------------ ------------
Net income per common and common
equivalent share $ 0.17 $ (0.34)
------------ ------------
------------ ------------
Weighted average number of common and
common equivalent shares outstanding 2,328,214 2,295,881
</TABLE>
-5-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE PERIODS ENDED:
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
March 31, March 31,
1995 1994
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 406,000 $ (784,000)
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization 778,000 1,480,000
Changes in assets and liabilities, net
(Increase) decrease in accounts receivable 287,000 (3,172,000)
(Increase) decrease in other current assets - (247,000)
(Increase) decrease in income tax receivable - 2,388,000
(Increase) decrease in deferred income tax benefit - (387,000)
(Increase) decrease in inventories (504,000) 177,000
Increase (decrease) in accounts payable
and accrued expenses 146,000 (1,562,000)
Gain on sale of building (175,000)
Changes in prepaid and deferred taxes (187,000) -
Other (115,000) -
------------ ------------
Net cash provided (used) by operating activities 636,000 (2,107,000)
------------ ------------
Cash flows from investing activities:
Capital expenditures, net (422,000) (237,000)
(Purchase) Sale of Marketable Securities 218,000 -
Proceeds from sale of Property, Plant & Equipment 487,000
Other - (7,000)
------------ ------------
Net cash provided (used) in investing activities 283,000 (244,000)
------------ ------------
Cash flows from financing activities:
Total payments of debt, gross (916,000) (2,623,000)
Proceeds from debt (532,000)
(Purchases) issuances of common stock 359,000 44,000
Cash Dividends - -
------------ ------------
Net cash provided (used) in financing activities (1,089,000) (2,579,000)
------------ ------------
Net increase (decrease) in cash and equivalents (170,000) (4,930,000)
Cash and equivalents at beginning of the period 1,213,000 7,864,000
------------ ------------
Cash and equivalents at end of the period $ 1,043,000 $ 2,934,000
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 16,000 $ 310,000
Income taxes $ - $ 6,000
</TABLE>
-6-
<PAGE>
NOTES
1. The significant accounting policies followed by the Company in
preparing its consolidated financial statements are set forth in Note (2) to
such financial statements included in Form 10-K for the year ended September
30, 1994.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market, and include labor, materials, and overheads for manufacturing and
engineering. Inventories at March 31, 1995 and September 30, 1994 consist of:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
----------- -------------
<S> <C> <C>
Work-in process $11,343,000 $ 10,021,000
Raw materials 3,255,000 3,721,000
Spare parts 755,000 744,000
----------- -------------
$14,990,000 $14,486,000
----------- -------------
----------- -------------
</TABLE>
-7-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 1995 COMPARED WITH SECOND QUARTER FISCAL 1994
Net sales decreased by $294,000 or 7% to $ 4,212,000 in the
second quarter of fiscal 1995. Sales in the Fabricated Specialty
Metal Products industry segment increased by $1,410,000 or 75%,
largely due to increased sales of commercial depleted uranium.
Sales in the Metal Powders industry segment decreased by
$282,000, or 24%. The decrease in the Metal Powders industry
segment was due primarily to lower production volume in each of
the product areas, with the largest decrease in the medical
powder area. Sales in the Depleted Uranium Penetrator industry
segments decreased by $1,422,000 or 98%. The decrease in the
Depleted Uranium Penetrator segment was mainly due to lower large
caliber production.
Gross profit in the second quarter decreased by $496,000 or 67%
to $240,000. The decrease in gross profit was primarily the
result of lower sales volume and an increase of inventory
reserves of $575,000 in fiscal 1995. As a percent of sales,
gross profit was 6% as compared to 16% for the second quarter of
fiscal 1994.
Selling, general and administrative expenses increased by
$1,065,000 or 253% as compared to the second quarter of fiscal
1994. The increase was primarily the result of higher legal and
audit costs during second quarter fiscal 1995. As a percentage
of sales, selling, general and administrative expenses increased
to 35% as compared to 9% for the same period a year earlier.
As a result of the foregoing, the Company sustained an
operating loss of $1,355,000 in the second quarter of fiscal 1995
as compared to operating income of $142,000 in the second quarter
of fiscal 1994.
Other income increased by $203,000 to $223,000, compared to
$20,000 for the second quarter of fiscal 1994. This was primarily
due to a gain received from the Company's sale of an office
building in Acton, Massachusetts.
Interest expense decreased by $18,000 to $107,000, from
$125,000 for the same period a year earlier. This decrease was
primarily the result of the Company's lower levels of
outstanding debt.
Income taxes benefited during the second quarter of fiscal 1995
were at an effective rate of 2%. The income taxes benefited
during the second quarter of fiscal 1995 also included the
benefit of a tax refund of $918,000. Income taxes provided for
in the second quarter of fiscal 1994 were at an effective rate of
34%.
-8-
<PAGE>
SIX MONTHS FISCAL 1995 COMPARED WITH SIX MONTHS FISCAL 1994
Net sales increased by $1,033,000 or 12% to $9,839,000 in the
first six months of fiscal 1995. Sales in the Fabricated
Specialty Metal Products industry segment increased by $2,457,000
or 58%, due to increased sales in all product lines, with the
largest increase in beryllium products. Sales in the Metal
Powders industry segment decreased by $615,000 or 26%. The
decrease in the Metal Powders industry segment was due primarily
to decreased production volumes in the medical and ti - aerospace
areas. Sales in the Depleted Uranium Penetrator segment
decreased by $810,000 or 38%, mainly due to lower large caliber
sales.
Gross profit increased by $617,000 or 66% to $1,551,000. As a
percent of sales, gross profit was 16% as compared to
11% for the first six months of fiscal 1994.
Selling, general and administrative expenses increased by
$935,000 or 62% as compared to the first six months of fiscal
1994. This increase was the result of higher legal and audit
costs. As a percentage of sales, selling, general and
administrative expenses increased to 25%, as compared to 17% for
the same period a year earlier.
As a result of the foregoing, the Company sustained an
operating loss of $1,134,000 for the six months ended March 31,
1995 compared to an operating loss of $976,000 in the comparable
period of fiscal 1994.
Other income increased by $157,000 to $235,000, compared to
$78,000 for the same period in fiscal 1994. This was primarily
due to a gain received on the sale of an office building in
Acton, Massachusetts.
Interest expense decreased by $73,000 to $216,000 from $289,000
for the same period a year earlier. This decrease was primarily
the result of lower levels of outstanding debt.
Income taxes during the first six months of fiscal 1995 and
1994 were at an effective rate of 2% and 34% respectively.
-9-
<PAGE>
SECOND QUARTER FISCAL 1995 COMPARED WITH FIRST QUARTER FISCAL 1995
Net sales decreased by $1,414,000, or 25% in the second quarter
of fiscal 1995 as compared to the first quarter. Sales in the
Fabricated Specialty Metal Products industry segment decreased by
$80,000 or 2%, primarily due to decreased sales of commercial
depleted uranium. Sales in the Metal Powders industry segment
decreased by $27,000, or 3%. Decreased sales in the Metal
Powders industry segment were due primarily to decreased
production in steel powders. Sales in the Depleted Uranium
Penetrator industry segment decreased by $1,307,000 or 98%,
mainly due to lower large caliber sales.
Gross profit decreased by $1,068,000 or 82% to $242,000 for the
second quarter of fiscal 1995 compared to $1,310,000 for the
first quarter. The decrease in gross profit was primarily the
result of lower sales volume and an increase in inventory
reserves of $575,000 in the second quarter. As a percent of
sales, gross profit was 6%, as compared to 23% for the first
quarter of fiscal 1995.
Selling, general and administrative expenses increased by
$533,000 compared to the first quarter of fiscal 1995. The
increase was primarily the result of higher legal and audit
expenses during the second quarter. As a percentage of sales,
selling, general and administrative expenses increased to 35% for
the second quarter of fiscal 1995 as compared to 17% for the
first quarter of fiscal 1995.
Income taxes during the second quarter of fiscal 1995 and the
first quarter of fiscal 1995 were at an effective rate of 2%.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the first six months of fiscal
1995 was $16,429,000, a decrease of $1,048,000. Cash and
investments at the end of the six month period were $1,322,000, a
decrease of $388,000 primarily due to repayment of debt.
Capital spending will continue in support of facilities both in
Concord, Massachusetts and at Carolina Metals, Inc., the
Company's Barnwell, South Carolina subsidiary. The Company
anticipates that this will require $750,000 during fiscal 1995.
During the second quarter, the Company restructured its long-
term debt. The principal balance of $3,532,000 outstanding with
an insurance company was negotiated at a discount and replaced
through a loan from a commercial bank. The bank established a
credit facility in the principal amount of $4,650,000. The credit
consists of a revolving line of credit in the amount of
$2,250,000 and a term credit of $2,400,000, which was outstanding
at March 31, 1995. The maturity dates for the term credit and
the line of credit are November 30, 1996 and February 29, 1996
respectively. Amounts outstanding under the line of credit and
the term note bear interest at the bank's prime rate plus .50%.
The Company has granted to the bank a security interest in all
assets of the Company and Carolina Metals, Inc. to secure
repayment of the loans. The loan documents generally: prohibit
the Company and its subsidiaries from repurchasing their
securities; contain limitations on indebtedness, guarantees,
liens, loans, and investments; require the bank's approval of
mergers and consolidations; prohibit disposition of assets other
than in the normal course of business; contain limits on
transactions with affiliated persons; and prohibit the payment
of cash dividends. Additionally, the Company is required to
maintain certain financial performance and balance sheet ratios
and levels. There was no outstanding balance on the line of
credit at March 31, 1995.
During the second quarter of fiscal 1995, the Company received
a net operating loss carryback tax refund of $918,000.
-11-
<PAGE>
PART II
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10A Credit Agreement dated March 31, 1995 between Nuclear Metals, Inc.,
Carolina Metals, Inc. and State Street Bank and Trust Company.
10B Revolving Credit Note dated March 31, 1995 of Nuclear Metals, Inc.
and Carolina Metals, Inc. payable to State Street Bank and Trust
Company in the principal amount of $2,250,000.
10C Term Note dated March 31, 1995 of Nuclear Metals, Inc. and Carolina
Metals, Inc. payable to State Street Bank and Trust Company in the
amount of $2,400,000.
b. Reports on Form 8-K: The Company did not file any reports on Form 8-K
during the second quarter ended March 31, 1995.
-12-
<PAGE>
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.
Nuclear Metals, Inc.
By /s/ Robert E. Quinn
____________________________________________
Robert E. Quinn, President and Treasurer
Chief Executive Officer
Date ___May 12, 1995_____________________________
By /s/ James M. Spiezio
____________________________________________
James M. Spiezio, Vice President, Finance
Chief Financial Officer
Date ___May 12, 1995_____________________________
-13-
<PAGE>
EXHIBIT 10A
CREDIT AGREEMENT
AGREEMENT made as of this 31st day of March, 1995 between NUCLEAR
METALS, INC., a Massachusetts corporation ("Nuclear Metals"), CAROLINA
METALS, INC., a Delaware Corporation ("Carolina Metals," together with
Nuclear Metals, "Borrowers") and STATE STREET BANK AND TRUST COMPANY, an FDIC
insured Massachusetts chartered trust company ("Bank").
WHEREAS, Bank has agreed to establish a credit facility for the
Borrowers;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I. AMOUNT AND TERMS OF THE CREDIT.
SECTION 1.01. THE CREDIT.
Subject to the terms and conditions hereof, and in reliance on the
representations and warranties contained herein, Bank hereby establishes a
credit facility in favor of the Borrowers in the principal amount of
$4,650,000 (the "Credit"). The Credit consists of (a) a revolving line of
credit of $2,250,000 ("Revolving Credit"), and (b) a term credit of
$2,400,000 ("Term Credit").
SECTION 1.02. THE REVOLVING CREDIT.
(a) AMOUNT. Provided no Event of Default (as defined in Article V), or
event which with the passage of time or notice or both would become an Event
of Default, has occurred and is continuing, each Borrower may from time to
time from the date hereof up to February 29, 1996 (the "Maturity Date")
borrow and reborrow from Bank, and Bank shall advance funds under the
Revolving Credit to such Borrower (an "Advance" or the "Advances"); provided
that the aggregate of all Advances outstanding at any time shall not exceed
the lesser of (i) $2,250,000 less the maximum aggregate liability of the
Borrowers under any outstanding letters of credit issued prior to the date
hereof or pursuant to this Credit Agreement (the "Maximum Credit") or (ii)
the "Borrowing Base" (as defined below).
(b) BORROWING BASE. The Borrowing Base shall consist of 80% of
Eligible Accounts less 100% of the maximum outstanding liability under any
letters of credit issued by Bank on behalf of either Borrower (including
letters of credit issued prior to the date hereof); provided that commencing
May 1, 1995 and on the first day of each month thereafter, the percentage of
Eligible Accounts in the Borrowing Base shall decline by 1.11%.
"Eligible Accounts" means accounts receivable of the Borrowers which (a)
arise from the sale of goods which have been shipped or the performance of
services which have been
<PAGE>
performed; (b) are not outstanding for more than 90 days after the date of
the invoice for such goods or services; (c) are not represented by a note or
other negotiable instrument; (d) the account debtor is credit worthy; (e) the
account debtor is not subject to any insolvency proceeding; (f) are not due
from a Subsidiary (as defined in Section 2.02) or an Affiliate (as defined in
Section 4.17); (g) either (i) are due from an account debtor located in the
United States or (ii) are due from an account debtor (other than a Subsidiary
or Affiliate) located outside of the United States provided the payment of
accounts described in clause (ii) are guaranteed by a commercial letter of
credit acceptable to Bank in its sole discretion; (h) are not due directly
from the United States government or any agency or department thereof; and
(i) have not been deemed unsatisfactory by ten (10) days prior notice given
by Bank to the Borrowers.
At the time of the first Advance requested hereunder and on the first
day of each month commencing on May 1, 1995, the Borrowers shall furnish a
computation of the Borrowing Base on the form attached as Exhibit 1.02(b)(ii)
("Borrowing Base Certificate"), together with supporting schedules acceptable
to Bank, which certificate shall be prepared as of the close of business on
the prior business day and be signed by each Borrowers' chief financial
officer or president. By prior notice, Bank may require daily Borrowing Base
Certificates. Bank shall be under no obligation to make any Advance if the
Borrowers fail to furnish Borrowing Base Certificates as set forth above.
In calculating the Borrowing Base, the Borrowers shall deduct from
Eligible Accounts the amount of any (i) deposit or payment which an account
debtor may have paid with respect to the goods or services to which such
account receivable relates, (ii) potential set off, and (iii) dispute.
Bank, in its reasonable discretion, may from time to time by sixty (60)
days prior notice to the Borrowers (i) modify the percentages applied to any
component of the Borrowing Base and (ii) establish sublimits on Advances for
each Borrower and in connection therewith require separate Borrowing Base
Certificates from the Borrowers. Bank, in its reasonable discretion, may
from time to time by ten (10) days prior notice to the Borrowers (a)
determine that any item included in the Borrowing Base is unacceptable for
inclusion in the Borrowing Base in the future, or (b) establish reserves
against the collection of any accounts receivable where Bank has a basis to
doubt the full and timely collectability of such accounts receivable.
(c) REVOLVING CREDIT PAYMENT. The aggregate Advances outstanding at
any time shall not exceed the lesser of (i) the Borrowing Base, as reflected
in the most recent Borrowing Base Certificate, or (ii) the Maximum Credit.
If the aggregate Advances outstanding at any time exceed such limit, then the
Borrowers shall immediately pay such excess. Bank may, without prior notice
to the Borrowers, charge any of their accounts under the control of Bank to
effect such payment.
(d) THE REVOLVING CREDIT NOTE. Amounts owed to Bank with respect to
Advances made by Bank shall be evidenced by Bank's books and records and may,
at the request of
2
<PAGE>
Bank, be further evidenced by a revolving credit note in the maximum
principal amount of the Revolving Credit (the "Revolving Credit Note") in the
form of Exhibit 1.02(d) hereto. The unpaid principal balance of the
Revolving Credit may be voluntarily prepaid in whole or in part during the
continuation of the Revolving Credit without premium or penalty; provided
that if the Revolving Credit is to be terminated by the Borrowers, thirty
(30) days prior notice shall be given to Bank. Upon termination, the
Borrowers shall satisfy the provisions of Section 6.01. The Revolving Credit
Note is subject to mandatory repayments, as provided in Section 1.02(c).
[cad 179]
(e) INTEREST. Advances made by Bank shall bear interest prior to
maturity or the occurrence of an Event of Default (computed on the basis of
actual number of days elapsed over a 360 day year) on the unpaid principal
balances outstanding from time to time at a rate per annum equal to the Prime
Rate plus one-half percent (1/2%). After the Maturity Date or the occurrence
of an Event of Default, the unpaid principal balance shall bear interest at
the Prime Rate plus five (5%) percent. Interest shall be payable monthly in
arrears on the first day of each month commencing on May 1, 1995. The
effective rate of interest shall change on each day the Prime Rate changes.
(f) REQUESTS FOR ADVANCES. Each Advance shall be made on the Banking
Day on which Bank receives notice from the Borrower if such notice is
received prior to 11:00 a.m. Boston time on such Banking Day, and otherwise
on the next Banking Day. Each request for an Advance shall be made to Bank
in writing or by telephone by a duly authorized representative of the
Borrowers. Bank may rely upon any telephone request which it believes is
made by such a representative. The Borrowers agree to indemnify and hold
Bank harmless for any action, including the making of Advances hereunder, or
loss or expense, taken or incurred by Bank in good faith reliance upon such
telephone request. At the time of the initial request for an Advance, the
Borrowers shall have provided Bank with a Compliance Certificate
substantially in the form of Exhibit 1.02(f) hereto ("Compliance
Certificate"). Bank shall be entitled to rely upon the most recent
Compliance Certificate in its possession until it is superseded by another
certificate.
(g) EXPIRATION. The Revolving Credit shall expire on the Maturity Date
and all Advances then outstanding under the Revolving Credit shall be due and
payable without notice on such date. In the event Bank continues Advances
after the Maturity Date without a written extension of the Maturity Date, (i)
all such Advances shall be made within the sole discretion of Bank; (ii) the
entire Revolving Credit shall be due on demand; and (iii) other than such
Advances, the entire Revolving Credit shall earn interest at the rate
specified to be earned after maturity in Section 1.02(e).
(h) OVERADVANCES. Bank may from time to time in its sole discretion
permit Advances to exceed the limitations set forth in this Agreement,
including, without limitation, (i) Advances in excess of the Maximum Credit
or the Borrowing Base, and (ii) Advances after the Maturity Date or the
occurrence of an Event of Default. All such Advances shall be deemed part of
the Credit secured by any collateral securing the Credit and supported by any
credit enhancements supporting the Credit. The making of an Advance on one
or more
3
<PAGE>
occasion will not operate to limit, waive or otherwise modify any
rights of Bank hereunder on any future occasion unless otherwise agreed in
writing.
(i) SPECIAL USES. The Borrowers may request portions of the Revolving
Credit in the form of letters of credit pursuant to Section 1.05 hereof.
(j) USE OF PROCEEDS. Other than as set forth in clause (i) above,
proceeds from Advances only shall be used by the Borrowers for working
capital purposes.
SECTION 1.03. TERM CREDIT.
(a) TERM AMOUNT. Subject to the terms and conditions herein, Bank
shall loan the Borrowers $2,400,000.
(b) TERM NOTE. All amounts owed to the Bank with respect to the Term
Credit shall be evidenced by a term note (the "Term Note") dated the date
hereof in the form attached hereto as Exhibit 1.03(b). The principal of the
Term Note shall be repaid in equal monthly payments of $133,333.33 due and
payable on the first day of each month commencing May 1, 1995, with a final
balloon payment in the amount of all unpaid principal and accrued interest
due and payable on October 1, 1996. The Term Credit may be prepaid upon in
whole or in part without penalty or premium provided that any partial
prepayments shall be applied to scheduled payments of principal in the
inverse order of maturity.
(c) INTEREST. The Term Note shall bear interest prior to maturity or
the occurrence of an Event of Default (computed on the basis of the actual
number of days elapsed over a 360-day year) on the unpaid principal balance
outstanding from time to time at a rate per annum equal to the Prime Rate
plus one-half percent (1/2%). After maturity, or after the occurrence of an
Event of Default and until such Event of Default shall have been cured or
waived in writing by Bank, the unpaid principal balance of the Term Note
shall bear interest at the Prime Rate plus five percent (5%). Interest shall
be payable monthly in arrears on the first day of each month commencing May
1, 1995. The effective rate of interest shall change on each day the Prime
Rate changes.
(d) USE OF PROCEEDS. All proceeds from the Term Credit shall be paid
to satisfy in part the obligations of the Borrowers to The Prudential
Insurance Company of America ("Prudential").
SECTION 1.04. DEFINITIONS.
"Banking Day" shall mean any day which Bank is open to conduct
commercial banking business in Boston, Massachusetts.
"Notes" shall mean the Revolving Credit Note, the Term Note and any
other notes issued by the Borrowers to Bank pursuant to this Agreement.
4
<PAGE>
"Prime Rate" shall mean the rate of interest per annum from time to time
announced by Bank as its prime rate, it being understood that such rate is a
reference rate, not necessarily the lowest, which serves as the basis upon
which effective rates of interest are calculated for obligations making
reference thereto.
The following terms are defined in the following sections:
Advance Section 1.02(a)
Affiliate Section 4.17
Banking Day Section 1.04
Base Financial Statement Section 2.04
Bonds Section 4.12(b)
Borrowing Base Section 1.02(b)
Borrowing Base Certificate Section 1.02(b)
Compliance Certificate Section 1.02(f)
Closing Fee Section 1.10
Credit Section 1.01
Current Assets Section 4.22
Current Liabilities Section 4.22
Debt Section 4.20
Debt Service Section 4.23
Eligible Accounts Section 1.02(b)
ERISA Section 2.10
Event of Default Article V
Facility Fee Section 1.08
"L/Cs" Section 1.05(a)
Maturity Date Section 1.02(a)
Maximum Credit Section 1.02(a)
Net Income Section 4.22
1982 Indenture Section 4.12(b)
1985 Trust Agreement Section 4.12(b)
Notes Section 1.04
Prime Rate Section 1.04
Prudential Section 1.03(d)
Restricted Payments Section 4.24
Revolving Credit Section 1.01
Revolving Credit Note Section 1.02(d)
SEC Section 4.08(a)
Security Agreement Section 3.01(d)
Service Fee Section 1.09
Special Counsel Section 3.01(b)
Stock Section 4.27
Subordinated Debt Section 4.20
Subsidiaries Section 2.02
Term Credit Section 1.01
5
<PAGE>
Term Note Section 1.03(b)
Tangible Assets Section 4.20
Tangible Capital Base Section 4.20
SECTION 1.05. LETTERS OF CREDIT.
(a) ISSUANCE PROCEDURES. Each Borrower may request and Bank will
issue standby letters of credit (such letters of credit together with any
letters of credit outstanding on the date hereof and any renewal of any such
outstanding letter of credit, collectively "L/Cs") for the account of such
requesting Borrower. With each request, the requesting Borrower shall
deliver to Bank an L/C application and L/C agreement together with the
proposed form of such L/C (which, together with all schedules and exhibits
thereto, shall be in form and substance satisfactory to Bank and its counsel)
and such other certificates, documents and other papers and information as
Bank may reasonably request. Any foreign beneficiary must be satisfactory to
Bank. All L/C's (other than letters of credit which are outstanding on the
date hereof and any renewal of any such outstanding letter of credit) must
expire at least one day prior to the Maturity Date. Within five Banking Days
following receipt of the above-described documents in satisfactory form, Bank
shall, provided that no Event of Default exists and no event exists which,
with the giving of notice or passage of time, or both, would constitute an
Event of Default, issue such L/C.
(b) REIMBURSEMENT. The Borrowers agree to pay Bank on each date that
any amount is drawn under an L/C, a sum equal to the amount so drawn. The
Borrowers agree to pay on demand any and all reasonable expenses incurred by
Bank in enforcing any rights under this Section 1.05. In the event any L/C
is payable in foreign currency, the Borrowers shall reimburse Bank at Bank's
selling rate of exchange on the date such reimbursement is made.
(c) COMMISSION. The Borrowers agree to pay Bank in advance one and
one-half percent (1.5%) per year (prorated based upon the number of days from
the issue date to the expiry date) of the face amount of any L/C issued or
renewed after the date hereof, together with any transactional fees at Bank's
customary rates.
(d) METHOD OF PAYMENT. Bank is authorized to obtain reimbursement by
making Advances under the Revolving Credit. Bank may make such Advance even
if it causes the outstanding balance to exceed the limits set forth in
Section 1.02(a) and the making of such Advance shall be an Event of Default
under Article V.
(e) AMOUNT. The aggregate amount of L/Cs outstanding at any time shall
not exceed $1,250,000.
SECTION 1.06. PAYMENT BY THE COMPANY.
All payments and prepayments of principal and interest due with respect
to the Credit and all other sums due hereunder shall be made by the Borrowers
in immediately available
6
<PAGE>
funds deposited with Bank. Payments received by Bank after 11:00 a.m. Boston
time shall be deemed received on the next succeeding Banking Day. Bank is
authorized to make all such payments by Advances under the Revolving Credit.
SECTION 1.07. CREDIT FOR UNCOLLECTED ITEMS.
Bank will give the Borrowers credit for uncollected items deposited with
Bank (a) the next Banking Day for purposes of computing availability under
the Revolving Credit and (b) two Banking Days after deposit for purposes of
computing interest and fees with respect to the Credit.
SECTION 1.08. FACILITY FEE.
On the first day of each month (and upon the day of termination if the
Credit is terminated), the Borrowers shall pay Bank a facility fee of
one-half percent (1/2%) per year of the unused portion of the Revolving
Credit for the preceding month.
SECTION 1.09. AUDIT EXPENSES.
The Borrowers shall pay Bank on demand Bank's customary and reasonable
fees and expenses for audit reviews by employees of Bank (currently $400 per
man-day plus out-of-pocket expenses).
SECTION 1.10. CLOSING FEE.
On the date hereof, Bank shall earn a one-time closing fee ("Closing
Fee") of $100,000. Upon execution of this Agreement, the Borrowers shall pay
$33,334 of the Closing. The balance thereof shall be paid in two equal
installments of $33,333 due on October 1, 1995 and December 1, 1995,
respectively.
ARTICLE II. REPRESENTATIONS AND WARRANTIES.
The Borrowers jointly and severally represent and warrant as follows:
SECTION 2.01. CORPORATE EXISTENCE AND POWER.
Each Borrower and its Subsidiaries (as defined in Section 2.02) are
corporations duly incorporated, validly existing and in good standing under
the laws of the respective jurisdictions of their incorporation and have full
corporate and other power and authority to conduct businesses and own their
properties as now conducted and owned. Each Borrower and its Subsidiaries
are licensed or qualified as foreign corporations in each jurisdiction where
the conduct of their respective businesses or the ownership of their
respective properties require such licensing or qualification and where the
failure to be so licensed or
7
<PAGE>
qualified would have a material adverse effect on the business, finances or
operations of such Borrower or any of its Subsidiaries.
SECTION 2.02. SUBSIDIARIES.
Any corporation, business trust, partnership or other business entity in
which either Borrower or any Subsidiary of such Borrower owns or has options
to acquire 50% or more of the voting control shall constitute a Subsidiary.
The Borrowers currently have no Subsidiaries except as set forth in
Exhibit 2.02. The ownership of each Subsidiary is set forth on Exhibit 2.02.
SECTION 2.03. POWER AND AUTHORITY RELATIVE TO BORROWING; LEGAL AND
BINDING NATURE; COMPLIANCE WITH OTHER INSTRUMENTS.
Each Borrower and its Subsidiaries has full power and authority and has
taken all required corporate and other action necessary to permit such
Borrower to execute and deliver and perform all of its obligations contained
in this Agreement and all documents or instruments required hereby or
incident or collateral hereto, and to borrow hereunder, and none of such
actions will violate any provision of law applicable to, or of the charter or
by-laws of, such Borrower or any such Subsidiary, or result in the breach of
or constitute a default under any agreement or instrument to which such
Borrower or any such Subsidiary is a party or by which any of them is bound.
This Agreement and all documents or agreements required hereby or incident
hereto to which the Borrowers are a party are the valid and binding
obligations of the Borrowers enforceable in accordance with their terms.
Neither the execution, delivery nor performance by the Borrowers or any of
their Subsidiaries of any of the obligations contained in this Agreement or
in any document or instrument required hereby or incident or collateral
hereto requires the consent, approval or authorization of any person or
governmental authority.
Neither Borrower nor any of their Subsidiaries is in violation of any
term of its charter or by-laws, or any agreement, instrument, mortgage,
indenture, contract, judgment, decree, order, statute, rule or governmental
regulation applicable to the Borrowers or any of their Subsidiaries except
for possible minor violations none of which could, either individually or in
the aggregate, have any material adverse effect on the business, financial
condition or assets of either Borrower or any of their Subsidiaries and
except as otherwise disclosed on an Exhibit to this Agreement. The execution,
delivery and performance of this Agreement, all agreements incident or
collateral hereto, and the Credit will not result in the creation of any
security interest, lien, charge or encumbrance upon any of the properties or
assets of the Borrowers or any of their Subsidiaries except in favor of Bank.
SECTION 2.04. FINANCIAL CONDITION.
The audited financial statement dated September 30, 1994 previously
delivered to Bank (the "Base Financial Statement") has been prepared with due
diligence and in accordance with generally accepted accounting principles and
practices. The Base Financial
8
<PAGE>
Statement fairly presents the financial condition of the Borrowers and their
Subsidiaries as of the date of such statement and the results of their
operations for the period then ending. The Borrowers and their Subsidiaries
have no material contingent liability (including, without limitation,
contingent tax and environmental liability) nor any burdensome agreement or
commitment which could have a material adverse effect on its business or
financial condition except as disclosed in the Base Financial Statement.
SECTION 2.05. NO MATERIAL ADVERSE CHANGE.
Since the date of the Base Financial Statement, there has been no
material adverse change in the condition (financial or otherwise), properties
or business operations of either Borrower or any of their Subsidiaries and
neither Borrower nor any of their Subsidiaries has paid any dividends or made
any distributions on or purchased or otherwise acquired any shares of the
capital stock of either Borrower or any of their Subsidiaries.
SECTION 2.06. LITIGATION.
Except as set forth in Exhibit 2.06 hereto, there are no suits or
proceedings pending or, to the best knowledge of the Borrowers, threatened
against or affecting them or any of their Subsidiaries which could have a
material adverse effect on the business, assets or financial condition of
either of the Borrowers or any of their Subsidiaries. Moreover, there are no
suits or proceedings pending or, to the knowledge of the Borrowers,
threatened with respect to the transactions contemplated by this Agreement.
SECTION 2.07. TITLE.
Except as set forth in Exhibit 2.07, the Borrowers and their
Subsidiaries have good and marketable title to all of the properties and
assets reflected in the Base Financial Statement or acquired since such date
(except for materials used, inventory sold, accounts receivable collected and
other items disposed of, all in the ordinary course of business), free and
clear of all mortgages, liens and encumbrances except liens permitted by
Section 4.14; easements, restrictions and minor defects in title which do
not, either individually or in the aggregate, materially detract from the
value or materially limit the use of any real property; and certain assets
listed on Exhibit 2.14 which are not owned but which are reflected on the
balance sheet as capitalized leases.
SECTION 2.08. TAX RETURNS AND PAYMENTS.
Except as set forth on Exhibit 2.08 attached hereto, all of the tax
returns and tax reports relating to taxes on income and, to the best
knowledge of the Borrowers, all other tax returns and reports of each
Borrower and their Subsidiaries required by law to be filed have been duly
filed, or extensions of the time for filing have been duly obtained, and,
except as set forth in Exhibit 2.08 hereto, the Borrowers and their
Subsidiaries have paid all taxes shown due thereon. Except as set forth in
Exhibit 2.08 attached hereto, the federal income tax returns of the Borrowers
and their Subsidiaries have never been audited by the Internal
9
<PAGE>
Revenue Service. Except as set forth on Exhibit 2.08 attached hereto, there
are in effect no waivers of the applicable statutes of limitations for
federal taxes for any period. No deficiency assessment or proposed
adjustment of the federal income taxes of either Borrower or of any of their
Subsidiaries is pending except as set forth in Exhibit 2.08 and the Borrowers
have no knowledge of any proposed liability of a substantial nature for any
tax to be imposed upon any of their properties or assets, for which there is
not an adequate reserve reflected in the Base Financial Statement.
SECTION 2.09. COMPLIANCE WITH LAW.
The Borrowers and their Subsidiaries have all necessary franchises,
permits, licenses and other rights to allow them to conduct their businesses
as presently conducted, and are not in default with respect to any order or
decree of any court, or under any law, order or regulation of any
governmental authority, or under the provisions of any contract or agreement
to which any of them is a party or by which they may be bound, which default
would have a material adverse effect on the business, finances or operations
of any of them.
SECTION 2.10. PENSION MATTERS.
Except as set forth in Exhibit 2.10, neither Borrower nor any of their
Subsidiaries has incurred (a) any material accumulated funding deficiency
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or (b) any material liability to the Pension Benefit
Guaranty Corporation in connection with any employee benefit plan established
or maintained by it; nor has either Borrower or any of their Subsidiaries had
any tax assessed against it by the Internal Revenue Service for any alleged
violation under Section 4975 of the Internal Revenue Code. Neither Borrower
nor any of their Subsidiaries has any material unfunded liability under a
pension plan or a contingent liability for withdrawal from a multi-employer
pension plan except as disclosed in the Base Financial Statement.
SECTION 2.11. ENVIRONMENTAL MATTERS.
Except as set forth on Exhibit 2.11, neither Borrower nor any of their
Subsidiaries has (a) been named as a potentially responsible party or
received notice of an investigation that could lead to such designation under
any proposed environmental cleanup; (b) incurred any unsatisfied liability
(contingent or otherwise) in connection with the release, spill, generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of hazardous materials, toxic substances or solid waste under any
state or federal environmental law; or (c) occupied in the past or currently
occupies any site designated as environmentally contaminated. The Borrowers
and their Subsidiaries have all licenses, permits, certificates and similar
authorizations required to conduct its business under applicable
environmental laws and is not subject to any pending investigation or
proceeding to revoke, limit or terminate such authorizations.
10
<PAGE>
SECTION 2.12. COMPLIANCE WITH REGULATION U.
None of the proceeds of the Credit will be used to purchase, carry or
refinance any borrowing the proceeds of which were used to purchase or carry
any "margin securities" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System.
SECTION 2.13. CREDIT AGREEMENTS.
Set forth on Exhibit 2.13 is a complete and correct list of all existing
loan agreements, indentures, purchase agreements, leases, guarantees or other
instruments relating to extensions of credit or money borrowed for an amount
in excess of $25,000 under which either Borrower or any of their Subsidiaries
is or may become directly or indirectly obligated.
SECTION 2.14. LEASES AND OPTIONS TO PURCHASE.
Set forth on Exhibit 2.14 is a complete and correct list of all existing
leases with respect to, or options to purchase any, real estate or any
equipment involving a commitment or potential commitment in excess of $25,000
under which either Borrower or any of their Subsidiaries is or may become
directly or indirectly obligated.
SECTION 2.15. REAL ESTATE OWNED.
Set forth on Exhibit 2.15 is a complete and correct list of all real
estate owned by each Borrower or any of their Subsidiaries.
SECTION 2.16. FISCAL YEAR.
The fiscal year end for each Borrower is September 30, 1994.
ARTICLE III. CONDITIONS.
SECTION 3.01. CONDITIONS TO THE FIRST ADVANCE.
The obligation of Bank to make the first Advance and fund the Term
Credit is subject to the fulfillment of the following conditions:
(a) THE NOTE. The Borrowers shall have executed and delivered to Bank
the Revolving Credit Note.
(b) THE TERM NOTE. The Borrowers shall have executed and delivered to
Bank the Term Note.
11
<PAGE>
(c) LEGAL OPINIONS FROM COUNSEL FOR THE COMPANY. Bank shall have
received the written opinion of Peabody & Arnold, counsel for the Borrowers,
in form satisfactory to Goodwin, Procter & Hoar special counsel to Bank (said
special counsel and any successor counsel shall be hereinafter referred to as
"Special Counsel").
(d) THE SECURITY AGREEMENT. The Borrowers shall have executed and
delivered to Bank a security agreement in a form approved by Special Counsel
(the "Security Agreement"), granting to Bank a first priority security
interest in all accounts, inventory and general intangibles of the Borrowers
and all financing statements and other documents in connection therewith
shall have been duly filed or recorded.
(e) INSURANCE. Each Borrower shall have delivered to Bank an executed
Certificate of Insurance in the form of Exhibit 3.01(e) hereto.
(f) COMPLIANCE CERTIFICATE. The Borrowers shall have delivered to Bank
an executed Compliance Certificate dated the date of the first Advance.
(g) OFFICER'S CLOSING CERTIFICATE. Each Borrower shall have delivered
to Bank an executed Officer's Closing Certificate in substantially the form
of Exhibit 3.01(g) hereto.
(h) BORROWING BASE CERTIFICATE. The Borrowers shall have delivered to
Bank an executed current Borrowing Base Certificate.
(i) REQUEST FOR LOAN. The Borrowers shall have delivered to Bank a
written request specifying the amount of the Advance.
(j) NO DEFAULT. No Event of Default and no event which, with the
giving of notice or the lapse of time, or both, would become an Event of
Default, has occurred and is continuing.
(k) CLOSING FEE. Bank shall have received from the Borrowers $33,334
of the Closing Fee.
(l) PRUDENTIAL. The Borrowers shall have paid to Prudential $3,000,000
and Prudential shall have delivered to the Borrowers a release and waiver of
claims satisfactory in form and substance to Bank by which Prudential
releases and waives any and all claims against the Borrowers in connection
with that certain Note Agreement dated October 21, 1987, as amended.
SECTION 3.02. CONDITIONS TO SUBSEQUENT ADVANCES.
Each request for a subsequent Advance shall be deemed to be a
representation by the Borrowers to Bank that all representations and
warranties contained in Article II hereof or in any Exhibit, Schedule or
Certificate attached hereto or delivered to Bank in connection herewith were
true and correct when made, and continue to be true and correct except those
12
<PAGE>
items which relate to a specific date and except as disclosed to Bank by the
Borrowers, and that no Event of Default, and no event which, with the giving
of notice or the lapse of time, or both, would become an Event of Default,
has occurred and is then continuing.
ARTICLE IV. COVENANTS OF THE COMPANY
The Borrowers jointly and severally covenant that:
SECTION 4.01. PAYMENT OF AMOUNTS DUE.
The Borrowers will make all payments of principal and interest on the
Credit in accordance with the terms hereof and thereof and will observe,
perform and comply with each and every one of the covenants, terms and
conditions contained herein, in the Credit or in any other document or
instrument required hereby or incident or collateral hereto to be observed,
performed or complied with by them.
SECTION 4.02. CORPORATE EXISTENCE.
The Borrowers and each of their Subsidiaries will maintain and preserve
in full force and effect their respective corporate existences and, insofar
as reasonable and practicable, will maintain and preserve in full force and
effect all material rights, licenses, patents and franchises, and comply with
all applicable regulations in all jurisdictions necessary for the conduct of
their businesses.
SECTION 4.03. MAINTENANCE OF PROPERTIES.
The Borrowers and each of their Subsidiaries will maintain, preserve,
protect and keep all properties used or useful in the conduct of their
businesses in good repair, working order and condition, and from time to time
make such repairs, renewals, replacements, betterments and improvements
thereto as are necessary to permit such businesses to be properly and
advantageously conducted at all times.
SECTION 4.04. PAYMENT OF TAXES.
The Borrowers and each of their Subsidiaries will pay and discharge all
lawful taxes, assessments and governmental charges or levies imposed upon
them or upon their income or profits, or upon any property belonging to them
before the same shall become past due, as well as all lawful claims for
labor, materials and supplies, which, if not paid when due, might become a
lien or charge upon such property or any part thereof; provided, however,
that neither Borrower nor any of their Subsidiaries shall be required to pay
and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof shall be contested in good faith by appropriate proceedings
and an adequate reserve for the payment thereof is established on the books
of the appropriate Borrowers or the appropriate Subsidiary in accordance with
generally accepted accounting principles.
13
<PAGE>
SECTION 4.05. COMPLIANCE WITH ERISA.
The Borrowers and their Subsidiaries will satisfy, or cause to be
satisfied, the minimum annual funding standard required by ERISA for any
employee benefit plan established or maintained by it which is subject to
ERISA and the Borrowers and their Subsidiaries will not permit any tax or
penalty to be incurred by it as a result of any failure to satisfy any such
minimum funding requirement or as a result of any violation of the provisions
of Section 4975 of the Internal Revenue Code or any regulation issued
thereunder.
SECTION 4.06. COMPLIANCE WITH LAWS.
The Borrowers and their Subsidiaries at all time in all material
respects will comply with applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders and observe all requirements of
federal, state, local and other governmental authorities including, without
limitation, all provisions of the Fair Labor Standard Rules of 1938, the
Occupational Safety and Health Act of 1970 and all applicable environmental
laws; provided, however, that neither Borrower nor any of their Subsidiaries
shall be required to comply with such requirements so long as the validity or
applicability thereof shall be contested in good faith by appropriate
proceedings and an adequate reserve is established on the books of such
Borrower or any such Subsidiary in accordance with generally accepted
accounting principles.
SECTION 4.07. INSURANCE.
The Borrowers and their Subsidiaries will keep their insurable
properties insured by financially sound and reputable insurers satisfactory
to Bank against such risks and in such amounts as are deemed prudent by the
Borrowers and are reasonably acceptable to Bank and will name Bank as a Loss
Payee under all insurance policies maintained with respect to insurable
properties subject to a security interest or lien in favor of Bank. The
Borrowers and their Subsidiaries will maintain in full force and effect
public liability insurance against claims for bodily injury, death or
physical property damages occurring upon, in, about, or in connection with
the use of any properties occupied or controlled by them, or through the
operation of any motor vehicles by their agents or employees or arising in
any manner out of the businesses carried on by them in such amounts and with
such coverages as are deemed prudent by the Borrowers and are reasonably
acceptable to Bank.
SECTION 4.08. ACCOUNTS AND REPORTS.
The Borrowers will furnish or cause to be furnished to Bank the
following reports:
(a) ANNUAL REPORTS. As soon as available, and in any event within
ninety (90) days after the end of each fiscal year of the Borrowers,
consolidated and consolidating audited financial statements of the Borrowers,
of the Borrowers, together with all notes thereto, prepared in reasonable
detail and in accordance with generally accepted accounting principles
consistently applied (except there will be no required notes to the
consolidating
14
<PAGE>
balance sheet) such consolidated (but not consolidating) statements to be
duly certified by Arthur Anderson & Co., SC or other certified, independent
public accountants selected by the Borrowers and acceptable to Bank. Such
statements shall be accompanied by a statement of such certified, independent
public accountants that the examination made in certifying such statements
did not disclose the existence of any condition or event which constitutes an
Event of Default under this Agreement or which, after notice or lapse of time
or both, would constitute such an Event of Default, or a statement specifying
the nature and period of existence of any such condition or event disclosed
by such examination; provided, however, that in issuing such statement, such
accountants shall not be required to exceed the scope of normal accounting
procedures conducted in connection with their audit opinion. Notwithstanding
the foregoing, delivery within the period specified above of a copy of the
Annual Report on Form 10-K of Nuclear Metals filed with the Securities and
Exchange Commission (the "SEC"), shall be deemed to satisfy the requirements
of this Section 4.08(a) so long as the Form 10-K contains all of the
information required by this Section 4.08(a), or, is otherwise supplemented
so that such Form, together with such supplemental information, satisfies the
requirements hereof.
(b) QUARTERLY REPORTS. As soon as available, and in any event within
forty-five (45) days after the end of each quarterly accounting period in
each fiscal year of the Borrowers, unaudited consolidated and consolidating
financial statements of the Borrowers prepared in reasonable detail and in
accordance with generally accepted accounting principles consistently applied
(except that such statements need not contain notes thereto) certified by the
chief financial officers of the Borrowers, which statements shall contain
balance sheets as of the end of such accounting period and statements of
profit and loss for the period from the beginning of such fiscal year to the
end of such accounting period. Notwithstanding the foregoing, delivery
within the period specified above of a copy of the Quarterly Report on Form
10-Q of Nuclear Metals filed with the SEC, shall be deemed to satisfy the
requirements of this Section 4.08(b) so long as the Form 10-Q contains all of
the information required by this Section 4.08(b), or, is otherwise
supplemented so that such Form, together with such supplemental information,
satisfies the requirements hereof.
(c) MONTHLY REPORTS. As soon as available, and in any event within
thirty (30) days after the end of each monthly accounting period in each
fiscal year, consolidated and consolidating unaudited financial statements of
the Borrowers prepared in reasonable detail and in accordance with generally
accepted accounting principles consistently applied (except that such
statements need not contain notes thereto and except as may be otherwise
required hereby) certified by their respective chief financial officers,
which statements shall contain balance sheets as of the end of such
accounting period and statements of profit and loss for the period from the
beginning of such fiscal year to the end of such accounting period.
(d) PERIODIC REPORTS. With the monthly financial statements furnished
pursuant to subsection (c) hereof, (i) summary of all Advances and L/C's
outstanding at the end of such period, (ii) consolidated and consolidating
accounts receivable aging based on invoice date, (iii) a backlog sales
report, (iv) an updated Compliance Certificate, and (v) such other reports as
Bank shall reasonably request. With the quarterly financial statements
furnished
15
<PAGE>
pursuant to subsection (b) hereof, a list of the names and addresses of the
respective customers of each Borrower.
(e) AUDITOR'S MANAGEMENT LETTER. Promptly after receipt by either
Borrower, copies of the management letter, if any, provided by the
independent certified public accountants who audit the annual financial
statements.
(f) PUBLIC INFORMATION. Promptly, copies of all reports and financial
statements which either Borrower sends to its stockholders as a class or
which either Borrower, or any of their Subsidiaries, file with the Securities
and Exchange Commission or any other public body.
(g) PROJECTIONS. At least thirty (30) days prior to the end of each
fiscal year of the Borrowers, projections for the next fiscal year indicating
the Borrowers' expected operating results (on a consolidated and
consolidating basis), Borrowing Bases and proposed capital expenditures.
Such projections shall be made on a month-by-month basis.
(h) ACCOUNTING PRINCIPLES. Reports furnished under this Agreement
shall be prepared in accordance with generally accepted accounting principles
except that unaudited statements shall be subject to normal year end
adjustments and there shall be no requirement for notes thereto. Any
accounting terms not otherwise defined shall have the same meaning provided
by generally accepted accounting principles. Compliance with the covenants
set forth in this Agreement will be determined on the basis of accounting
principles used in the preparation of the Base Financial Statements. In the
event that any subsequent reports shall have been prepared in accordance with
accounting principles different than those used in the Base Financial
Statements, the Borrowers shall inform Bank of such changes in accounting
principles and shall provide to Bank, with such subsequent reports, such
supplemental reconciling financial information as may be required to
ascertain performance by the Borrowers and their Subsidiaries with the
covenants contained in this Agreement.
SECTION 4.09. INFORMATION AND INSPECTION.
At all reasonable times and as often as Bank shall reasonably request on
one (1) day's written notice, the Borrowers will furnish to Bank from time to
time with reasonable promptness full information pertinent to any covenant,
provision or condition hereof or to any matter in connection with their
business and permit any authorized representative designated by Bank to visit
and inspect any of their properties and those of their Subsidiaries,
including their books (and to make extracts therefrom), and to discuss their
affairs, finances and accounts with their officers. The Borrowers and their
Subsidiaries, will, in addition, furnish to Bank with reasonable promptness
such financial information as Bank shall reasonably request. Without
limiting the generality of the foregoing, Bank shall be entitled to conduct
field audits of the accounts receivable and inventory of the Borrowers and
their Subsidiaries, and subject to the limitations set forth in Section 1.09
hereof, the Borrowers shall pay on demand Bank's out-of-pocket expenses and
reasonable field audit fees.
16
<PAGE>
SECTION 4.10. ADDITIONAL ADVICE.
The Borrowers will promptly advise Bank of (i) any material casualty
loss whether or not insured; (ii) the threat of or commencement of any
material litigation; (iii) the assertion by any governmental authority or
private party of a material violation of or material liability arising under
any environmental law; (iv) any change which constitutes or, after notice or
lapse of time or both, would constitute an Event of Default as defined in
Article V of this Agreement; and (v) each waiver, consent or amendment
granted or made with respect to instruments or agreements relating to
borrowed money in excess of $100,000 and each request by either Borrower
therefor.
SECTION 4.11. PAYMENT OF BANK EXPENSES.
The Borrowers will bear all reasonable expenses incurred by Bank in
connection with the negotiation, preparation, execution, amendment,
interpretation, administration, termination or enforcement of this Agreement
(whether or not the Credit is consummated) and the making and collection of
the Credit, including without limitation, the reasonable fees and
disbursements of Special Counsel and appraisers employed by Bank.
SECTION 4.12. LIMITATION ON INDEBTEDNESS.
Neither Borrower nor any of their Subsidiaries will create, incur,
assume, or become, be or remain liable in any manner in respect of, or allow
to exist, any indebtedness (which term includes all indebtedness, obligations
and liabilities which in accordance with generally accepted accounting
principles would be reflected on the balance sheet of either Borrower or any
of their Subsidiaries as a liability and any negative cash balance; all
indebtedness, obligations and liabilities, whether or not assumed by either
Borrower or any of their Subsidiaries, secured by any mortgage, pledge or
lien existing on property owned by either Borrower or any of their
Subsidiaries; and all amounts representing rental payments which, in
accordance with generally accepted accounting principles, would be classified
as a liability on its balance sheet), except for:
(a) the Credit and any other obligations owed to Bank in connection
with this Agreement or otherwise;
(b) the obligations to Barnwell County, South Carolina and the
Massachusetts Industrial Finance Agency and Bank related to those certain
industrial revenue notes or bonds (collectively "Bonds") issued pursuant to
that certain (i) Indenture dated as of May 11, 1982 ("1982 Indenture")
between Barnwell County, South Carolina and Bank, (ii) Indenture dated as of
September 27, 1984 between Barnwell County, South Carolina and Bank, and
(iii) Security and Trust Agreement dated as of June 1, 1985 ("1985 Trust
Agreement") between Nuclear Metals, the Massachusetts Industrial Finance
Agency and Bank;
(c) indebtedness representing trade debt, wages, employee benefits and
similar indebtedness incurred in the ordinary course of business;
17
<PAGE>
(d) indebtedness secured by liens to the extent permitted by
Section 4.14;
(e) liabilities for taxes, assessments, governmental charges, liens or
claims to the extent that payment thereof is not required by Section 4.04;
(f) indebtedness in respect of final judgments for the payment of money
not in excess of $50,000 in the aggregate at any time outstanding (excluding
sums covered by insurance) which has been in force for less than the
applicable appeal period or less than sixty (60) days, whichever is sooner,
provided that such indebtedness may remain outstanding if the appropriate
Borrower or the appropriate Subsidiary at the time shall in good faith be
prosecuting an appeal, or proceedings for review or pending and in respect of
which a stay shall have been obtained pending such appeal or review;
(g) Subordinated Debt;
(h) such other indebtedness of the Borrowers and their Subsidiaries
which is specifically disclosed in Exhibit 4.12 attached hereto;
(i) indebtedness of either Borrower to the other provided such
indebtedness is not represented by a note or other negotiable instrument.
SECTION 4.13. LIMITATION ON LIABILITY FOR OBLIGATIONS OF OTHERS.
Neither Borrower nor any of their Subsidiaries will assume, guarantee,
endorse or otherwise be or become liable, contingently or otherwise, for the
obligations of any other corporation, firm or entity or other person, except:
(a) guarantees in favor of the Bank in connection with the Bonds;
(b) for the endorsement of negotiable instruments for deposit or
collection in the normal course of its business; and
(c) guarantees and other contingent liabilities which are disclosed on
Exhibit 4.13.
SECTION 4.14. LIMITATION ON LIENS.
Neither Borrower nor any of their Subsidiaries will create, incur,
assume or allow to be created, incurred or assumed, or to exist, any pledge
of, or any mortgage, lien, charge or encumbrance of any kind on, any of its
property or assets, or subject any of such assets to prior payments of any
other indebtedness whether by subordination agreement, transfer of assets or
otherwise, or own or acquire or agree to acquire any property of any
character subject to or upon any mortgage, conditional sale agreement or
other title retention agreement except:
(a) liens in favor of Bank;
18
<PAGE>
(b) any lien securing the purchase price of any fixed asset to be used
in the business of either Borrower or any of their Subsidiaries, but not any
renewal, extension or refunding of any such lien or the indebtedness secured
thereby, provided that (i) each such lien shall at all times be confined
solely to the item of property so acquired, and (ii) the aggregate
indebtedness secured by all such liens does not exceed $500,000 at any one
time or if such indebtedness so exceeds $500,000, Bank has consented in
writing in advance of the subject transaction;
(c) liens for taxes, assessments, governmental charges and levies or
for claims to the extent that payment thereof is not then required by such
Section 4.04;
(d) liens in respect of judgments which had been in force for less than
the applicable appeal period or less than sixty (60) days, whichever is
sooner, so long as execution is not levied thereunder, or in respect of which
the appropriate Borrower or the appropriate Subsidiary at the time shall in
good faith be prosecuting an appeal, or proceedings for review are pending
and in respect of which a stay of execution shall have been obtained pending
such appeal or review;
(e) liens on deposits made in connection with, or to secure payment of,
workmen's compensation, unemployment insurance or similar programs; liens,
charges or encumbrances imposed by law, such as carriers', warehousemen's and
mechanics' liens and similar involuntary liens arising in the ordinary course
of business which do not, individually or in the aggregate, materially
detract from the value or limit the use of any property subject thereto;
landlords' liens in respect of rent not in default; and liens on deposits
made to secure the performance of bids, appeal bonds and surety bonds; and
(f) liens and encumbrances which are disclosed on Exhibit 4.14.
SECTION 4.15. SALE OF ACCOUNTS RECEIVABLE.
Neither Borrower nor any of their Subsidiaries will sell or transfer any
of its accounts receivable, whether with or without recourse.
SECTION 4.16. LOANS AND INVESTMENTS.
Neither Borrower nor any of their Subsidiaries will purchase or
otherwise acquire or retain any stock, partnership interest, or obligations
of, or make any loans or advances to, or investments in any corporation or
other entity or person, including loans or advances to or investments in
Carolina Metals by Nuclear Metals other than:
(a) the present investment of Nuclear Metals in its Subsidiaries;
(b) open account transactions between the Borrowers and between
Subsidiaries in the ordinary course of business;
19
<PAGE>
(c) loans or advances for reimbursable expenses to employees not
exceeding $50,000 outstanding in the aggregate at any time;
(d) obligations of the United States of America, or any agency thereof,
maturing not more than one (1) year from the date of issue thereof, provided
that Bank shall acquire a perfected first security interest in such
obligation simultaneously with its purchase or acquisition;
(e) certificates of deposit or other obligations maturing not more than
one (1) year from the date of issue thereof issued by a bank, provided that
Bank have a perfected first security interest in such obligation; and
(f) indebtedness of either Borrower to the other permitted pursuant to
Section 4.12(i).
SECTION 4.17. TRANSACTIONS WITH AFFILIATED PERSONS.
Neither Borrower nor any of their Subsidiaries will enter into any
transaction with any Affiliate, except on terms no less favorable to either
such Borrower or any such Subsidiary than would be available in a bona fide
arm's length transaction with a non-affiliated person or entity. "Affiliate"
means any officer, director or shareholder who owns ten percent (10%) or more
of any class of securities of Nuclear Metals or any Subsidiary of either
Borrower; any entity where either Borrower owns directly or indirectly ten
percent (10%) or more of any class of securities or interest issued by such
entity; or any entity that controls, is controlled by or under common control
with either Borrower or any of their Subsidiaries.
SECTION 4.18. CONSOLIDATION, MERGER AND DISPOSITION OF ASSETS.
Neither Borrower nor any of their Subsidiaries will consolidate with or
merge into or with another corporation, partnership or other entity; directly
or indirectly issue, sell, assign, pledge or otherwise encumber or dispose of
any shares of its capital stock or the capital stock of any such Subsidiary;
sell, lease or otherwise dispose of all or any material portion of its
properties or assets (other than in the ordinary course of its business) to
any firm, person or corporation; or acquire any material portion of the
properties or assets of any other corporation, partnership or entity, whether
in one or a series of related transactions, except:
(a) any Subsidiary may merge into or consolidate with its respective
parent Borrower (provided that such Borrower shall be the surviving
corporation);
(b) with prior written consent of Bank, either Borrower may transfer
equipment to the other Borrower;
(c) Nuclear Metals may issue capital stock for cash and may issue
options or warrants to any person for cash or to employees for services;
20
<PAGE>
provided that in each case no Event of Default as set forth in Article V
hereof, and no condition or event which after notice or lapse of time, or
both, would constitute an Event of Default, would exist immediately after any
such transaction or series of related transactions.
SECTION 4.19. CHANGES IN BUSINESS.
Neither Borrower nor any of their Subsidiaries will materially alter the
nature of its business.
SECTION 4.20. DEBT-TANGIBLE CAPITAL BASE.
The ratio of Debt to Tangible Capital Base of the Borrowers shall not
exceed at any time 1.20 to 1.0.
"Debt" shall mean the sum of all liabilities (including all liabilities
to Bank), both short- term and long-term, of the Borrowers and all of their
Subsidiaries, but excluding stockholders equity and Subordinated Debt.
"Subordinated Debt" means the outstanding principal amount of any debt
of either Borrower which is subordinated to the obligations of the Borrowers
to Bank in form and substance satisfactory to Bank and its Special Counsel.
"Tangible Assets" shall mean the sum of all assets of the Borrowers and
all Subsidiaries, but excluding intangible assets such as goodwill,
organization expenses, patents, trademarks, copyrights, research and
development costs, training costs, unamortized debt discount and similar
items deemed to be intangible by Bank.
"Tangible Capital Base" shall mean Tangible Assets, less Debt, plus
Subordinated Debt.
SECTION 4.21. TANGIBLE CAPITAL BASE.
The Tangible Capital Base of the Borrowers shall be not less than
$25,000,000 at any time.
SECTION 4.22. NET INCOME.
The Net Income of the Borrowers for the periods set forth below shall
not be less than the amounts set forth opposite such periods:
<TABLE>
<CAPTION>
PERIOD NET INCOME
<S> <C>
January 1, 1995 - March 31, 1995 $ 50,000
April l, 1995 - June 30, 1995 $350,000
July 1, 1995 - September 30, 1995 $300,000
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
October 1, 1995 - December 31, 1995 $150,000
January 1, 1996 - March 31, 1996 $250,000
April 1, 1996 - June 30, 1996 $250,000
July 1, 1996 - September 30, 1996 and
each consecutive three month period
thereafter $300,000
</TABLE>
"Net Income" shall mean all net income of the Borrowers before interest and
taxes.
SECTION 4.23. CAPITAL EXPENDITURE.
In any fiscal year, unless Bank otherwise consents in writing, the
Borrowers and their Subsidiaries shall not make or incur expenditures which
are properly chargeable to capital account under generally accepted
accounting principles (including leases which are capitalized) in an
aggregate amount in excess of $1,000,000.
SECTION 4.24. RESTRICTED PAYMENTS.
Neither Borrower nor any of their Subsidiaries will, directly or
indirectly, declare, order, pay or make any Restricted Payment (as
hereinafter defined), except the Borrowers may prior to the occurrence of an
Event of Default or an event which with notice or the passage of time will
constitute an Event of Default, and provided that such Restricted Payment
will not constitute an Event of Default or such an event:
(a) declare and pay dividends on its Stock payable solely in Stock;
(b) make exchanges of one or more classes of Stock provided that no
cash or other property is distributed in such exchange; or
(c) retire Stock out of the net proceeds of the simultaneous sale of
other Stock; and
(d) pay principal and interest on Subordinated Debt to extent permitted
by Bank pursuant to a subordination agreement or agreements in form and
substance satisfactory to Bank.
For the purposes of this Section 4.24, the following terms shall have
the following respective meanings:
(i) Restricted Payments shall mean:
(a) any payment or declaration of any dividend on any class of
Stock of Nuclear Metals or any other distribution on account
of any class of Stock;
22
<PAGE>
(b) any redemption, purchase or other acquisition by Nuclear
Metals, directly or indirectly, of any shares of its Stock;
and
(c) any payments of principal or interest made by either Borrower
in respect of any Subordinated Debt.
(ii) "Stock" shall mean capital stock and warrants or options to
purchase stock.
SECTION 4.25. RESTRICTION ON USE OF PROCEEDS.
None of the proceeds of the Credit shall be used by the Borrowers to
purchase commodities except for use in the ordinary course of the Borrowers'
business or for the purpose of purchasing or carrying, or refinancing any
borrowing the proceeds of which were used to purchase or carry any "margin
securities" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System.
SECTION 4.26. INTENTIONALLY OMITTED.
SECTION 4.27. CONTROLLING INTEREST.
Nuclear Metals will at all times own 100% of the issued and outstanding
capital stock of Carolina Metals.
SECTION 4.28. BANK ACCOUNTS.
The Borrowers shall maintain at all times their principal operating
accounts with Bank and other operating accounts with other banks approved by
Bank. A complete list of all existing banks, mutual fund, brokerage or other
accounts containing cash, cash equivalents or marketable securities for the
Borrowers and all of their Subsidiaries is set forth on Exhibit 4.28.
Neither Borrower nor any of their Subsidiaries will open any further account
of the type required to be listed on Exhibit 4.28 without prior notice in
writing to Bank.
SECTION 4.29. FURTHER SECURITY.
The Borrowers agree to provide Bank with such security interest or liens
as Bank may hereafter reasonably request with respect to their assets or
assets of any of their Subsidiaries.
SECTION 4.29. FISCAL YEAR.
The Borrowers shall (a) maintain the same fiscal year end, and (b) not
change such fiscal year end without prior written consent of Bank.
23
<PAGE>
SECTION 4.30. AMENDMENTS TO DOCUMENTS.
Neither Borrower shall agree to any amendment or modification to any
instrument or agreement executed by either Borrower in connection with any
Subordinated Debt or any of the Bonds, nor shall either Borrower request, or
consent to, any waiver of any provision contained in any of the foregoing.
ARTICLE V. EVENTS OF DEFAULT.
If, while any part of the principal of or interest on the Credit remains
unpaid or while this Agreement shall be in effect, any one of the following
"Event of Default" shall occur:
(a) nonpayment of principal of the Revolving Credit when due;
(b) nonpayment of principal of the Term Credit when due;
(c) failure to pay any Advances in excess of the Borrowing Base as
required by Section 1.02(c);
(d) failure to pay any amounts due with respect to letters of credit
issued by Bank when due;
(e) nonpayment of interest on the Advances or on the Term Credit when
due;
(f) either Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee or liquidator of it or of all or a substantial part of
its assets; (ii) admit in writing its inability to pay its debts as they
mature; (iii) make a general assignment for the benefit of creditors; (iv) be
adjudicated a bankrupt or insolvent; (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an
arrangement with creditors to take advantage of any insolvency law; (vi) file
any answer admitting the material allegations of a petition filed against it
in any bankruptcy, reorganization or insolvency proceeding or fail to dismiss
such petition within thirty (30) days after the filing thereof; or (vii) take
any corporate action for the purpose of effecting any of the foregoing;
(g) an order, judgment or decree shall be entered, without the
application, approval or consent of either Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization or liquidation of
such Borrower or appointing a receiver, trustee or liquidator of either
Borrower or of all or a substantial part of its assets;
(h) any representation or warranty made by the Borrowers herein or
hereunder or in any certificate, document or instrument furnished pursuant
hereto shall prove to have been false or incorrect in any material respect
when made;
(i) default by the Company in the performance of any covenant or
agreement contained in Sections 4.01 through 4.19 or Sections 4.23 through
4.30;
24
<PAGE>
(j) except as otherwise set forth herein, default by the Company in the
performance of any other covenant or agreement contained herein or in any
document or instrument required hereby or incidental or collateral hereto
which shall not have been remedied within thirty (30) days after written
notice thereof shall have been given to the Borrowers by Bank;
(k) default by either Borrower in the performance of any covenant or
agreement contained in any other agreement to which it is a party or by which
it is bound involving a liability in excess of $100,000 which shall not be
remedied within the period of time (if any) within which such other agreement
permits such default to be remedied without the consent or waiver of the
other party thereto, unless such default is waived or excused as a matter of
law;
(l) failure by either Borrower to make any payment of principal or
interest beyond the period of grace contained in the respective instrument or
agreement evidencing any indebtedness for money borrowed in excess of
$100,000 to which it is a party or by which it may be bound (unless such
default is the result of a good faith dispute arising under such agreement or
instrument), or default by either Borrower in the performance of any other
covenant or agreement contained in any such agreement or instrument which
results in the acceleration of the maturity of any indebtedness to others of
such Borrower under such agreement or instrument;
(m) default by either Borrower in the performance of any covenant or
agreement contained in the Security Agreement or other documents in favor of
Bank executed in connection with this Agreement which continues beyond any
grace period provided therein;
(n) all or any substantial part of the property of either Borrower
shall be condemned, seized or otherwise appropriated by any governmental
authority or any officer or instrumentally thereof;
(o) a judgment or judgments for the payment of money in excess of the
sum of $100,000 in the aggregate (not covered by insurance) shall be rendered
against either Borrower and such judgment or judgments shall remain
unsatisfied and in effect for any period of sixty (60) days without a stay of
execution;
(p) either Borrower shall fail to deposit proceeds of Bank's collateral
with Bank;
(q) the Borrowers or either Borrower if separate Borrowing Base
Certificates are required by Bank pursuant to Section 1.02(b) hereof shall
deliver to Bank a materially inaccurate Borrowing Base Certificate to Bank;
(r) there shall occur any material adverse change in the financial
condition of either Borrower;
25
<PAGE>
(s) (i) George Matthews shall cease, for any reason, to be the Chairman
and Chief Executive Officer of Nuclear Metals and a successor to Mr. Matthews
reasonably satisfactory to Bank, shall not have become Chairman and Chief
Executive Officer within ninety (90) days of the date of cessation, or (ii)
Robert Quinn shall cease, for any reason, to be the President of Nuclear
Metals and a successor to Mr. Quinn reasonably satisfactory to Bank, shall
not have become President within ninety (90) days of the date of cessation,
provided, however, that in either event, an Event of Default shall not arise
until sixty (60) days after Bank has given the Borrowers written notice
thereof;
then and in every such event, while such event shall be continuing, Bank may,
by written notice to the Borrowers, declare the Credit (and any Notes issued)
to be forthwith due and payable, whereupon the Credit shall forthwith become
due and payable and the right to borrow hereunder shall terminate; provided,
however, that upon the happening of any event under Subsections (f) or (g) of
this Article V, then the Credit shall, without the taking of any action by
Bank, immediately become due and payable and the right to borrow hereunder
shall immediately terminate.
ARTICLE VI. MISCELLANEOUS.
SECTION 6.01. TERM OF AGREEMENT.
This Agreement shall terminate whenever all of the following conditions
shall have been met: (i) all principal of and interest of the Credit and all
other amounts due and payable under this Agreement have been paid and
discharged in full, (ii) all letters of credit or other financial
accommodation provided by Bank shall have been terminated or an indemnity
provided in a form acceptable to Bank, (iii) the Borrowers shall have
provided indemnity by cash or other collateral satisfactory to Bank for any
projected fees, expenses and other contingent liabilities, and (iv) the
Borrowers shall have no further right to borrow under the Credit.
SECTION 6.02. INDEMNITY.
The Borrowers agree to indemnify and hold harmless Bank and each of
their directors, officers, agents, employees and counsel, from and against
any and all losses, claims, damages, liabilities or expenses imposed on or
incurred by any of them in connection with the lending relationship reflected
in this Agreement except as a result of such indemnified parties' negligence
or willful misconduct. This indemnity shall survive termination of the
Agreement.
SECTION 6.03. CONSENT TO JURISDICTION.
Each Borrower irrevocably consents and submits to the non-exclusive
jurisdiction of the Superior Court in the Commonwealth of Massachusetts and
the United States District Court for the Eastern District of Massachusetts in
connection with any action, proceeding or
26
<PAGE>
claim arising out of or relating to this Agreement or other document executed
in connection with this Agreement. In any such litigation, each Borrower
waives personal service and agrees that service may be made in the manner
specified for Notices under this Agreement.
SECTION 6.04. WAIVER OF JURY TRIAL.
Each Borrower waives trial by jury in any action or proceeding of any
kind arising out of or relating to this Agreement or other document executed
in connection with this Agreement.
SECTION 6.05. NOTICES.
Except as otherwise specifically provided in this Agreement, all notices
hereunder shall be deemed to have been given when delivered in person or, if
mailed, when actually received by the party to whom addressed; provided,
however, that any written notice given pursuant to Article V hereof shall be
deemed to be effective when mailed, so long as such notice is mailed by
registered or certified mail, addressed to any party at its address set forth
below or at any other address notified in writing to the other parties
hereto. Actual receipt shall be conclusively presumed if such notice shall
be mailed by registered or certified mail, addressed to any party at its
address set forth below or at any other address notified in writing to the
other parties hereto by notice pursuant to this Section, and if the sender
shall have received back a return receipt.
To Bank: State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: William R. Dewey IV
With a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, Massachusetts 02109
Attention: Jon D. Schneider, P.C.
To the Borrowers: Nuclear Metals, Inc.
Carolina Metals, Inc.
2229 Main Street
Concord, MA 01742
Attn: James M. Spiezio
With a copy to: Peabody & Arnold
50 Rowes Wharf
Boston, Massachusetts 02110
Attention: Thomas A. Wooters, Esq.
27
<PAGE>
SECTION 6.06. NO WAIVER.
No failure to exercise, and no delay in exercising, on the part of Bank,
any right, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The rights and remedies herein provided
are cumulative and not exclusive of any rights or remedies provided by law.
SECTION 6.07. SETOFF.
Any sums due from Bank to either Borrower, any property in the
possession of Bank and any balance in the Borrower's accounts with Bank may
be held and treated as collateral security for the payment of the obligations
of the Borrowers to Bank and, after the occurrence of an Event of Default,
may be applied to the payment of such obligations regardless of the adequacy
of other collateral. Any sums due from any financing institution that may
participate in the Credit or property of the Borrowers in the possession of
such institution may be held as collateral security for the payment of the
obligations of the Borrowers to Bank as if such institution had extended the
Credit directly to the Borrowers and, after the occurrence of an Event of
Default, may be applied to the payment of such obligations regardless of the
adequacy of other collateral.
SECTION 6.08. CONSTRUCTION.
This Agreement shall be deemed to be a contract made under the laws of
the Commonwealth of Massachusetts, and shall be construed in accordance with
the laws of the Commonwealth of Massachusetts. The descriptive headings of
the several Sections hereof are for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
SECTION 6.09. AMENDMENTS, WAIVERS AND CONSENTS.
Compliance by the Borrowers with any term, covenant or condition of this
Agreement may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively) only by a consent or
consents in writing signed by Bank.
SECTION 6.10. COUNTERPARTS.
This Agreement may be executed in any number of counterparts which
together shall constitute one Agreement.
SECTION 6.10. JOINT AND SEVERAL OBLIGATIONS.
The obligations of the Borrowers hereunder and under any agreement or
instrument executed in connection herewith, including the Notes, shall be
joint and several.
28
<PAGE>
SECTION 6.11. PRIOR FACILITIES.
The Credit is in substitution for the $6,000,000 line of credit facility
that was previously made available by Bank to Nuclear Metals and the
Borrowers acknowledge and agree that all rights and claims under or relating
to such facility have been terminated and waived and Bank has no further
obligations to either Borrower thereunder.
SECTION 6.12. GUARANTEES.
Each Borrower irrevocably and unconditionally guarantees the payment and
performance of the obligations to Bank of the other Borrower under, arising
from or relating to any L/C which is outstanding as of the date hereof and
Carolina Metals guarantees the payment and performance of the obligations of
Nuclear Metals to Bank under, arising from or relating to the Bonds issued in
connection with the 1982 Indenture and the 1985 Trust Agreement, including
without limitation, any guaranty of such Bonds by Nuclear Metals in favor of
Bank. The above guarantees are of payment and not collection.
SECTION 6.13. CONFIDENTIALITY, ETC.
The Bank agrees to use reasonable precautions to keep confidential, in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrowers pursuant to this Agreement which is
identified by the Borrowers as being confidential at the time the same is
delivered to the Bank, provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute,
rule, regulation or judicial process, (ii) to counsel for the Bank, (iii) to
bank examiners, auditors or accountants, (iv) in connection with any
litigation to which the Bank is a party, (v) to any assignee or participant
(or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and
delivers to the respective Bank a confidentiality agreement, or (vi) to the
extent it subsequently becomes public. The Bank may assign or sell
participations in, all or any part of the Credit to another bank or other
entity.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal as of the date first above written.
NUCLEAR METALS, INC.
By: /s/ James M. Spiezio
------------------------------
Name: James M. Spiezio
Title: Vice President Finance
CAROLINA METALS, INC.
By: /s/ James M. Spiezio
------------------------------
Name: James M. Spiezio
Title: President
STATE STREET BANK AND TRUST
COMPANY
By: /s/ William R. Dewey IV
------------------------------
Name: William R. Dewey IV
Title: Assistant Vice President
30
<PAGE>
EXHIBIT 10B
REVOLVING CREDIT NOTE
$2,250,000 March 31, 1995
FOR VALUE RECEIVED, the undersigned, NUCLEAR METALS, INC., a
Massachusetts corporation and CAROLINA METALS, INC., a Delaware corporation
(the "Borrowers"), hereby jointly and severally promise to pay to the order
of STATE STREET BANK AND TRUST COMPANY, an FDIC insured Massachusetts
chartered trust company ("Bank"), in lawful money of the United States of
America in immediately available funds at its office at 225 Franklin Street,
Boston, Massachusetts 02110 the principal sum of TWO MILLION TWO HUNDRED AND
FIFTY THOUSAND DOLLARS ($2,250,000) or such lesser sum as may from time to
time be outstanding under the terms of a Credit Agreement between the
Borrowers and Bank of even date herewith, as amended, modified, supplemented
and/or restated from time to time (the "Credit Agreement").
The Borrowers promise to pay interest on the unpaid principal balance at
the rates and at the times provided in the Credit Agreement. This Note may
be prepaid only in accordance with the terms of the Credit Agreement.
This Note will become due and payable at the Maturity Date (as defined
in the Credit Agreement) and earlier upon the occurrence of an Event of
Default (as defined in the Credit Agreement). The Borrowers agree to pay all
reasonable legal fees and other costs of collection of this Note.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right, nor shall any waiver on
one occasion be deemed to be an amendment or waiver of any such right with
respect to any future occasion. The Borrowers hereby waive presentment,
demand, protest and notice of every kind and assents to any one or more
indulgences, to any substitution, exchange or release of collateral (if at
any time there be available collateral to the holder of this Note) and to the
addition or release of any other party or persons primarily or secondarily
liable.
<PAGE>
This Note shall be governed and construed under the laws of
the Commonwealth of Massachusetts and shall be deemed to be under seal.
NUCLEAR METALS, INC.
WITNESS:
/s/ By: /s/ James M. Spiezio
- - -------------------------- -------------------------------
Name:
Title: Vice President Finance
CAROLINA METALS, INC.
WITNESS:
/s/ By: /s/ James M. Spiezio
- - -------------------------- -------------------------------
Name:
Title: President
2
<PAGE>
EXHIBIT 10C
TERM NOTE
$2,400,000 March 31, 1995
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, NUCLEAR METALS, INC., a
Massachusetts corporation and CAROLINA METALS, INC., a Delaware corporation
(the "Borrowers") hereby jointly and severally promise to pay STATE STREET
BANK AND TRUST COMPANY (the "Bank"), or order, at the Bank, TWO MILLION FOUR
HUNDRED THOUSAND DOLLARS ($2,400,000) with interest from the date hereof
(computed on the actual number of days elapsed over a 360 day year) on the
unpaid balance from time to time outstanding at the Prime Rate (as defined in
the Credit Agreement referred to below) plus one half percent (1/2%) per
annum, such interest to be paid monthly in arrears on the first day of each
month commencing May 1, 1995. Payments of principal shall be paid in monthly
installments due and payable on the first day of each month commencing May 1,
1995 in the amounts set forth in the Credit Agreement, with a final balloon
payment in the amount of all unpaid principal and accrued interest due and
payable on October 1, 1996.
This Note may be at any time or from time to time secured and may be
prepaid at any time in whole or in part at the option of the Borrowers,
provided that any partial prepayments shall be applied to scheduled payments
of principal in the inverse order of maturity.
This Note is issued pursuant to the Credit Agreement of even date, as
amended, modified, supplemented and/or restated from time to time ("Credit
Agreement") between the Bank and the Borrowers, and the holder of this Note
is entitled to the benefits and rights of the Bank under said Credit
Agreement. This Note may become due and payable and matured upon the
occurrence of an Event of Default (as defined in the Credit Agreement). The
Borrowers agree to pay all reasonable legal fees and other costs of
collection of this Note.
After maturity, or after the occurrence of an Event of Default under the
Credit Agreement, and until such Default shall have been cured or waived in
writing by Bank, the unpaid principal balance hereof shall bear interest at
the Prime Rate (as defined in the Credit Agreement) plus 5%. Prior to the
occurrence of an Event of Default, all payments shall be applied first to
accrued interest and then to principal. After the occurrence of an Event of
Default, payments may be applied in such order as the Bank determines.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of
such holder, nor shall any delay, omission or waiver on any one occasion be
deemed a bar to or waiver of the same or any other right on any future
occasion. The undersigned and every endorser or guarantor of this Note
regardless of the time, order or place of signing waives presentment, demand,
protest and notices of every kind and assents to any one or more indulgences,
to any substitutions, exchanges or releases of collateral if at any time
there be available to the
<PAGE>
holder collateral for this Note, and to the additions or releases of any
other parties or persons primarily or secondarily liable.
All rights and obligations hereunder shall be governed and construed
according to the internal statutes and laws of The Commonwealth of
Massachusetts from time to time in effect and this Note shall be deemed to be
under seal.
NUCLEAR METALS, INC.
WITNESS:
/s/ By: /s/ James M. Spiezio
- - -------------------------- -------------------------------
Name:
Title: Vice President Finance
CAROLINA METALS, INC.
WITNESS:
/s/ By: /s/ James M. Spiezio
- - -------------------------- -------------------------------
Name:
Title: President
2
