<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q/A
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of
----- the Securities Exchange Act of 1934
for the quarterly period ended June 30, 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
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 August 2, 1995 there were issued and outstanding 2,383,264 shares of
the Registrant's Common Stock.
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
INDEX
Page
Part I. Financial Information 2
Item I. Financial Statements
Consolidated Balance Sheets,
June 30, 1995 and September 30, 1994 3
Consolidated Statements of Income:
Three Months Ended June 30, 1995 and June 30, 1994 4
Consolidated Statements of Income:
Nine Months Ended June 30, 1995 and June 30, 1994 5
Consolidated Statements of Cash Flow:
Nine Months Ended June 30, 1995 and June 30, 1994 6
Notes to Consolidated Financial Statements 7
Item II Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II Other Information 12
Item 1. Legal Proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
-1-
<PAGE>
PART I - FINANCIAL INFORMATION
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)
JUNE 30, SEPTEMBER 30,
1995 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 867,000 $ 1,213,000
Marketable Securities 168,000 497,000
Accounts receivable, net of allowances
for doubtful accounts of $483,000 at
June 30, 1995 and $1,290,000 at
September 30, 1994 4,758,000 5,455,000
Inventories 16,661,000 14,486,000
Deferred income tax benefit 675,000 675,000
Other current assets 438,000 371,000
--------------- --------------
Total current assets 23,567,000 22,697,000
--------------- --------------
Property, Plant and Equipment 45,600,000 45,867,000
Less accumulated depreciation 30,296,000 29,706,000
--------------- --------------
Net property, plant and equipment 15,304,000 16,161,000
--------------- --------------
Other assets 1,808,000 1,684,000
--------------- --------------
$ 40,679,000 $ 40,542,000
--------------- --------------
--------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,605,000 $ 1,091,000
Accounts payable and accrued expenses 4,619,000 4,129,000
--------------- --------------
Total current liabilities 7,224,000 5,220,000
--------------- --------------
Deferred federal and state income taxes 676,000 676,000
--------------- --------------
Long term obligations 1,057,000 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; 2,373,764 issued and
outstanding for June 30, 1995 and
2,307,464 issued and outstanding
for September 30,1994 240,000 230,000
Additional paid-in capital 14,141,000 13,752,000
Retained earnings 12,715,000 12,270,000
--------------- --------------
Total stockholders' equity 27,096,000 26,252,000
--------------- --------------
$ 40,679,000 $ 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
-------------------------------
JUNE 30, JUNE 30,
1995 1994
--------------- --------------
<S> <C> <C>
Net sales and contract revenues $ 3,753,000 $ 5,527,000
-------------- --------------
Cost and expenses
Cost of sales 2,562,000 6,146,000
Selling, general and administrative 1,052,000 1,466,000
Research and development 94,000 98,000
-------------- --------------
Total Cost and expenses 3,708,000 7,710,000
-------------- --------------
Operating profit(loss) 45,000 (2,183,000)
Other income 8,000 16,000
Interest expense, net (56,000) (138,000)
-------------- --------------
Loss before income taxes (3,000) (2,305,000)
Benefit for income taxes 42,000 274,000
-------------- --------------
Net Income(loss) $ 39,000 $ (2,031,000)
-------------- --------------
-------------- --------------
Per Share Information
---------------------
Net Income (loss) per common and common
equivalent share $ 0.02 $ (0.88)
-------------- --------------
-------------- --------------
Weighted average number of common and
common equivalent shares outstanding 2,369,364 2,303,031
</TABLE>
-4-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED:
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
JUNE 30, JUNE 30,
1995 1994
-------------- --------------
<S> <C> <C>
Net sales and contract revenues $ 13,592,000 $ 14,333,000
-------------- --------------
Cost and expenses
Cost of sales 10,850,000 14,018,000
Selling, general and administrative 3,490,000 2,969,000
Research and development 342,000 505,000
-------------- --------------
Total Cost and expenses 14,682,000 17,492,000
-------------- --------------
Operating loss (1,090,000) (3,159,000)
Other income 243,000 93,000
Interest expense, net (271,000) (426,000)
-------------- --------------
Loss before income taxes and
extraordinary item (1,118,000) (3,492,000)
Benefit for income taxes 978,000 677,000
Extinguishment of Debt, net of taxes of $10,000 585,000 --
-------------- --------------
Net Income(loss) $ 445,000 $ (2,815,000)
-------------- --------------
-------------- --------------
Per Share Information
---------------------
Income/(loss) before extraordinary item (0.06) (1.22)
Gain on Extinguishment of Debt,
net of taxes of $10,000 0.25 --
-------------- --------------
Net Income (loss) per common and common
equivalent share $ 0.19 $ (1.22)
-------------- --------------
-------------- --------------
Weighted average number of common and
common equivalent shares outstanding 2,358,547 2,298,264
</TABLE>
-5-
<PAGE>
NUCLEAR METALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE PERIODS ENDED:
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
------------------------------
JUNE 30, JUNE 30,
1995 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 445,000 $ (2,815,000)
Adjustments to reconcile net income
to net cash provided (used) by operating
activities:
Depreciation and amortization 1,158,000 2,228,000
Changes in assets and liabilities, net
(Increase) decrease in accounts receivable 697,000 (1,886,000)
(Increase) decrease in income tax receivable -- 2,394,000
(Increase) decrease in deferred income tax benefit -- (674,000)
(Increase) decrease in inventories (2,174,000) 904,000
(Increase) decrease in other current assets (67,000) (143,000)
Increase (decrease) in accounts payable and
accrued expenses 489,000 (1,302,000)
Gain on sale of building (175,000) --
Other Assets (124,000) --
-------------- --------------
Net cash provided (used) by operating activities 249,000 (1,294,000)
-------------- --------------
Cash flows from investing activities:
Capital expenditures, net (611,000) (475,000)
(Purchase) Sale of Marketable Securities 325,000 --
Proceeds from sale of Property, Plant & Equipment 487,000 --
Other -- (11,000)
-------------- --------------
Net cash provided (used) in investing activities 201,000 (486,000)
-------------- --------------
Cash flows from financing activities:
Total payments of debt, gross (3,594,000) (3,374,000)
Proceeds from bank debt 2,400,000 --
(Purchases) issuances of common stock 398,000 57,000
-------------- --------------
Net cash provided (used) in financing activities (796,000) (3,317,000)
-------------- --------------
Net increase (decrease) in cash and equivalents (346,000) (5,097,000)
Cash and equivalents at beginning of the period 1,213,000 7,864,000
-------------- --------------
Cash and equivalents at end of the period $ 867,000 $ 2,767,000
-------------- --------------
-------------- --------------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 65,000 $ 312,000
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 June 30, 1995 and September 30, 1994 consist of:
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1995 1994
------------ ------------
<S> <C> <C>
Work-in process $ 14,399,000 $ 10,021,000
Raw materials 1,584,000 3,721,000
Spare parts 678,000 744,000
------------ ------------
$ 16,661,000 $ 14,486,000
------------ ------------
------------ ------------
</TABLE>
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER FISCAL 1995 COMPARED WITH THIRD QUARTER FISCAL 1994
Net sales decreased by $1,774,000 or 32.1% to $3,753,000 in the third
quarter of fiscal 1995. Sales in the Fabricated Specialty Metal Products
industry segment increased by $858,000 or 42%, primarily as a result of
increased sales of beryllium products and commercial depleted uranium. Sales
in the Metal Powders industry segment decreased by $238,000, or 23% due to
decreased sales of powders in all product areas. Sales in the Depleted Uranium
Penetrator industry segment decreased by $2,394,000 or 99%, due to the absence
of large caliber penetrator sales.
Gross margin in the third quarter was $1,191,000. An improvement of
$1,810,000 from the prior year's ($619,000). As a percentage of sales, gross
margin was 32% as compared to (11)% for the third quarter of fiscal 1994. The
change in gross margin is primarily attributable to a reduction of inventory
reserves of $575,000 during the third quarter of fiscal 1995. As well as the
third quarter of fiscal 1994 included establishment of a provision of $1,000,000
for the estimated loss on two contracts and a $600,000 reserve for
contractual.
Selling, general and administrative expenses decreased by $414,000 or
28% as compared to the third quarter of fiscal 1994. The decrease is primarily
due to reduced spending as a result of reduced sales. As a percentage of sales,
these expenses increased to 28% as compared to 27% for the same period a year
earlier.
Other income decreased by $8,000 to $8,000, compared to $16,000 for
the third quarter of fiscal 1994. The decrease is primarily from lower levels of
cash investments.
Interest expense decreased by $82,000 to $56,000, from $138,000 for
the same period a year earlier as a result of lower outstanding debt.
Income taxes benefited during the third quarters of fiscal 1994 was at
an effective rate of 12%. The income tax benefited for the third quarter of
fiscal 1995 includes a tax refund of $42,000.
-8-
<PAGE>
NINE MONTHS FISCAL 1995 COMPARED WITH NINE MONTHS FISCAL 1994
Net sales decreased by $741,000 or 5.2% to $13,592,000 in the
first nine months of fiscal 1994. Sales in the Fabricated Specialty Metal
Products industry segment increased by $3,316,000 or 53%, largely due to
increased sales of beryllium products. Sales in the Metal Powders industry
segment decreased by $853,000 or 25%. Sales in the Depleted Uranium
Penetrator segment decreased by $3,204,000 or 70% primarily resulting from
lower large caliber penetrator sales.
Gross margin increased by $2,427,000 or 770% to $2,742,000. As a
percentage of sales, gross margin was 20% as compared to 2% for the first
nine months of fiscal 1994. Gross margin for the nine months ended June 30,
1994 includes a provision of $1,000,000 for the estimated loss on two
contracts that were in production and a $600,000 reserve for contractual
disputes.
Selling, general and administrative expenses increased by $521,000
or 18% as compared to the first nine months of fiscal 1994. This increase was
the result of higher legal and audit costs during the second quarter of
fiscal 1995. As a percentage of sales, these expenses increased to 26%, as
compared to 21% for the same period a year earlier.
Other income increased by $150,000 to $243,000, compared to $93,000
for the same period in fiscal 1994. This was primarily due to a gain
recognized during the second quarter of fiscal 1995 on the sale of an office
building in Acton, Massachusetts.
Interest expense decreased by $155,000 to $271,000, from $426,000
for the same period a year earlier. This decrease was primarily a result of
lower levels of outstanding debt.
Income taxes benefited during the first nine months of fiscal 1994
were at an effective rate of 19%. The income tax benefit for the nine months
ended June 30, 1995 includes tax refunds received of $960,000.
-9-
<PAGE>
THIRD QUARTER FISCAL 1995 COMPARED WITH SECOND QUARTER FISCAL 1995
Net sales decreased by $459,000, or 11% in the third quarter of fiscal
1995 as compared to the second quarter. Sales in the Fabricated Specialty Metal
Products industry segment decreased by $389,000 or 12%, primarily due to
decreased sales of government depleted uranium and beryllium products offset by
an increase in sales of commercial depleted uranium. Sales in the Metal Powders
industry segment decreased by $81,000, or 9% due primarily to reduced sales in
all the metal powders products area. Sales in the Depleted Uranium Penetrator
industry segment increased by $11,000 or 44%. The sales increase in the
Depleted Uranium Penetrator industry segment was mainly due to higher large
caliber development sales.
Gross profit increased by $951,000 or 396% to $1,191,000 for the third
quarter of fiscal 1995, compared to $240,000 for the second quarter. As a
percentage of sales, gross profit was 32%, as compared to 6% for the second
quarter of fiscal 1995.
Selling, general and administrative expenses decreased by $433,000
compared to the second quarter of fiscal 1995. This decrease was primarily due
to higher legal and audit costs during the second quarter which were primarily
associated with debt restructuring and a property sale. As a percentage of
sales, these expenses decreased to 28% for the third quarter of fiscal 1995 as
compared to 35% for the second quarter of fiscal 1995.
Income taxes provided for or benefited during the third quarter of
fiscal 1995 and the second quarter of fiscal 1995 were at an effective rate of
2%. The income taxes benefited during the second and third quarter of fiscal
1995 included the benefit of a tax refund of $918,000 and $42,000, respectively.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the first nine months of fiscal 1995 was
$16,343,000, a decrease of $1,134,000. Cash and investments at the end of
this nine month period were $1,035,000, a decrease of $675,000 from September
30, 1994. This is primarily due to the repayment of debt and losses incurred.
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
$700,000 during fiscal 1995, which will be funded through existing cash
balances.
The maximum availability under the Company's bank revolving line of
credit has been increased to $3,250,000 from the original amount of $2,250,000.
The increased maximum availability includes up to $2,250,000 in standby letters
of credit (currently fully utilized). The working capital revolving loan
availability under the line of credit is reduced by the amount of outstanding
letters of credit and is subject to the availability of sufficient loan
collateral as determined in accordance with the borrowing base formula set
forth in the bank credit agreement. Until December 31, 1995, the bank will
also allow the Company to borrow up to $1,000,000 more than the value of
eligible loan collateral determined under the borrowing base formula. These
changes were made to accommodate the Company's cash needs due to the temporary
delay in program funding on a large production contract. As of June 30, 1995,
the Company had outstanding $600,000 on the line of credit.
Included in the $2,250,000 in standby letters of credit outstanding
is a letter of credit in favor of Olin Corporation ("Olin") to secure the
Company's performance under a requirements contract with Olin for the production
of penetrators. The Company has no reason to believe that it will be unable to
perform under this contract or any other contract for which a letter of credit
secures the Company's performance. Accordingly, the Company believes that the
letters of credit outstanding on its account will not be drawn on and,
accordingly, will not affect the Company's long-term liquidity, although the
Company's working capital loan availability is reduced by such letters of
credit and so the Company's liquidity would be increased to the extent its
contingent liability for such letters of credit were reduced or eliminated.
A significant portion of the Company's business is dependent on the
award of contracts or subcontracts for the supply of products and materials to
governmental departments and agencies. Payment to the Company of all or a
portion of the amounts called for under such contracts or subcontracts, is often
subject to legislative funding appropriations, governmental agency purchasing
requirements and other conditions and factors beyond the Company's control.
Accordingly, the Company's performance under such contracts may be delayed or
may not commence at all, in which case the payments thereunder may be
recognized later than anticipated at the time of the contract award or not at
all in cases in which the Company is not called upon to perform. As a result,
the timing and amount of revenues under such government contracts is uncertain
and subject to change, which may result in volatile fluctuations in the
Company's operating results and cash flows from quarter to quarter.
Subject to the foregoing, the Company believes that the combination
of cash flow from operations and anticipated borrowings under the Company's
line of credit will be sufficient for the Company's short-term operating
requirements. If, however, the Company's revenues, in combination with bank
borrowings, are insufficient to fund its obligations, the Company might need
additional financing in an amount which could be substantial. There can be no
assurance that the Company would be able to obtain such additional financing
on favorable terms, if at all.
-11-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has settled litigation with its customer in the case
styled OLIN CORPORATION/ORDNANCE DIVISION V. NUCLEAR METALS, INC., No. 94-1517-
CIV-T-21C, in the United States District Court for the Middle District of
Florida in Tampa. Under the terms of the settlement agreement between the
parties, NMI's customer released its claim for a refund which it had paid NMI
for the manufacture of depleted uranium penetrators in 1993. NMI has, in turn,
released its customer of NMI's counterclaims in the litigation. NMI and its
customer have also agreed to certain terms affecting their future business.
ITEM 5. OTHER INFORMATION.
The Company was awarded a contract from Olin Ordinance Corporation for
approximately $14.5 million for production of penetrators. Under the terms of
the contract, the Company will produce a certain number of penetrators each year
over a period of four years at firm prices. In connection with the contract,
the Company has also obtained a letter of credit to secure the Company's
performance under the contract, which is reflected as a contingent borrowing
under the Company's revolving line of credit. The federal government
has appropriated the necessary amounts to fund the payments to be made to the
Company for the first year of the contract. For a more detailed discussion of
the risks inherent in contracting or subcontracting with governmental
agencies, see "Management's Discussion and Analysis and Results of
Operations -- Liquidity and Capital Resources."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10-1 Settlement Agreement (Confidential Treatment requested
as to certain portions)
10-2 Olin Letter of Subcontract (Confidential Treatment
requested as to certain portions)
b. Reports on Form 8-K:
No reports were filed on Form 8-K in the quarter ended
June 30, 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 November 16, 1995
-------------------------------------------------------
By /s/James M. Spiezio
-------------------------------------------------------
James M. Spiezio, Vice President, Finance & Controller
Chief Financial Officer
Date November 16, 1995
-------------------------------------------------------
By /s/Rebecca L. Perry
-------------------------------------------------------
Rebecca L. Perry, Assistant Controller
Chief Accounting Officer
Date November 16, 1995
-------------------------------------------------------
-13-
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS FINAL SETTLEMENT AGREEMENT AND MUTUAL RELEASE is made as of this
29th day of June 1995, by and between Olin Corporation Division (Olin)
and Nuclear Metals, Inc. (NMI) (hereafter collectively referred to as, the
Parties).
W I T N E S S E T H
WHEREAS, disputes arose between the Parties concerning agreements
entered into between them for the purchase of depleted uranium (DU)
penetrators for use in kinetic energy (KE) cartridges purchased by the United
States Army in FY 91/91S and FY 93, and the fact that the United States Army
purchased no KE cartridges in FY 94, and with respect to the current
multi-year procurement of M829A2 KE cartridges with DU penetrators and
specifically disputes concerning Olin Purchase Orders 02708 and 44661 and a
Negotiated Agreement between the Parties of 13 November 1991, and, with
respect to certain antitrust claims made by NMI against Olin including the
requirement of a letter of credit to secure NMI's performance on the
anticipated M829A2 penetrator requirement; and,
WHEREAS, there is presently pending in the United States District Court
for the Middle District of Florida, Tampa Division, an action styled OLIN
CORPORATION/ORDNANCE DIVISION V. NUCLEAR METALS, INC., Case No.
94-1517-CIV-T-21(c) (hereinafter, the Lawsuit), in which the Parties have
filed claims and counterclaims against each other; and,
WHEREAS, some of the claims and disputes between the Parties were
asserted by the Parties against each other in the Lawsuit and certain other
claims could have been asserted therein; and,
WHEREAS, the Parties entered into a mediation on May 8 and 9, 1995 at
which the Parties settled their above-stated differences and entered into a
Mediated Settlement
<PAGE>
Agreement attached hereto as Exhibit 1, and which is incorporated by
reference as though fully set forth herein; and,
WHEREAS, the Parties wish to resolve all disputes pending between them
concerning the purchase of DU penetrators for KE cartridges produced or to be
produced under government contracts in FY 91/91S and FY 93/94 and the current
multi-year M829A2 procurement, and any disputes related thereto and related
to or arising out of the acquisition of Aerojet Ordnance by Olin, including
all claims or disputes which were or could have been asserted in the Lawsuit.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in the Mediated Settlement Agreement and below, the sufficiency of
which is hereby mutually acknowledged by the Parties, the Parties agree as
follows:
1. The Parties do for themselves, any predecessors, successors or
affiliated companies, and the officers, directors, employees, servants,
agents, successors or assigns of those companies, jointly and severally, do
hereby and by these presents and for anyone claiming by, through or under
them, fully remise, release, acquit and forever discharge the other of and
from any and all rights, claims, demands, damages, actions, and causes of
action, of any nature whatsoever, whether arising at law or in equity, which
any or all of the Parties may have had, may now have or may hereafter have
against the other by reason of any matter concerning the purchase of DU
penetrators for KE cartridges produced or to be produced under government
contracts in FY 91/91S and FY 93/94 and the current multi-year M829A2
procurement, and any disputes related thereto and related to or arising out
of the acquisition of Aerojet Ordnance by Olin, occurring prior to and
including the date of this Agreement.
2
<PAGE>
And for the same consideration, without limiting in any way the
generality of the above and foregoing, the Parties fully acquit, release and
forever discharge each other of and from all claims, demand, damages, actions
or causes of action which the Parties may now have or may have had from the
beginning of time to the date of execution of this Agreement because or
arising out of any matter that was raised or which could have been raised in
the Lawsuit.
And, without limiting in any way the generality of the above and
foregoing release, the Parties do hereby and by these presents fully acquit,
remise, release and forever discharge the other of and from all rights,
claims, demands, damages, actions and causes of actions, whether arising at
law or in equity, which they may now have, may have had, or which might have
been made as a result of any and all goods purchased, services performed, or
property leased or conveyed, including, but not limited to any right, claim,
action, cause of action, suit, debt due, sum of money, account, reckoning,
covenant, contract, controversy, agreement, promise, representation,
restitution, damage and demand whatsoever, at law or in equity which they may
have, may have had, or may hereafter have each against the other, for any
beach of contract, or for breach of fiduciary duty, or for an accounting, or
for specific performance, or for restitution, or for rescission, or for
fraud, or for any other tort, or consequential damages, or for rights under
any state or federal statute, including statutes pertaining to Federal
Procurements (including false claims acts, QUI TAM actions, etc.) the
Securities Act or Antitrust Laws, or for any other matter, thing, or cause of
action concerning the purchase of DU penetrators for KE cartridges produced
or to be produced under government contracts in FY 91/91S and FY 93/94 and
the current multi-year M829A2
3
<PAGE>
procurement, and any disputes related thereto and related to or arising out
of the acquisition of Aerojet Ordnance by Olin.
It is intended by the Parties to this Agreement to forever remise,
acquit, waive, release and forever discharge each other of and from all
claims, demands for losses, injuries and damages, rights known or unknown,
direct or indirect, arising from the aforementioned matters and from any
other matter occurring prior to the date of this Agreement, it being
understood that all rights which the Parties or any person who claims by,
through or under them may have against the other as of the date of this
Agreement, shall be forever released, remised and acquitted and the Parties
to this Agreement and such persons shall be forever barred from bringing or
asserting the same in their own name or names, jointly with or through any
person, natural or corporate, for or upon or by reason of any act, matter,
transaction, cause or thing whatsoever from the beginning of the world to the
date of these presents.
HOWEVER, NOTHING HEREIN SHALL BE DEEMED TO RELEASE, AFFECT, MODIFY OR
OTHERWISE ALTER THE OBLIGATIONS OF THE PARTIES UNDER THAT CERTAIN MEDIATED
SETTLEMENT AGREEMENT ENTERED BETWEEN THEM ON MAY 9, 1995.
2. Within five (5) business days of execution of this Agreement, the
Parties will, by their respective counsel, execute a Stipulation and Joint
Motion for Dismissal with Prejudice of the Lawsuit and the claims and
counterclaims set forth in the Lawsuit, which Stipulation for dismissal and
Order is set forth in the form attached hereto as Exhibit 2 and is
incorporated by reference herein.
4
<PAGE>
3. The Parties agree that the form of the Letter of Credit for the
current multi-year M829A2 procurement will be substantially in the form
attached hereto as Exhibit 3.
4. This Settlement Agreement and Mutual Release and the exhibits
attached hereto and incorporated by reference herein may be executed in two
(2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same Agreement.
5. The mutual consideration exchanged herein and this Settlement
Agreement and Mutual Release (and its exhibits) is not to be considered an
admission of liability on the part of any settling party, individually or
collectively, but is in full settlement of disputed claims as to which
liability has been and continues to be denied. This Settlement Agreement and
Mutual Release, and its exhibits, shall not be admissible in evidence in any
proceeding, judicial or otherwise, except as between the Parties herein and
then only for the limited purpose of proving settlement of the disputed
claims, and except as may be necessary to effectuate the purposes hereof.
6. This Agreement shall be construed in accordance with Florida law.
(Excluding Florida's choice of law rules). This Agreement, and all exhibits
hereto, with the exception of the Letter, Subcontract referenced in the
Mediated Settlement Agreement, constitute the full and complete agreement of
the Parties and all prior or contemporaneous negotiations, discussions or
understandings are considered fully integrated and merged herein.
5
<PAGE>
OLIN CORPORATION NUCLEAR METALS, INC.
By: /s/ Angelo A. Catani By: /s/ Robert E. Quinn
--------------------------------- ---------------------------------
Its Duly Authorized Officer Its Duly Authorized Officer
ATTEST: ATTEST:
By: /s/ Bradford C. Vassey By: /s/ Thomas A. Wooters
--------------------------------- ---------------------------------
Witness Clerk
6
<PAGE>
EXHIBIT 1
SETTLEMENT AGREEMENT
OLIN CORPORATION AND NUCLEAR METALS, INC.
Olin Corporation ("Olin") and Nuclear Metals, Inc. ("NMI") ("the Parties")
agree to settle all disputes between them arising out of (1) OLIN CORPORATION
VS. NUCLEAR METALS, INC., Civil Action No. 94-1517-Civ-T-21C, United States
District Court of the Middle District of Florida and (2) the current M829A2
("2") penetrator procurement as follows:
1. This settlement agreement is binding and covers material terms of the
settlement. Counsel will prepare formal settlement documents incorporating
these terms as soon as possible.
2. Olin will award NMI a subcontract for 40% of the penetrator requirement for
the A2 prime contract, if Olin signs such a contract, subject to all usual
terms and conditions and the following additional terms and conditions:
a. Olin will provide NMI with a letter subcontract, including schedule, as
soon as possible.
b. Olin will provide a formal subcontract/purchase order within 90 days of
the signing of the subcontract, which will award to NMI 40% of any
penetrator requirement against A2 quantities ordered by the government
for any procurement year under the multi-year contract, including
options.
c. Within no more than 90 days of the signing of the subcontract, NMI will
have in place and provide Olin an irrevocable **** letter of credit
from a bank with a Bankwatch "A" rating in favor of Olin to provide
security against certain specified adverse events relating to NMI's
performance under the A2 contract. The letter of credit will provide
that Olin has the right to draw on the letter of credit if any of the
conditions set forth in part "e" of this section occur.
d. NMI will not begin work under the subcontract until the letter of credit
is in place and has been provided to and approved by Olin. Olin will not
unreasonably withhold approval.
e. The specified adverse events ("triggering events") permitting Olin to
draw on the letter of credit shall be limited as follows:
**** Confidential Treatment Requested
<PAGE>
i. If NMI, any parent, subsidiary of affiliate, files for protection
under the U.S. Bankruptcy Code, or is forced into bankruptcy by
creditors, or is adjudged a bankrupt, or makes a general assignment
for the benefit its creditors, or if a Receiver is appointed on
account of NMI's insolvency; or
ii. If NMI's production under the A2 contract is impeded or halted such
that it cannot meet any contractually specified delivery date because
of action by any governmental agency due to any environmental
enforcement action, consent decree or the like.
f. Upon the occurrence of what Olin deems a triggering event, Olin shall
notify NMI in writing of its intent to draw upon the letter of credit. NMI
shall have five business days to attempt to correct the triggering event
or otherwise satisfy Olin that it should not draw on the letter of credit.
At the end of five business days, if not satisfied by NMI's actions, Olin
may draw upon the letter of credit by submitting to the bank a declaration
under penalty of perjury by an officer of Olin that a triggering event has
occurred.
g. Any dispute about whether a triggering event occurred shall be resolved
by arbitration after Olin has drawn on the letter of credit, as set out
below.
h. In addition to providing the letter of credit, NMI agrees to other
contractual provisions in order to provide security to Olin with regard to
NMI's performance, as follows:
i. NMI will not undertake advance work unless asked. Accelerated or
partial deliveries will not accepted, unless at Olin's request.
Accelerated deliveries are any deliveries more than 15 days prior
to the contract delivery date.
ii. NMI will limit progress billings to deliveries per the project
schedule and materials availability. There will be no advance
progress billings.
iii. NMI will not accelerate production, deliveries or billings without
written permission.
iv. NMI will provide bi-weekly status reports and a monthly
"line of balance" chart against schedule.
<PAGE>
v. NMI will undertake any reasonable steps to provide Olin assurances
that work is progressing appropriately and that funding is being
provided only for completed work or for work in process according to
schedule.
3. The parties will settle all disputes relating to the lawsuit, as follows:
a. The pending lawsuit between the parties, Olin Corporation vs. Nuclear
Metals, Inc., Civil Action No. 94-1517-Civ-T-21C, and all claims and
counter-claims therein, will be dismissed with prejudice, each side to
bear its own costs and attorneys' fees. The parties will execute
appropriate releases relating to the subject matter of the claims and
counterclaims in suit.
b. Olin and NMI will undertake appropriate joint and/or parallel efforts
to sell the 900 penetrators produced by NMI during the 900 contract at
issue in the lawsuit, but not sold to the Army. All proceeds from the
sale of such penetrators shall be divided 66.7% to NMI and 33.3% to Olin,
until such time as Olin shall have received $951,000, after which
NMI shall retain 100% of the proceeds.
c. Olin will provide additional compensation to NMI under the 900 contract
at issue in the lawsuit, as follows:
i. Upon the completion of the first year of the A2 subcontract, as
provided for below, and at the end of each of the following three
years thereafter, Olin shall accrue a liability to NMI for $100,00,
such that Olin's total liability to NMI on the fourth anniversary
of the signing of the A2 contract shall be $400,000.
ii. Providing that no triggering event has taken place, as set out above,
Olin shall pay NMI the accrued $400,000 upon completion of the A2
subcontract (approximately 4 years), payable as part of the final NMI
invoice for work performed. If the A2 subcontract is completed prior
to the planned four years, Olin shall pay upon completion an amount
of the $400,000 equal to a total prorated accrual to the date of
completion, and shall pay any balance of the $400,000 upon the date
it later accrues under this agreement. For example, if the contract
is completed at the end of three and a half years, $350,000 shall be
paid upon completion and an additional $50,000 paid at the end of the
fourth year.
iii. If a triggering event has taken place, Olin will retain all of part
of the $400,000.
<PAGE>
4. Except as specifically provided herein, disputes between the parties
relating to the A2 subcontract shall, after its signing, be resolved
according to terms set out therein. Arbitration will be used as
follows with regard to certain specified disputes:
a. In the event of a disagreement between the parties prior to the signing
of the A2 subcontract with regard to any term of this agreement, the
formal settlement documents or any term of the A2 subcontract, the formal
settlement documents or any term of the A2 subcontract, the disagreement
will be resolved through mediation by Jonathan Marks or, failing
agreement, through binding arbitration by Mr. Marks under procedures
that he shall determine in his sole discretion.
b. In the event of a disagreement over whether a triggering event occurred
justifying drawing the letter of credit, the matter shall be resolved
through binding arbitration by Mr. Marks under procedures that he shall
determine in his sole discretion, except that the arbitration shall begin
within 5 business days after the draw down of the letter of credit and be
resolved within 10 business days.
c. Any arbitration decision under this agreement shall be enforceable in a
court of general jurisdiction.
d. If Mr. Marks is not available the parties shall agree on a substitute
from a J*A*M*S/ENDISPUTE panel and, failing agreement, JAMS/ENDISPUTE
shall appoint an arbitrator.
--------------------------------- ---------------------------------
For Olin For NMI
--------------------------------- ---------------------------------
Date Date
<PAGE>
EXHIBIT 2
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
OLIN CORPORATION/ORDNANCE :
DIVISION, a Virginia Corporation, :
Plaintiff,
vs. : CASE NO. 94-1517-CIV-T-21 (c)
NUCLEAR METALS, INC., :
a Massachusetts Corporation, :
Defendant. :
____________________________________:
STIPULATION AND JOINT MOTION FOR DISMISSAL WITH PREJUDICE
Plaintiff, Olin Corporation/Ordnance Division, and Defendant, Nuclear
Metals, Inc., by and through their undersigned counsel, hereby stipulate to
the dismissal of the Complaint, Counterclaim and causes of action herein,
with prejudice, each party to bear its own costs and attorneys' fees, and
jointly move the Court to enter an Order in substantially the form attached
hereto as Exhibit A to that effect.
Dated this _____ day of May, 1995.
________________________________________
JOHN S. VENTO, ESQUIRE
Florida Bar No. 329381
TRENAM, KEMKER, SCHARF, BARKIN,
FRYE, O'NEILL & MULLIS, P.A.
Suite 2700, Barnett Plaza
Post Office Box 1102
Tampa, Florida 33601
(813) 223-7474
(813) 229-6553
-and-
1
<PAGE>
BRADFORD C. VASSEY, ESQUIRE
Florida Bar No. 845061
Associate Counsel
OLIN CORPORATION/ORDNANCE DIVISION
10101 NINTH STREET NORTH
St Petersburg, Florida 33716
(813) 578-8781
(813) 578-8795
Attorneys for Plaintiff,
OLIN CORPORATION/ORDNANCE DIVISION
-and-
________________________________________
PHILIP M. CRONIN, ESQUIRE, K
BBO #106060
THOMAS FRISARDI, ESQUIRE
BBO #662479
CHANTAL M. HEALEY, ESQUIRE
BBO #556766
PEABODY & ARNOLD
50 Rowes Wharf
Boston, Massachusetts 02110
(617) 951-2100
Attorneys for Defendant,
Nuclear Metals, Inc.
2
<PAGE>
EXHIBIT A
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
OLIN CORPORATION/ORDNANCE :
DIVISION, a Virginia Corporation,
:
Plaintiff,
:
vs. CASE NO. 94-1517-CIV-T-21 (c)
:
NUCLEAR METALS, INC.,
a Massachusetts Corporation, :
:
Defendant.
_________________________________ :
ORDER OF DISMISSAL WITH PREJUDICE
THIS CAUSE having come before the court on the parties' Stipulation and
Joint Motion for Dismissal with Prejudice and the Court having reviewed the
said Stipulation and Motion and being otherwise fully advised in the premises,
it is thereupon
ORDERED AND ADJUDGED that:
The Stipulation is approved, the Motion is granted and the Complaint,
Counterclaim and all causes of action herein shall be and hereby are dismissed,
with prejudice, each party to bear its own costs and attorneys' fees.
3
<PAGE>
DONE AND ORDERED in Chambers at Tampa, Hillsborough County, Florida,
this ________ day of ____________, 1995.
_______________________________________
RALPH W. NIMMONS, JR.
UNITED STATES DISTRICT JUDGE
Copies furnished to:
John S. Vento, Esquire
P.O. Box 1102
Tampa, Florida 33601-1102
Thomas Frisardi, Esquire
50 Rowes Wharf
Boston, MA 02110
4
<PAGE>
EXHIBIT 3
DRAFT FORM
LETTER OF CREDIT
We hereby establish in your favor for up to a maximum of **** our
irrevocable standby Letter of Credit Number ____________ (Credit) by order
and for the account of Nuclear Metals, Inc. ("NMI").
The Credit is available only against presentation of the following
documents:
1. A written statement purportedly signed under penalty of perjury by an
officer of Olin Corporation ("Olin"), that any one of the following
events has occurred:
a. NMI, or any parent, subsidiary or affiliate, has filed for
protection under the U.S. Bankruptcy Code; or has been forced
into bankruptcy by creditors; or has been adjudged a bankrupt; or
has made a general assignment for the benefit of its creditors; or
that a receiver has been appointed on account of NMI's insolvency;
or
b. NMI's production under the NMI/Olin Contract identified as
Subcontract No. ___, dated________ has been impeded or halted such
that it has not met a contractually specific delivery date because
of action by any governmental agency due to any environmental
enforcement action, consent decree or the like, and that NMI has
not corrected the failure and made the delivery within five (5)
business days thereof.
2. A copy of a letter purportedly signed by an officer of Olin Corporation
and delivered to NMI at least five days prior to any draw under this
Letter of Credit and detailing all obligations which NMI has failed to
perform under the above referenced contract.
We hereby engage with you that all drafts drawn under and in strict
compliance with the terms and conditions of these Credit shall be duly honored
by us. This original letter must accompany all drafts here under. This Credit
shall remain valid until you notify us that the above referenced contract has
been fully performed.
This irrevocable standby Letter of Credit is subject to Article 5 of the
Uniform Commercial Code, as incorporated into the laws of [state to be
specified by bank].
**** Confidential Treatment Requested
<PAGE>
22 May 1995
Nuclear Metals, Inc.
2229 Main Street
Concord, MA 01742
Attn: Mr. Donald T. King
Reference: P.O. F45835, M829A2 Penetrator Award
Gentlemen:
This letter is issued to confirm the award of a requirements subcontract
(Purchase Order Number F45835) to Nuclear Metals, Inc. (NMI) for
approximately **** Penetrators for the U.S. Government Program Year 2 (PY2)
at a firm price of **** each. This award includes an option for PY3 of
approximately **** each; an option for PY4 of approximately **** each; an
option for PY5 of approximately **** each: and an extended option for PY3, PY4,
and PY5 of **** each, all at a firm price of **** each. The foregoing
quantities will be adjusted to be equal to **** of the actual quantities in
the **** Government prime contract award.
Olin Flinchbaugh will confirm this letter subcontract with a formal
subcontract/purchase order within 90 days of NMI countersigning this letter
subcontract.
NMI will have in place and provide Olin Flinchbaugh an irrevocable **** letter
of credit within 90 days of NMI countersigning this letter subcontract.
This letter subcontract is not effective until above required letter of credit
has been approved by Olin Flinchbaugh. NMI agrees to not begin work under this
subcontract until the letter of credit is in place and has been provided to
Olin Flinchbaugh and has been approved by Olin. Olin will not unreasonably
withhold approval.
Quality/SPC Audits: Prior to initiation of production under this subcontract,
NMI's PCDs must be reviewed and receive approval by Olin Flinchbaugh, and
possibly the Government, and both Mil-Q-9858A and Statistical Process Control
audits must be performed and approvals issued by Olin Flinchbaugh, as
previously noted in our letters of 2 December 1994 and 16 January 1995.
Technical Data: The technical data applicable to this subcontract is as follows
(this list is based on current revision levels, some of which are advanced from
the bid levels, and which are subject to change at the time of Government
contract award):
**** Confidential Treatment Requested
<PAGE>
+ Purchase Specification A34124, Rev. none
+ Drawing 12944262, Rev. B
+ QAP 12944264, Rev. C
Nuclear Metals, Inc. - page 2 -
+ SDRL #F45452, 6/16/94, Items A008, A010, A013, A015, A018, A019,
A022, A026, A030, B001, B002, B003, C005, C014 and associated Data
Item Descriptions (DIDs).
+ Technical Data Package List (TDPL) 12944257, Rev R05, dated 16 Feb 95,
Projectile, 120 mm, APFSDS-T, M829A2.
Delivery Schedule: The quantities and dates shown are approximate and subject
to adjustment based on time of approval of the letter of credit, Government
contract quantities and schedules, lot size definitions, and other relevant
factors. Delivery dates shall be interpreted to mean the date the material is
due on our dock in Red Lion, PA.
<TABLE>
<CAPTION>
Quantity
Year Lot# Per Del. Sub-lot A Sub-lot B Sub-lot C
- ---- ---- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PY2 1 **** **** **** ****
2 **** **** **** ****
Option Quantities -
PY3 3 **** **** **** ****
4 **** **** **** ****
PY4 5 **** **** **** ****
6 **** **** **** ****
PY5 7 **** **** **** ****
8 **** **** **** ****
</TABLE>
Government Furnished Materials: The Government will furnish **** pounds
of Unalloyed Depleted Uranium Armor Scrap per penetrator ordered for use in the
performance of this subcontract. This material will be delivered within 30 days
of the Government award of the prime contract. This material must be used on
each production lot under this subcontract, without change in blend of
materials. No other materials are authorized for use in production under this
subcontract.
**** Confidential Treatment Requested
<PAGE>
Source Inspection: Olin Flinchbaugh and Government source inspection will be
required prior to each shipment from your plant. Upon receipt of this order
promptly notify the Government representative who normally services your
plant so that appropriate planning for Government inspection can be made.
Demilitarization: Demilitarization must result in complete destruction or
mutilation of the item. Disposition will be via scrap only.
Nuclear Metals, Inc. - page 3 -
Priority Rating: The award from the Government is expected to contain a
Defense Priorities and Allocations Systems (DPAS) rating of DX-A4.
Scheduling Controls: NMI will not perform work in advance of that required to
meet delivery schedule, unless specifically requested by Olin Flinchbaugh in
writing to do so. Materials will not be assigned to the subcontract in advance
of actual need in production based on a normal production schedule. Accelerated
or partial deliveries will not be accepted, unless requested by Olin Flinchbaugh
in writing. Accelerated deliveries are any deliveries more than 15 days prior
to the subcontract delivery requirement. Source inspection will not be
performed earlier than needed to meet the required delivery schedule.
Reporting: NMI will provide a "line of balance" chart prior to initiation of
production and update it monthly to show planned production and material
acquisition as it relates to the required delivery schedule. NMI will provide
bi-weekly status reports to show actual status against this planning chart.
Progress Billings: Progress billings are acceptable, but must be consistent
with the actual performance in accordance with the above limitations. Progress
billings will be at the rate of 80%. NMI will undertake any reasonable steps to
provide Olin Flinchbaugh assurances that work is progressing appropriately and
that funding is being requested only for completed work or for work in process
according to schedule.
Terms and Conditions: In addition to the above, the terms and conditions in the
following listed documents are applicable to this subcontract:
Olin Flinchbaugh Special Terms and Conditions Applicable to
Purchase Orders Under Government Contracts, Form FP-03, dated
11 January 1994;
<PAGE>
Federal Acquisition Regulations (FAR) Clauses, Olin Flinchbaugh
Flysheet FAR-0043, Revision I, dated 04/07/95;
Standard Notes Applicable to Flinchbaugh Purchase Orders, Flysheet
#790-9, dated January 24, 1995:
OLIN ORDNANCE Accepted By
Flinchbaugh Operations NUCLEAR METALS, INC.
M. Edward Shue
Senior Buyer _______________________________________
